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February 2, 2023

Friday Footnotes: EY Money Troubles; Fast Food > Public Accounting; From Athlete to Associate; | 12.16.22

Big 4

EY Looks at Backup Plans on Split Amid Higher Costs, Slower Growth [Wall Street Journal]
Ernst & Young’s leaders are looking at backup plans for the firm’s split to address rising funding costs and a potential slowdown in growth that could imperil the rich payouts promised to partners, according to people familiar with the matter. Leaders of the accounting powerhouse are talking to private-equity firms as they draw up plans for the sale of EY’s consulting arm, the people familiar with the matter said. Options include using private debt, which would involve private-equity funds in an initial public offering, or delaying the effort beyond the current target at the end of 2023, the people said. The money is supposed to be raised by the consulting firm through an initial public offering and by borrowing. Higher interest rates and lower valuations on IPOs could force EY to lower partner payouts or leave the consulting firm saddled with heavier financial obligations.

PwC launches program to support elite athletes in future careers [Consultancy.com.au]
PwC’s new elite athletes’ program will provide sportspeople with flexible employment and professional development opportunities to help prepare for a life after sport. The initial pilot, designed in conjunction with the Queensland Academy of Sport, will run for twelve weeks in Brisbane with six participants, including two Paralympians, an Olympian, and three aspiring competitors. According to PwC, the program participants will all be working on current, client-facing projects while being integrated into the working team to gain corporate knowledge and experience. Meanwhile, the athletes in turn will be able to schedule work responsibilities around their training and competition, with PwC to further provide support in planning for a career after sport with a view to future full-time employment at the firm.

Deloitte govt contracts soar 67% since pandemic to $324m [InnovationAus]
The Australian government paid Deloitte more than $324 million last financial year, representing a staggering $130 million or 67 per cent increase in federal outsourcing to the company since the pandemic began. The 2021/22 payments include $14 million from an Industry department contract the Audit Office has found to have been “tailored” to company, and massive deals with the country’s cyber spy agency and Defence. These three contracts alone paid Deloitte more than $123,000 every single day last year – just under $45 million in total.

The Fed is really worried we’re going to hit a floor in inflation that’s too high, says KPMG’s Diane Swonk [CNBC]
We will continue to post Diane Swonk videos because we know Grant Thornton is still butthurt about losing her to KPMG.

CFOs Convey Cautious Outlook for 2023, as Pessimism Over Economic Conditions Prevails: Deloitte CFO Signals™ Survey 4Q 2022 [PR Newswire]
The proportion of CFOs feeling pessimistic about their companies’ financial prospects increased to 41% this quarter from 37% in 3Q22. Nearly three-quarters (74%) of CFOs expect talent/labor costs to increase substantially in the year ahead. Meanwhile, CFOs lowered their growth expectations for revenue, which decreased to 4.2% from 6.2%, and earnings, which dropped to 2.9% from 6.4%.

Audit

Quiz: Test your remote audit knowledge [Journal of Accountancy]
Remote audits are the new norm for firms for many strategic reasons. They may save time and costs, reduce travel, or boost employee retention, among other advantages. Think you have what it takes to perform a successful remote audit? Find out in this short quiz.

Bro what?

BDO Governance Lapses Detailed in Expanded Inspection Reports [Bloomberg Tax]
BDO USA LLP failed to supervise its audits properly, and its professionals weren’t skeptical enough of corporate managers, thus falling short of US audit governance standards, according to newly released details about the firm’s regulatory inspections.

Reports:

Crypto

Audits could solve crypto’s transparency problem. Why is that so hard? [Fortune Crypto]
Writes Jeff John Roberts: All this raises the question of why, if they are looking to build trust, Binance and the others didn’t hire one of the Big Four accounting firms to conduct their audits. Is it because they didn’t want the level of scrutiny those firms would provide? Or is it because the firms can’t or won’t conduct a proper crypto audit?

I put the question to Twitter and was surprised at the number of responses received. The CEO of Coinbase replied that the company uses Deloitte, while Tezos’s cofounder told me her project uses PwC—with both adding that these firms are risk averse and picky when it comes to taking on clients. Meanwhile, a senior executive at Uniswap Labs informed me the DeFi giant works with Deloitte but added that she is frustrated at how difficult it is for early-stage crypto companies to find accounting firms. The blockchain head at EY directed me to a tweet saying his team had examined the Binance report and that the numbers in it—those made available—did add up. (KPMG completes the Big Four.)

This suggests that, unlike the earlier days of crypto, the major players in the accounting profession are capable of providing their services to blockchain companies, but that they could do more to make these services widely available. It would be even better if they could come up with a common methodology of what amounts to a sufficient audit and push the profession’s oversight body, FASB, which only recently moved to recognize crypto as a distinct asset, to help in the process.

The trouble with auditing crypto firms [ICAEW Insights]
Cryptocurrency business models pose a unique set of challenges for audit and assurance, predominantly stemming from the nature of crypto assets themselves, which can be hard to verify. Proving ownership can also be tricky; custody arrangements can differ greatly and the complexity of cryptographic keys raise questions around who actually controls an asset. The price of certain crypto assets, particularly cryptocurrencies, can also be extremely volatile. Ownership may provide the holder with some benefit – eg as a medium of exchange in some transactions – but generally there is no intrinsic value to the assets, nor are they backed by more conventional financial assets or a fiat currency. The price is driven by speculation and anticipation akin to tulip bulbs in 17th century Amsterdam. This makes auditing the assets’ value very difficult.

ICYMI: Mazars and Armanino Just Abruptly Stopped Working For Crypto Clients [GC]

On the subject of crypto, Accountingfly is looking for a senior associate to fill this remote blockchain/digital assets job. Is it you?

Salaries, Talent, and Exit Opportunities

When Flipping Burgers Beats Being an Accountant, You Know There’s a Problem [CPA Practice Advisor]
Writes Garrett Wagner: Imagine a world where a CPA enjoyed his time working at a fast food restaurant more than he enjoys working at his current large regional accounting firm. That’s exactly the story that was shared with me this Fall as I led a leadership training program, and this comment stopped the entire training program right in its tracks, and for good reason. I think we can all agree that something just doesn’t seem right about having a better work experience at a fast food joint than an esteemed accounting firm, but sadly this story is far too common. His experience illuminates an issue pervading our entire profession; accounting firms are suffering from poor workplace culture and show no signs of making any changes.

ICYMI: I am a recruiter with a focus on remote and hybrid work AMA [r/accounting]

Does it pay to be an accountant? The numbers don’t lie! [Accountants Daily]
Say cap: Overall, accountants enjoy a higher salary than the average Australian. However, this gap has been decreasing. In 2006, the average full-time weekly earnings for accountants were 35 per cent higher than the comparable figure for all workers. By 2021, this gap had reduced to 17 per cent. While this figure is still large, it shows that many other professions are catching up to the historically prestigious wages of accountants.

Related:

A couple in their 20s quit their ‘Big 4’ accounting jobs and now earn up to $19,000 a month creating online content. They explain how they turned a side hustle into a lucrative business that is helping them achieve financial freedom. [Insider]
Big 4 to YouTubeSteph Gordon, 26, and Den Mathu, 27, had a set plan to achieve financial independence: They both landed jobs at “Big 4” accounting firms in their early 20s, had been gradually climbing the ladder, and were methodically increasing their savings rates with each raise. Gordon was working in HR at PricewaterhouseCoopers, while Mathu was a consultant at Deloitte. Their plan changed course in the fall of 2021, when they quit their day jobs to turn their side project — making YouTube videos about navigating their careers and finances — into a full-fledged business. While they still wanted to build a seven-figure net worth, they realized they might be able to do so quicker by working for themselves rather than for somebody else — and, so far, they’ve been right.

Podcasts

The CPA’s guide to technology (and tech gifts) [Journal of Accountancy podcast]

Latest Accounting Jobs--Apply Now:

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