September 24, 2022

Friday Footnotes: EY Split Drags Out; Advisory Firm Defrauds Clients; Student Loan Forgiveness and Taxes | 9.2.22

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Ed. note: Although Going Concern observes Labor Day because our handlers are not monsters, we’ll be back Monday as usual. See you then and have a wonderful weekend (hopefully it’s a three-day one for at least some of you).

Firm Watch

EY’s talks on potential split to continue into Autumn [City A.M.] EY’s talks on whether to separate its audit segment from its consulting arm are set to continue into this Autumn – despite initial suggestions the Big Four firm could reach a decision by the end of summer. The accounting firm’s internal negotiations over plans to split out its advisory business, in an effort to free itself of any conflicts-of-interest issues that prevent it from selling consultancy services to audit clients, will continue over the coming months, Financial News reported.

KPMG UK unveils executive committee reshuffle [Accountancy Today] KPMG UK has announced a raft of new executive committee appointments, effective 1 October, which will reportedly support its strategy and growth under Jon Holt’s leadership.

Historic building near Dallas Fair Park is new digs for accounting firm [Dallas Morning News] “To accommodate the growing head count and dynamic growth, Embark is excited to announce it will be relocating the firm’s headquarters to its first dedicated building,” a spokesman for the firm said in an email. “The new 36,000-square-foot office will have a podcast studio, golf simulator, pingpong table and other features.”

Accounting firm opens new office in LaPorte [The Times of Northwest Indiana] “The field of accounting has undergone significant change since our company began operating 30 years ago. Our firm now has the capacity to provide a much more diverse range of business and personal services than ever before, and our growing team of talented professionals leverages new and emerging skills to help our clients succeed,” said Robert Lange, III, CPA and Managing Partner of CLH.

SEC

SEC Charges Advisory Firm and Executives with Devising an Elaborate Scheme to Defraud Clients out of More Than $75 Million [SEC] The Securities and Exchange Commission today charged two North Carolina-based executives, Gregory E. Lindberg and Christopher Herwig, and their Malta-based registered investment adviser, Standard Advisory Services Limited, for defrauding clients out of more than $75 million through undisclosed transactions that benefited themselves and their companies. According to the SEC’s complaint, from July 2017 through 2018, Lindberg and Herwig, through Standard Advisory, breached their fiduciary duties to their advisory clients by fraudulently causing them to engage in undisclosed related-party transactions that were not in the best interest of their clients. The SEC’s complaint further alleges that the defendants misappropriated more than $57 million in client funds and that Standard Advisory collected more than $21.4 million in advisory fees generated in connection with these schemes. In an attempt to conceal the fraud, Lindberg allegedly orchestrated the schemes through complex investment structures and a web of affiliate companies and allegedly used the proceeds to pay themselves or to divert the funds to Lindberg’s other businesses.

CHS avoids fine in SEC accounting fraud case [Compliance Week] A Minnesota-based agricultural cooperative settled charges levied by the Securities and Exchange Commission (SEC) that the company violated federal securities laws when it filed materially false financial statements with the agency over five years. CHS is a global agribusiness owned by farmers, ranchers, and cooperatives across the United States, according to its website. In its settlement with the SEC, the company agreed to cease and desist from future violations of federal securities laws but was not fined or otherwise penalized.

Accounting Firm M&A

Pinion and Anderson ZurMuehlen to Merge Firms [CPA Practice Advisor] Pinion, formerly KCoe Isom, and Anderson ZurMuehlen, two U.S. accounting and business advisory firms, have announced their intent to combine, effective January 1, 2023. The two companies will expand their footprint under the Pinion name and provide enhanced business advisory and accounting services for clients.

Audit

Three Reasons the PCAOB’s Agreement With China May Not Have Changed the Landscape [JD Supra] After months of closed-door negotiations, the Public Company Accounting Oversight Board (PCAOB) announced on Friday that it has entered into a Statement of Protocol with the China Securities Regulatory Commission (CSRC) and the Ministry of Finance of the People’s Republic of China (PRC).1 The Statement of Protocol creates a pathway for companies based in China and Hong Kong to remain listed on US exchanges past 2024, notwithstanding the Holding Foreign Companies Accountable Act (HFCAA) adopted in 2020. Despite this milestone, there are at least three reasons why this agreement may not be as significant as the press reporting suggests.

Audit under fire: Is the worst yet to come? [AccountancyAge] Auditors have been feeling the heat recently after a series of high-profile failures, but what lies ahead and are they solely to blame?

China securities regulator says will implement Sino-U.S. audit deal [Reuters] China will implement an audit agreement with the United States announced last week and will strengthen communication with foreign investors, a senior Chinese securities regulatory official said on Friday.

Town of Manteo warns of auditing scam [The Outer Banks Voice] There has been a report of fraudulent activity where a local business received a call from someone who they thought was a Town of Manteo employee. The individual stated it was time to perform an annual audit of the business. Audits of private businesses are not performed by The Town of Manteo nor its employees. In addition, the local business was asked to count their cash drawer and then make cash deposits via barcodes provided to them through an app. Lastly, they told the employee it was okay to close the store for the day so the audit could be performed.

Tax

More States To Join The Flat Tax Club [Forbes] After lawmakers in nearly 10 states enacted income tax cuts in the first half of 2022, a string of special sessions in the second half of the year is resulting in further income tax relief and strengthening the recent trend of states moving from graduated to flat income taxes. Most recently, Idaho legislators returned to the state capital in Boise on the first day of September for a special session called by Governor Brad Little (R) for the purpose of making Idaho the newest flat tax state.

Student Loan Forgiveness Means Higher Taxes in North Carolina — and Possibly 4 Other States [CNET] If your student loans will be forgiven, either through President Joe Biden’s recent announcement, Public Service Loan Forgiveness or another program, here’s everything you need to know about your student loans and taxes, as well as some additional deductions and credits that could lower your tax bill in 2023.

The witnesses missing from tax hearings: average taxpayers [The Hill] As Congress raced to pass long-stalled health, climate and tax legislation this summer, Democrats advanced the country’s latest update to U.S. tax laws, giving the IRS $15 million to design a free “e-file” tax return system. However, over the course of several months working on the legislation, on no occasions were working Americans asked in hearings before the main tax writing and tax collection oversight committees in Congress to describe or comment on the personal administrative work of filing their yearly taxes.

What Reddit’s Been Up To This Week

Long (and Frankly a Little Weird) Read

‘Little girl’ running Kenya’s Big Four accounting firm [Business Daily Africa] You do not know the true meaning of the expression ‘bang on time’ until you meet with Anne Muraya. At precisely 10am she walks into the Bambara lounge at Nairobi Serena. Not a minute shy of 10am but right on the stroke of 10am. “My dad was in the military,” she explain. “It teaches you something about time; yours and others.” She is deceptively petite with a shock of silver hair that gives her a very royal aura, like one of those old photos of phenomenal women who did unimaginable things in history books. But phenomenal is a glove that fits her description all right having made the first female CEO for Deloitte East Africa in June this year and also having been the first female East Africa Audit Leader and managing director for Responsible Business and Public Policy for Africa for the same company. Anne keeps winning.

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