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.
Talent
After a pandemic-era hiring binge, consulting firms are cutting back [Crain’s Chicago Business]
There’s a paywall but you kids are internet savvy.
After ramping up headcount during a post-pandemic rebound, consulting firms have been laying off staffers even as the economy continues to expand and unemployment steadies at levels not seen since the groovy ’60s. Thoughtworks, a 30-year-old Chicago-based consultant, has dismissed more than 1,000 employees — about 10% of its total — in two rounds of layoffs this year, culminating in red ink and a reorganization announced this week. Chicago’s West Monroe Partners has dispatched more than 430 professional staffers, nearly one in five. Accounting and advisory firm Grant Thornton trimmed about 3% of its ranks in June.
Firm Watch
SingerLewak Grows in Pacific Northwest With Acquisition [INSIDE Public Accounting]
Los Angeles-based IPA 100 firm SingerLewak (FY22 net revenue of $89.6 million) is merging in Hearthstone CPA Group of Bremerton, Wash.
MCM CPAs & Advisors Joins Cherry Bekaert [PR Newswire]
Cherry Bekaert (the Firm) is pleased to announce the completion of an acquisition transaction with MCM CPAs & Advisors LLP (MCM), a large regional accounting and advisory firm headquartered in Louisville, Kentucky, providing highly specialized services to a broad range of clients. MCM is the Southeast region’s eighth-largest accounting service provider based on Accounting Today’s Top 100 Firms ranking with ~370 employees and approximately $72 million in annual revenue. “The pairing of these two Top 100 accounting firms will bring together two organizations that are fully aligned in their core values and quality of client service,” said Allan D. Koltin, CEO of Koltin Consulting Group and an advisor on the acquisition. “MCM has a prominent reputation within the region and chose Cherry Bekaert because of their close cultural alignment and business outlooks for their team and their clients.”
New Eide Bailly partner: Firm blends national resources with family-friendly approach [Siouxfalls.business]
Normally we wouldn’t share paid promotion articles but this comment from a freshly minted Eide Bailly partner was funny.
What drew you to the field of accounting? “I am very much a left-brained individual, and I’ve always liked math and numbers. I walked onto Augustana’s campus as an accounting major because that seemed like a logical, solid career. My husband makes fun of my terrible mental math skills, but that is what calculators are for, and luckily there is much more to public accounting than doing math. I have learned that I love the problem-solving and window into clients’ businesses a lot more than just the numbers themselves.”
Tax
Location of millions of tax records uncertain, TIGTA says in IRS critique [Journal of Accountancy]
The IRS is uncertain about what happened to millions of tax records with sensitive information that could be used “to commit tax refund fraud identity theft,” the Treasury Inspector General for Tax Administration (TIGTA) said in a report posted Tuesday. At least 8,500 microfilm cartridges that were supposed to be transferred from Fresno, Calif., to Kansas City when a Fresno tax processing center closed in September 2021 have not been found, the report from the government watchdog said. The missing cartridges contain a mix of tax information about individuals and businesses. Also, the report said, the whereabouts of as many as 168 cartridges from a processing center in Ogden, Utah, are unknown. Each cartridge can hold up to 2,000 images, a vendor told TIGTA.
Office Space
Deloitte opens ‘future of work’ office in Edinburgh [Insider.co.uk]
Deloitte has opened a new ‘future of work’ office in Edinburgh. An internal survey found that 86% of staff ranked ‘collaborating with colleagues’ and ‘interacting with others’ in the top three ways they envisaged using the office. Douglas Farish, office senior partner for Edinburgh at Deloitte, said: “We listened to our people and incorporated what they wanted into the design of our new Edinburgh office. “The way we deliver work for our clients has evolved, so we needed to rethink our office environment based on how, when, and where we want to work to deliver the best for our clients’ needs. “We’ve created a very open and welcoming space for our people and clients, and it really is a physical manifestation of our culture – a place for collaboration, connection and innovation.” The office features open and transparent floors, 360-degree cameras for meetings and adjustable height desks, as well as ‘dancing’ walls in collaboration spaces that double as interactive screens to allow for easier presenting and workshops.
KPMG doubles in size, opens $6m office [The Fiji Times]
Since establishing the KPMG South Pacific Partners in 2021, with its Australian and PNG counterparts, KPMG Fiji has doubled in size. Speaking at the opening of the $6 million KPMG Fiji office in Nadi, KPMG Australia Managing Partner Naomi Mitchell said this was a very successful decision by the company. “KPMG Australia has a long and proud history of collaboration with Fiji that extends over four decades,” Ms Mitchell said. “In July, 2021, the firm established the KPMG South Pacific Partners made up of KPMG Fiji, KPMG PNG and KPMG Australia. “This has been a very successful decision with KPMG doubling in size since then assisting our growing client base in areas including audit services, advisory and business and tax advisory.”
Big 4
80% of bosses say they regret earlier return-to-office plans: ‘A lot of executives have egg on their faces’ [CNBC]
The companies that are seeing the most success with returning to the office appear to be the ones that are making decisions with their employees, rather than for them. Take Ernst & Young, for example. The global accounting and consulting firm weathered some employee criticism for its initial return-to-office announcement in June 2021, when the firm told employees that they would be encouraged to spend 40-60% of their time in the office. Their plan was put on pause through the end of the year as Covid-19 cases ticked up once again throughout the U.S., so EY leaders used that time to ask employees about their reluctance to come into the office. Common threads stood out to Frank Giampietro, EY’s chief wellbeing officer for the Americas: Employees weren’t sure what to do about pet care or child care. In response, EY announced a fund in February 2022 to reimburse up to $800 per year for commuting, pet care and dependent care costs for each of its 55,000-plus U.S. employees. The fund, which is ongoing, had an immediate positive impact on employees’ in-office attendance, Giampietro adds. Since EY first rolled out this benefit in February 2022, EY has seen a 150% uptick in office attendance across the U.S. “It didn’t take a complete rehaul of our return-to-office policies to make employees happy,” he says. “We just needed to listen to our people and understand what, specifically, was problematic for them, and offer resources to address that.”
Big Four: AI will augment, not replace, accountants [Accounting Today]
The Big Four do not intend to replace human accountants with artificial intelligence anytime soon — and even if they wanted to, firm leaders concede the technology isn’t yet at the level where they could contemplate doing so. This is despite each of the four largest firms making billions of dollars of investments in the sector over the past year. Instead, the focus at each of the firms seems to be more on augmentation versus full automation. Cliff Justice, KPMG U.S. enterprise innovation leader, said right now the firm is thinking of AI in terms of increasing the efficiency and productivity of human accountants, enabling them to concentrate on broad strategic thinking while computers take care of routine tasks like data entry. This is because accounting is more than these routine tasks; despite advancements in AI, Justice believes the human element will remain essential in the profession. “It won’t replace the human at the human-to-human interaction level,” he said. “It doesn’t ideate, it doesn’t create innovations by itself.”
Federal judge ends attorney’s attempt to funnel class action money to UT Knoxville [Knoxville News Sentinel]
This story is related to a multiyear lawsuit against KPMG by investors of the now-defunct oil and gas company Miller Energy Resources Inc, we last wrote about it in 2021.
A federal judge has closed the door on an attempt by prominent Tennessee attorney Gordon Ball to send unclaimed cash from a class action lawsuit to the University of Tennessee at Knoxville. U.S. District Judge Thomas Varlan’s decision was brief. He simply signed off on an opinion written by Magistrate Judge Debra Poplin, who suggested in July Ball should not be allowed to shepherd unclaimed money from a lawsuit over shoddy auditing by an international accounting firm to the Neel Corporate Governance Center at UT. Ball’s effort was opposed by a law firm that also took on the accounting firm, but wanted unclaimed reward money to go to a consumer advocacy group that works on behalf of people nationwide. The dollars at stake haven’t been finalized, but $23.4 million was set aside for victims of the accounting firm, and it’s common for substantial sums to be left after victims have been identified and given a chance to secure their portion.
Ex-PwC CEO in $2m taxpayer bonanza [The Klaxon]
The private company of the PwC CEO for the entire tax leaks affair has been given millions of dollars in new Federal Government contracts — and is being awarded them at three times the rate it was before the government’s “crackdown” in May. In the past two months, five new contracts to Luke Sayers’ Sayers Group, totalling $1.955 million, have been reported on Federal Government procurement site AusTender — with the latest just last week. On August 4 the Department of Climate Change & Energy reported it had given Sayers Group a new $572,000 contract for “management support services”. That same department started an $82,500 contract with Sayers Group — for “management advisory services” — on May 22, AusTender records show. Sayers was PWC Australia CEO from 2012 until May 2020, and so boss of the company for the entire period it was illegally sharing and selling Federal Government tax policy secrets, in one of the biggest corporate scandals in Australian history. Like PwC, Sayers Group, founded by Sayers in 2020, cashes in on government “outsourcing”, making large sums of money providing services previously undertaken by the public service. Sayers Group employs many former PwC partners and staff.
PwC lost track of number of client privilege claims allegedly used to stymie ATO investigations [The Guardian]
PwC Australia lost track of who prepared dozens of client privilege claims that blocked the Australian Tax Office from gathering evidence for its investigations, a Senate inquiry has heard. Earlier this week, the ATO published a timeline of the PwC scandal that confirmed years of frustration at the firm over allegedly withholding information related to multinational tax avoidance. As part of an ongoing Senate inquiry, Greens senator Barbara Pocock had asked the firm how many times its former general counsel had prepared or been involved in legal professional privilege claims made to the ATO between 2016 and 2020. In response, PwC Australia said it received at least 46 notices from the ATO requiring them to produce documents and information during this period. The orders related to ATO investigations concerning PwC and, in some cases, PwC’s clients. PwC was unable to provide a figure.
CFOs
Commanders hire Craig Fischer as chief financial officer [Washington Post]
The Washington Commanders named Craig Fischer their chief financial officer, according to three people with knowledge of the move. Previously CFO at Hemisphere Media Group, a Spanish-language media company based in Florida, Fischer is the first executive hire by new Commanders owner Josh Harris and a significant one; an investigation led by former SEC attorney Mary Jo White found the franchise and former owner Daniel Snyder intentionally shielded revenue from other team owners and withheld refundable deposits from season ticket holders. Two people with knowledge of the hire said the team had been interviewing candidates for months, but a move couldn’t be made until the ownership transition was finalized. Fischer started with the Commanders on July 24, according to one of the people knowledgeable about the hire, four days after NFL owners unanimously approved the $6.05 billion sale of the Commanders to Harris and his group of approximately 20 limited partners.
Pot firm says ex-CFO wrongly racked up over $350K in personal charges [CFO Dive]
Quincy, Florida-based Trulieve Cannabis is weighing next steps after an audit committee investigation into “irregularities” related to its former CFO Alex D’Amico’s expenses and use of corporate credit cards uncovered conduct that was “inconsistent with the company’s policies and procedures,” according to the findings included in the company’s 10-Q filed with the Securities and Exchange Commission Wednesday.
Who is new Tesla CFO Vaibhav Taneja? Wall Street favorite Zach Kirkhorn’s replacement is largely a blank slate for investors [Fortune]
Until Monday, Tesla executive Vaibhav Taneja was just another name adorning the occasional regulatory filing—even for the EV giant’s investors. As chief accounting officer, the 45-year-old is an insider privy to the financial secrets of Tesla and therefore subject to disclosure whenever he bought and sold shares in the company. Beyond the Form 4s he filed to disclose share movements, in which he most recently liquidated stock options worth a cool $1 million, he otherwise could have been a ghost. And forget about any fingerprints left on social media. Taneja, who keeps a low profile and hasn’t even posted the announcement on his own bare-bones LinkedIn page, joined Tesla by default through its $2.6 billion acquisition of SolarCity in 2016. He led the accounting team integration, eventually becoming corporate controller. When Kirkhorn was bumped up to the C-suite in March 2019, Taneja earned his own promotion to head of accounting for the carmaker. Prior to that, he’d spent a near 17-year career at top four accounting firm PricewaterhouseCoopers, where one of his skills would later prove very valuable for Tesla.
Rules and Regs
PCAOB Faces Competing Requests in Revising Audit Requirements for Non-Compliance with Laws and Regulations [Thomson Reuters]
Judging by the unusually high number of comment letters the Public Company Accounting Oversight Board (PCAOB) has received—121 as of Aug. 10, 2023—the board has a lot of work to do before it can finalize a proposal aimed at strengthening its standard to require public company auditors to more proactively identify, evaluate and communicate instances of a company’s non-compliance with laws and regulations (NOCLAR). While Thomson Reuters has not done a complete comment letter tally of all standard-setting projects during the board’s 20-year history, the PCAOB has usually gotten much fewer than 100 comment letters, largely ranging from about 20 to 50. There have been a few exceptions, for example, when the board took seven years to write a rule that expanded the auditor’s report to go beyond the pass-fail model that had been in place for 70 years. Auditors today disclose critical audit matters.
FASB’s ‘complex’ loss accounting change warrants extra time, insurer group says [CFO Dive]
The American Council of Life Insurers has joined the Securities Industry and Financial Markets Association— a powerful trade group that represents broker-dealers, investment banks and asset managers — in asking the Financial Accounting Standards Board to extend the public comment period on a proposed change of how companies report credit losses. ACLI’s Mike Monahan, senior director of accounting policy for the insurers’ trade group, is asking the standard-setting board to extend the current comment period deadline to Nov. 15 from Aug. 28, noting that the current period coincides with quarter-end reporting for members, a busy time for life insurers who will not be able to focus on the matter until after mid-August when 10-Qs are issued despite the expected credit loss impairment being an important topic for life companies. For a less complex proposal, that comment time for the accounting standards update might be enough, “but the Proposed ASU impacts CECL accounting, which was a significant new standard for the life insurance industry.”
Climate?
Deloitte Named a Leader in Climate Change Consulting by Independent Research Firm [PR Newswire]
Deloitte has been recognized as a leader for climate change consulting services, according to Verdantix’s report Green Quadrant: Climate Change Consulting 2023. Verdantix, an independent analyst firm, evaluated 15 climate change consulting providers and named Deloitte as one of the leading providers with comprehensive capabilities. Deloitte received the top score for vision, strategy and innovation. Verdantix’s analysis benchmarks climate change consulting offerings against four categories: climate resilience strategy and implementation; net-zero carbon strategy and implementation; climate data management and disclosures; and asset-level decarbonization. Verdantix defines climate change consulting as “services, comprising skilled professionals, methodologies and data resources that support corporates on their journey towards decarbonization and climate resilience, encompassing strategy, operations, opportunities and risk.”
KPMG: More than half of firms have canceled M&A deals because of ESG findings [Consulting.us]
More than half (53%) of investors have canceled M&A deals because of material findings in environmental, social, and governance (ESG) due diligence, KPMG’s 2023 ESG Due Diligence study found. The research surveyed 200 US ESG practitioners, including corporate and financial investors and M&A debt providers.
City officials to begin contract negotiations for pro-bono services from global accounting firm KPMG [The Ithaca Voice]
Ithaca city officials will begin negotiating a contract to receive pro-bono services from KPMG, one of the largest accounting firms in the world by revenue. The company has offered to do a range of work for the City of Ithaca, including flood risk modeling. The enticing offer comes as a part of the company’s Net Zero Urban Program. KPMG announced the program in 2022 as an effort to expand its presence in the field of city decarbonization — an initiative which the city of Ithaca has gained some international attention for its building electrification program. On Wednesday, Common Council authorized negotiations to begin with KPMG in an 8-1 vote. Representatives of KPMG initially expressed interest in Ithaca for its building electrification initiative, according to Rebecca Evans, the city of Ithaca’s Director of Sustainability. But Evans told Common Council Wednesday that it is apparent that “flooding is top of mind for our residents.” Considering that, Evans said she and other city officials told KPMG they would prefer the work focus on flood mitigation.
