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November 29, 2022

Friday Footnotes: Big 4 Nixes Legal Practices; EY Looks the Other Way; Auditors Get Lectured Again | 10.14.22

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Big 4

The drunken Big Four partners who are paid $1m+[eFinancialCareers]
Combined with other recent incidents, including the tragic case of Michael Brockie, a 28-year-old PWC audit manager who lost a large portion of his brain following a fall after a drunken work outing, and the death of Aishwarya Venkatachalam, a junior at EY in Sydney, who killed herself after drinking with colleagues, the partner infractions reinforce the impression that something is awry. It might be considered that senior staff at the Big Four are setting a bad example for vulnerable juniors.

KPMG UK keeps equity tight as it ramps up salaried partner promotions — here’s the list [Financial News]
KPMG UK has promoted a historically modest 25 new equity partners this year as it makes greater use of the salaried partner badge which it introduced in 2021. The firm has promoted 108 new partners in its latest cohort which it announced on 14 October. KPMG UK has added 210 partners since last year, however, only 25 are equity partners.

Whistleblowers accuse EY of whitewashing suspicious trades at longstanding client [Financial Times]
Whistleblowers have accused EY of whitewashing suspicions of money laundering and tax evasion in an investigation it conducted this year for longstanding client Leonteq. At the heart of the whistleblower complaints are two trades that the company, a listed fintech that designs bespoke investment products, created for a French workers co-operative society at the start of 2021. The whistleblowers said the trades should have been reported to French authorities as suspect on grounds of potential money laundering and tax evasion, after it was discovered that large commissions were routed to a British Virgin Islands company instead of the broker in France that sold the investments on Leonteq’s behalf.

Big Four Audit Giants Shut Down Legal Operations in China Following ‘Regulatory Raids’ [Law.com]
The Big Four auditing giants have quietly shut down their legal affiliations in China following intense regulatory scrutiny, according to an investigation by Law.com International, in a major development for Asia’s legal industry. PwC and Deloitte confirmed they have closed their associated Chinese law firms. KPMG and EY have also closed, according to people with knowledge of the matter, and both no longer have operational local law firm websites.

Talent and Hiring

List analysis: In fight for talent, nearly all accounting firms allow remote work [Crain’s Cleveland Business]
In the war for accounting talent, allowing remote work is table stakes. Almost every company on Crain’s annual Accounting Firms list said they allow remote work — which by one measure might be the most commonly employed tactic in their fight for talent. Of the 35 companies that submitted data for the list, 31 said they let most Northeast Ohio employees work remotely at least some of the time. In response to a separate optional question, two of the other four said they do allow some degree of remote work. It has almost become a necessity for recruiting and retention, according to a few firms on the list that spoke with Crain’s.

How to negotiate a job offer [Journal of Accountancy]
Accounting is an in-demand skill, so any pay package needs to reflect the specialization you’re bringing to the table. “We deal with sensitive and complex data to make sense of the financial status of individuals, firms, and businesses for them to make critical financial decisions,” said Mark Stewart, an accountant for Step By Step Business, a resource for those starting a business. “You can negotiate a job offer if you feel like it doesn’t compare to the value you will be giving.”

Firm Watch

Tom Sulewski Steps into New Role as CEO of Clark Nuber PS [Clark Nuber]
Clark Nuber PS, a Top 100 accounting and consulting firm, announced Tom Sulewski as its new chief executive officer, effective October 1, 2022. He succeeds Rob Wheeler, who served as the firm’s CEO since 2014. The two worked closely together in the preceding months to transition the role. Wheeler, who is transitioning out of the role due to shareholder term limits, remains with the firm in an advisory role and as a resource to the new CEO.

Miami accounting firm pays $17M for Blue Lagoon office building [The Real Deal]
Accounting firm Benitez & Co.’s principals rang up a $16.9 million purchase in Miami’s Blue Lagoon neighborhood, acquiring a four-story office building with a helipad. Juan and Maria Benitez bought the roughly 61,000-square-foot Waterford Corporate Centre at 5835 Blue Lagoon Drive, said their broker, Manny Chamizo III with One Sotheby’s International Realty. The deal breaks down to about $276 a square foot.

PYA Continues to Grow With Charlotte Office Location [PR Newswire]
PYA, a Top 100 accounting firm and one of the nation’s largest privately held healthcare consulting firms, is pleased to announce it is opening a seventh office location in Charlotte, North Carolina. The opening will strengthen the firm’s presence in both North and South Carolina, bringing our teams closer to clients throughout the southeastern United States.

Grant Thornton Names New OMP in Tampa Bay [INSIDE Public Accounting]
Grant Thornton LLP (FY21 net revenue of $1.97 billion) has named Jason Geisler as the new OMP of its Tampa Bay office. He succeeds Chris Martin, who now serves as OMP of the firm’s Boston office.

‘Amazing time’ to start an accounting firm, says marketing specialist [Accountants Daily podcast]
Of course the marketing guy at Intuit would say that. It’s an “amazing time” to start an accounting firm and inspirational role models – here and overseas – are showing what is possible, according to Damien Greathead, marketing leader for accounting and advisory at Intuit.

Audit

Where climate change isn’t global: auditing [Financial Times Opinion]
A longer, meatier report from auditors was introduced over the past decade in both the US and Europe. This aimed to open up the black box of the audit process to investors, giving them insight into tricky areas that might affect the accounts or the future value of the company. For several companies that file accounts in both the US and Europe, climate featured prominently as a so-called “key audit matter” in the audit report to investors internationally, only for that information to vanish or shrink drastically in the same company’s US filings. These are generally the same accounts, signed off by the same audit firm, under the stewardship of the same lead partner. Companies including Eni, Unilever, Shell, BP and TotalEnergies showed discrepancies between their US and international audit reports, said Carbon Tracker.

The Auditor’s Responsibility for Fraud Detection [SEC]
A statement from SEC Acting Chief Accountant Paul Munter: Auditors are gatekeepers and therefore the importance of their responsibilities with respect to the identification of risks of material misstatement due to fraud (“fraud risks”) and the detection of material misstatements in the financial statements due to fraud should not be underestimated. This is particularly true because any changes to the macroeconomic and geopolitical environment in which companies operate may result in new pressures, opportunities, or rationalizations for fraud. Areas that have historically been a focus for auditors—the tone at the top of a company and the effectiveness of internal controls—appear to be key factors in either exacerbating or mitigating such pressures, opportunities, or rationalizations for fraud. This provides auditors with a significant opportunity to support investor protection by helping to identify and address the precursors of financial reporting fraud so that more material misstatements due to fraud are detected by independent auditors.

How the US Army plans to achieve a clean audit [DefenseNews]
The U.S. Army hopes a program established through its comptroller’s office will help it reach a clean audit, a milestone the service hasn’t met since Defense Department audits began in 2018.

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