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Friday Footnotes: Ex-CPA Leaves Clients in the Lurch Before Tax Day; EY Layoffs; More ERC Concerns | 4.12.24

dog with eyeglasses doing taxes
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.

Comments are closed on Friday Footnotes and the Monday Morning Accounting News Brief by default. If you have something to say about any stories linked here you are welcome to contact the editor or hit us up on Twitter @going_concern. See ya.

ICYMI: These are the most-read articles on Going Concern this week:

Tax Preparer Finds Out in the Worst Way Possible That ERC Wasn’t a Free Money Glitch
Survey Says: Which Group of Auditors Are Most Satisfied With Their Salaries?
For the Eighth Year in a Row, EY Is the Busiest Public Company Auditor
Mid-Tier Firms Are Kicking Big 4’s Ass on Fortune’s 2024 Best Companies to Work For List
The PCAOB Just Handed Out Its Biggest Fine to Date to Some KPMG Cheaters

Honorable mention: You Might Not Be Using Microsoft Teams Much Longer

Threats Ethics

Chair Williams Press Conference Remarks: The PCAOB Will Not Tolerate Cheating [PCAOB]
PCAOB Chair Erica Y. Williams made the following statement today at a virtual press conference:

Since 2021, the PCAOB has sanctioned nine registered firms for exam cheating.

I want to be very clear: The PCAOB will not tolerate exam cheating nor any other unethical behavior, period.

Impaired ethics erode trust and threaten the investor confidence our system relies on. The PCAOB will take action to hold firms accountable when they fail to enforce a culture of honesty and integrity.

This Board set a goal to strengthen PCAOB enforcement, and we are doing just that. As of today, the PCAOB has imposed $34 million in penalties this year alone, and it’s only April.

We set a record in 2022. We broke that record in 2023. And we are breaking it again today.

Let today’s news be a clear warning to those who break the rules – if you put investors at risk, there will be consequences.

Talent

‘Breakdown in services’ looms because of vacancies in Montreal’s finance department: report [Montreal Gazette]
With numerous job vacancies and several retirements on the horizon, the city of Montreal’s finance department is facing “an imminent risk of a lack of expertise for ongoing business management and a breakdown in services,” according to a report tabled at the last city council meeting. The city’s audit committee, a monitoring body that tracks the findings and recommendations of Montreal’s auditor general, comptroller general and external auditors, makes the observation in its latest annual report. “This situation worsened in 2023,” says the report, which was tabled in council in March. It notes that numerous finance department employees are planning to retire in the next two years and that the department’s employee retention rate “is very low.” While it doesn’t provide reasons for the department’s low retention rate and difficulty with recruitment, the report says understaffing has an impact on performance.

Accounting jobs are in high demand—many pay over $100,000 and can be done from home [CNBC]
Didn’t they write this same article a few months ago?
While the average mean salary for accountants in the U.S. is about $68,000, according to ZipRecruiter data, more experienced accountants stand to earn anywhere from $150,000 to upwards of $200,000 a year. Increased demand for accountants means that even entry-level candidates can command higher salaries, says Brandi Britton, a finance and accounting expert at Robert Half, who notes that at some firms, even those new to accounting can expect to earn at least $85,000.

PCAOB Proposes Turnover Metrics and Other New Disclosures for Audit Firms [Wall Street Journal]
The Public Company Accounting Oversight Board wants audit firms to disclose metrics on the involvement and turnover of their auditors and provide new details on fees and cybersecurity vulnerabilities, in a pair of proposals aimed at standardizing the information provided to investors. Audit firms currently must publicly identify the lead partner on the audits they perform and the other firms that helped with that work. Firms also annually share information such as a list of their public-company audit clients and the addresses of their offices. Some firms voluntarily disclose firm-level data such as average staff turnover and employee-survey results on culture, but the metrics aren’t consistent and widespread across firms. The board on Tuesday voted unanimously, 5-0, to require hundreds of firms to publicly disclose a set of 11 metrics, ranging from auditor turnover to partner involvement, workload and work experience. Firms would have to provide these metrics for both their individual audit efforts and overall audit practices, but there are exceptions.

This is your weekly reminder that Accountingfly has loads of accounting talent ready to get to work for you. Check out this week’s top remote accountants to browse the goods and sign up for Always-On Recruiting to gain full, free access to a pool of highly skilled and experienced remote accountants ready to join your team at no up-front cost.

News

Accounting firm and second company ordered to pay $26m over confidential information [ABC News Australia]
A regional Victorian accounting firm, its director and a second company he is involved in have been ordered to pay more than $26 million to two former clients after using confidential information to take advantage of a business opportunity. A Supreme Court justice found Ballarat-based firm Mulcahy and Co director James Mulcahy formed a company with others to buy a stake in Chris’s Body Builders after discussions with two clients about their intentions to purchase the Melbourne truck manufacturing business.

Tesla Korea makes accounting errors [The Chosun Daily]
Tesla Korea, the South Korean unit of U.S. electric carmaker Tesla, has failed to properly reflect fines in its financial statements and was issued a “qualified opinion” from an accounting firm on April 10. Tesla Korea was subjected to 25.1 billion won in corporate taxes, but its management team recorded the amount as a receivable in its financial statements. Tesla Korea disclosed on the same day that it had received a “qualified opinion” on the previous year’s financial statements from Taesung Accounting Corp., the auditor of Tesla Korea, about the company’s financial statements for last year.

Generative AI

Adobe’s ‘Ethical’ Firefly AI Was Trained on Midjourney Images [Bloomberg]
When Adobe Inc. released its Firefly image-generating software last year, the company said the artificial intelligence model was trained mainly on Adobe Stock, its database of hundreds of millions of licensed images. Firefly, Adobe said, was a “commercially safe” alternative to competitors like Midjourney, which learned by scraping pictures from across the internet. But behind the scenes, Adobe also was relying in part on AI-generated content to train Firefly, including from those same AI rivals. In numerous presentations and public posts about how Firefly is safer than the competition due to its training data, Adobe never made clear that its model actually used images from some of these same competitors.

GenAI risks and challenges for the economy [EY Parthenon]
The economic gains from GenAI could favor company profits at the expense of labor. As organizations adopt and absorb GenAI technologies, they may substitute capital for labor, which could lead to lower labor demand and reduce workers’ bargaining power. Moreover, rising market concentration as the GenAI industry becomes dominated by a few large businesses may lead to higher markups and result in a growing fraction of productivity gains accruing to a few corporations.

What changes minds on GenAI? Adopting it [PwC]
When it comes to the impact of generative AI on business, adopting is believing, according to PwC’s 27th Annual Global CEO Survey. Respondents whose companies have already started widely using the technology reported considerably more confidence than other CEOs in GenAI’s potential to improve the quality of products and services, build trust with stakeholders and change how the company creates value—even as it spurs major changes in the workforce and the competitive landscape.

Tax

The Employee Retention Credit: New IRS Initiatives Raise Legal Considerations for Employers [CPA Journal]
Employers and their advisors should carefully consider recent IRS initiatives concerning the Employee Retention Credit (ERC). Although the initiatives are primarily procedural, an employer’s decision about whether to proceed with or withdraw an ERC claim requires both legal and factual analysis.

Lenexa accountant’s office goes dark, leaving clients concerned with looming deadline [KCTV5]
This guy’s CPA license was revoked by the Kansas Board of Accountancy last year.
With less than a week left before the federal tax filing deadline, Doug Blattman is in panic mode. His longtime CPA suddenly stopped answering his calls. Now, he can’t get access to the documents he dropped off, and he’s not the only one. Blattman contacted KCTV5 to send a message to other clients who might be waiting. Blattman said he last reached Charles Allen at his Lenexa office on Friday. He said Allen told him he needed more time. Blattman returned Monday. The office was dark. The door was locked. Other clients were there as well with similar accounts, he said. Blattman said his main concern now is getting the paperwork he dropped off at the start so that he can try to get it to another tax preparer, though he doubts he can find someone to get to it in time. “Since his revocation, we have received numerous complaints from clients who are unable to contact him; are unable to get their records returned; and or have learned that their tax returns have not been filed for which he was engaged to complete,” Kansas Board of Accountancy executive director Susan Somers wrote. “Given that Charles Allen no longer has a certificate and permit, these complaints do not fall within the jurisdiction of the Board.”

How PwC teams work on a transformation project [PwC Netherlands]
Oh boy is this corny.
At PwC, colleagues continuously work on customer solutions and strive, preferably in a team, for the best and most future-proof result. Read the story of Charlotte, Leonardo, and Rajeev. All three of them worked together from different disciplines on a transformation project for Heineken.

Practice

AICPA and State CPA Societies Have ‘Grave Concerns’ with BOI Reporting [AICPA & CIMA]
In a recent letter to the Department of the Treasury and the Financial Crimes Enforcement Network (FinCEN), the American Institute of CPAs (AICPA), together with 54 state CPA societies, expressed serious concerns with the rollout and push to implement FinCEN’s Beneficial Ownership Information reporting requirement without regard for the impact to the small business community. The AICPA has submitted past letters to FinCEN and the U.S. Congress noting concerns about the constricted timeline for the small business community to understand the reporting requirement and urging caution regarding the failure to provide a reasonable timeframe for small businesses to comply with BOI for both new and existing entities. Additionally, the AICPA has raised concerns over the estimated burden hours and associated time-cost which has effectively become a 30-day tracking requirement.

EY analyst warns of growing industry pushback against ESG scoring [Mining.com]
The mining industry is re-evaluating ESG benchmarking due to its perceived burdensome nature and perceived misalignment with core business objectives, EY Canada’s mining and metals sector leader, Theo Yameogo, says. “There’s increased pushback against ESG (environmental, social and governance) benchmarking, for various reasons,” Yameogo told The Northern Miner’s western editor, Henry Lazenby, during last month’s Prospectors and Developers Association of Canada’s annual convention in Toronto. “Some I’ve heard say it is too costly, too complex, and really detracts from the core business of doing business.”

Big 4

EY Weighs Another 100 Job Cuts in Oceania, The Australian Reports [Bloomberg]
EY is mulling plans to trim another 100 jobs in its Oceania business, the latest sign of pressure in an industry that spans accounting, audit and consulting, according to The Australian. “In the event EY Oceania makes any workforce changes, our first and foremost priority will be to communicate with impacted people in our business, before updating stakeholders more broadly,” the firm said in an emailed statement. “We have not communicated any workforce changes with our people and will update the media if this occurs.”

Aaaand…

EY to cut 100-plus staff amid advisory downturn [Australian Financial Review]
Big four consulting firm EY is planning to cut more than 100 roles next week, or more than 1 per cent of its 10,000-strong workforce, due to the persistent downturn in the advisory market. The cuts follow the firm culling dozens of partners and more than 240 staff in the second half of 2023. The Australian Financial Review understands that the losses will mainly come from the consulting and financial advisory divisions with final numbers still being determined.

Top Cloud Executives to Watch in 2024: Deloitte Consulting’s Paul Baliff [WashingtonExec]
As Deloitte’s federal health sector cloud lead, “Paul advocates for his clients and collaborates with Cloud hyperscalers and Alliance Partners to develop innovative solutions that propel our clients’ missions securely and with the highest quality outcomes for their constituents,” said Nishita Henry, principal at Deloitte Consulting and global chief commercial officer of Amazon relationship.