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Friday Footnotes: Consulting Gets Bumpy for New Hires; Cities Sans Accountants; PCAOB Priorities | 4.21.23

puppies in a basket

Footnotes is a collection of stories from around the accounting profession curated by actual humans and published every Friday at 5pm Eastern. While you’re here, subscribe to our newsletter to get the week’s top stories in your inbox every Tuesday and Friday. See ya.

Big 4

EY Confronts Slowing Growth After Breakup Deal Fails [Wall Street Journal]
Read this whole thing because it’s hilarous(ly awful for EY). Quick read from us here.
On a staff call this week, a senior Ernst & Young executive delivered an exhortation to the troops: Bill clients “every hour we can get our hands on.” A failed breakup attempt cost the company $600 million. Employees are angry. But that might be the least of it: The outlook for EY’s business of charging for advice and accounting is getting weaker in the U.S. by the month. The giant U.S. arm is “falling short” of its revenue and profit targets, executives said on an internal call, one of many in recent days that captured the gloom hanging over the 390,000-person firm. Cost cuts are coming and bonuses likely will be lower was the message on another call, according to recordings reviewed by The Wall Street Journal. “Right now, what’s really important is stability,” U.S. Chair Julie Boland told her staff. “Remember that we are an amazing place to work,” she said, adding that she recognized there was a “lot of emotion in the system.”

Are the “big four” too big for their own good? [The Economist]
On this week’s podcast, hosts Tom Lee-Devlin, Alice Fulwood and Mike Bird ask whether all four firms find themselves stuck in unhappy marriages. Professor Laura Empson of Bayes Business School retells how these audit firms were beguiled by the glamour and big fees of corporate advisory work. Meanwhile, Tom Rodenhauser, managing partner at Kennedy Research Reports, explains why the consulting units have now outgrown their auditing counterparts, and would do well to ditch them and go it alone.

Performance-related separations (a.k.a. “silent layoffs”) are on the menu

B4 Layoffs – USA
by u/additional_cats in Big4

KPMG is diversifying its partner rank through sponsorships and succession planning [Fortune]
Partners are among the most senior-level roles at accounting firms and some of the highest paid. They’ve also historically been one of the least diverse ranks among the Big Four. In 2020, KPMG announced plans to increase the overall representation of Black and Latinx employees by 50% in 2025. Three years in, the professional services firm has made progress. According to its latest impact plan, more than 50% of KPMG’s new U.S. partners in its 2023 promotion class are from underrepresented groups.

2023 KPMG U.S. Impact Plan [KPMG]
On that note…


McKinsey, Bain Delay Some M.B.A. Start Dates to 2024 [Wall Street Journal]
Bain told M.B.A.s with offer letters that if they waited to start until April 2024, the firm would pay them $40,000 to work for a nonprofit or $30,000 to learn a new language or participate in an educational program, in one communication that suggested hires could also become yoga instructors or go on safari for $20,000. At McKinsey, many M.B.A.s hires don’t have start dates yet, several students with offer letters said. The company, which is in the process of laying off as many as 2,000 workers, said those new hires will be brought in over a series of months, from shortly after graduation through February 2024.

EY India assures no plans to cut down on manpower after US arm lays off 3,000 []
EY India has struck a bullish tone and ruled out job cuts in the wake of its US counterpart citing “overcapacity” and announcing the elimination of as many as 3,000 employees. The domestic arm of the Big 4 giant said its verticals are growing at a robust pace and that “there are no similar plans in India” as it looks to add to its existing workforce. In response to an email query to EY India from Moneycontrol on the impact of the job cuts in the US and if a similar move would be considered in India, the firm said, “The announcement is specific to EY in the US market and there are no similar plans in India. We are looking forward to closing another strong growth year with robust growth across our service lines and increasing our people strength. We hired more than 18,000 people in the last 12 months and have more than 38,000 people across all member firms in India.”

Accountant Shortage Leaves Some US Cities Without Credit Ratings [Bloomberg]
The municipality of Marion had planned to finance a new $10 million firehouse with a bond deal later this year, but that project and others are on pause because the city north of Columbus, Ohio, doesn’t have a credit rating. It was among the 64 local governments and utility systems that S&P Global Ratings withdrew ratings for this month for failing to file financial information on time. In March, the company put Marion and 148 other entities on a negative credit watch. The withdrawal is “catastrophic,” said Miranda Meginness, Marion’s auditor. “It’s hard for us to figure out how to go forward.”

What The Consulting Hiring Delays Mean For The MBA Class Of 2023? [Poets & Quants]
Reacting to WSJ’s news on LinkedIn, Linda Abraham, founder of MBA admission consultancy Accepted, writes about the importance of having a Plan B — and maybe even a Plan C, “not to mention resilience and flexibility.”

“The people hired by McKinsey & Company, Bain & Company, et al are highly talented. They picked these companies as much as these companies picked them,” Abraham writes. “However, after incurring the debt that most MBA students incur, and counting on the salary that newly minted MBAs at top consulting firms get, a delayed start date is probably a frustrating and maybe scary outcome.”, Urban Assembly, and New York City Public Schools Launch Program to Bring Financial Accounting to High School Students [PR Newswire]
The incomparable Kelly Richmond Pope of DePaul University is the course’s lead lecturer.
400 NYC public school students will have the opportunity to enroll in’s highly regarded Intro to Financial Accounting college course. These students will earn college credit and gain valuable skills and insights into what a future career could look like in the field of accounting. “At Urban Assembly, we believe in providing students with opportunities for career-connected learning that allows them to gain real-world skills while they’re still in high school,” said David Adams, Chief Executive Officer at Urban Assembly. “With generous support from the Deloitte Foundation, Urban Assembly will be able to contribute to a reimagined student experience that opens doors to promising careers.”


PCAOB reveals priorities for 2023 inspections [Journal of Accountancy]
The PCAOB shared its list of priorities for 2023 audit inspections in a staff report released Monday. “Increased deficiencies in 2021 inspections and increased comment forms in 2022 inspections revealed a troubling trend in audit quality, which we are tackling head-on in 2023,” PCAOB Chair Erica Y. Williams said in a news release. “By staying ahead of new and emerging risks, our inspections plan will hold firms accountable and drive improvements in audit quality for investors.”

Watchdog probes EY audit of [Financial Times]
EY faces two new investigations by the UK accounting watchdog, including one into its audit of the collapsed online furniture retailer, The Financial Reporting Council said on Thursday that its probe would cover EY’s audit of’s accounts for the year ended December 2021. It did not provide details on the focus of its investigation. EY was paid £1.4mn for its work for in 2021, according to the company’s accounts. The FRC’s new probe adds to the woes of the Big Four firm: it is already under investigation over its audits of Thomas Cook, NMC Health and London Capital & Finance, all of which have collapsed in recent years.

KPMG faces $1.4-billion lawsuit for alleged role in Bridging Finance’s collapse [The Globe and Mail]
Meanwhile, in Canada…
Bridging Finance Inc.’s receiver is suing KPMG LLP for $1.4-billion, alleging the accounting firm failed to adequately audit the private debt manager before its collapse in 2021. In a lawsuit filed with the Ontario Superior Court, PricewaterhouseCoopers Inc., the receiver, alleges that “throughout KPMG’s tenure, the Bridging funds materially misrepresented the value of their assets and financial performance. KPMG negligently failed to detect and report on these misstatements.”

Settlement between State and PwC over Quinn Insurance collapse to reach €83m [Irish Examiner]
A settlement between the Irish State and PwC over the collapse of Quinn Insurance will eventually amount to €83m, an Oireachtas committee has heard. The Public Accounts Committee (PAC) hearing on Thursday morning saw the Central Bank appear to discuss the Insurance Compensation Fund and an unauthorised breach of its own credit limits to the tune of €738m over the last October bank holiday. The settlement, meanwhile, between PwC and the Insurance Compensation Fund (ICF) was made in relation to a €1.1bn dispute regarding the collapse of the insurer — and the consultancy’s responsibility for auditing of its books.

Other Stuff

How a Federal Fraud Investigation Inspired This CPA to Become a Founder [Inc.]
Stephen Griffin never planned on getting into the crime-solving business–especially not in his 50s. Yet the founder and CEO of upstart forensic accounting firm Alley101 currently finds himself assisting multiple federal agencies in fraud-related investigations. It all started back in 2017, when Griffin, a former CPA, made an investment in Legacy Global Sports, a Boston-based conglomerate that ran youth sports leagues in more than 10 countries. From the start, Griffin couldn’t shake the feeling that something was off. Ever the accountant, he spent the year after his investment digging into the com­pany’s financials, an investigation that would lead to Griffin’s fellow board members installing him as CEO in November 2018. And that’s not even the juiciest part of the story.

Beleaguered Swiss Bank Accused of Impeding Hunt for Accounts Linked to Nazis [New York Times]
The Senate Budget Committee opened an investigation after Credit Suisse fired a lawyer it had hired to oversee an independent inquiry hunting for accounts linked to Nazis who went to Argentina.