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.
CPA Exam
Friendly reminder, deadlines to apply for BEC before the new exam in 2024 are quickly approaching. Those sitting for BEC for the first time have until Monday to do so in most jurisdictions. Get on it.
CPA Exam Candidates: You Better Hurry Up and Apply For BEC Before It’s Gone Forever
Also, WTF?
Office Space
PwC looks to exit Downtown for office in West San Jose [The Real Deal]
Downtown San Jose has one more business casualty that could head west: PwC. The London-based global accounting firm officially known as PricewaterhouseCoopers International is in talks to lease three floors at a new office building at 3155 Olsen Drive, across from Santana Row in West San Jose, the San Jose Mercury News reported, citing unidentified sources.
Another big name is moving to 200 Public Square [Crain’s Cleveland Business]
Add the Grant Thornton LLP Cleveland office to the ranks of companies committing to remain downtown, though in a different skyscraper and a smaller office. The accounting and advisory firm in an email said it plans to move its office from One Cleveland Center (1375 E. Ninth St) to the 10th floor of 200 Public Square on Monday, Oct. 2.
What CPAs can learn from Smucker’s [Accounting Today Voices]
J.M. Smucker — makers of Smucker’s jam, Folger’s coffee and Jif peanut butter — has an innovative return to office policy. The company expects each of its roughly 1,300 Orrville, Ohio-based corporate workers to be on site for 22 “core” weeks a year. For the other 30 weeks of the year, they can live and work anywhere they choose, as long as they get their jobs done and pay their own way to Orrville when they need to be onsite.
Big 4
‘Shadow’ culture at consulting giant PwC led to tax-leaks scandal: Ziggy Switkowski [News.com.au]
Consulting giant PwC has been savaged in an independent review that exposed the firm’s “shadow” culture contributing to its infamous tax leaks scandal. The review, run by former Telstra boss Ziggy Switkowski, was tasked with investigating revelations earlier this year that the firm’s former tax partner Peter Collins shared confidential information within the firm regarding multinational tax measures it was helping Treasury to develop in 2015. The accounting firm subsequently used the information to advise clients on how to sidestep the tax changes. The review’s report, released on Monday, paints a brutal and unaccountable culture atop the big four firm, which is driven by a “growth at all costs” mantra with a myopic focus on “revenue, revenue, revenue”.
EY sets up six-way race to lead firm after break-up failure [Financial Times]
The candidates include the leader of EY’s Canadian business and the heads of its American consulting and financial services practices, said people familiar with the list, setting up multiple challenges to the early frontrunner Andy Baldwin, a longtime Di Sibio deputy.
KPMG offered video game training to some employees. They brought 16% more clients and 36% more in revenue-generating fees [Fortune]
One study from researchers at Harvard Business School and Columbia Business School analyzing the effects of a specific gamified training platform at professional services firm KPMG was able to gauge how practical this training is over a long-term period.
The researchers studied a training platform, KPMG Globerunner, used by client-facing employees at 24 KPMG global offices over 29 months to help employees learn more about the firm and its services. After creating a video game character, players “travel” around the globe, answering questions about the firm and earning points for every question answered correctly. Players receive instant feedback and a detailed explanation of questions answered incorrectly. To gauge the effectiveness of the gamified training, researchers analyzed several variables, including changes in fees collected (a revenue generator for the firm), the number of clients served, and the total number of new business opportunities per office. The study found that the gamified training led to a 36% increase in fees collected by participating offices, a 16% increase in clients, and a 22% increase in business opportunities with new clients.
Average income of Deloitte UK partners tops £1m for third year in a row [The Guardian]
The average income of Deloitte’s more than 640 equity partners in the UK rose to £1.1m this year, despite a recent slowdown in spending and company deals. Deloitte UK said revenue grew 14% to £5.6bn in the year to May, as buoyant markets in the first six months of its financial year bolstered demand for audit and advisory work. It helped offset the “increased caution” among more cash-strapped clients and a slowdown in merger and acquisition activity in the months that followed.
(Reminder: Layoff Watch ’23: Deloitte UK Cuts More Than 800 People Because Business is Slow and People Aren’t Quitting, September 13, 2023)
Audit
China Evergrande’s Rise, Massive Default and Debt Restructuring [Washington Post]
Prism, a small accounting firm named as Evergrande’s auditor in January, added a disclaimer of opinion to Evergrande’s full-year accounts 2021 and 2022, saying it’s unable to obtain sufficient and appropriate audit evidence. Prism didn’t issue a conclusion on the earnings report for the first half of 2023, citing multiple uncertainties. Still, the results give offshore bondholders something to chew on.
75% of companies unprepared for coming ESG audits: KPMG [CFO Dive]
Three out of four companies worldwide are unprepared for regulations coming into force next year requiring outside audits of environmental, social and governance policies, KPMG said. Although roughly half of companies (52%) subject their ESG disclosures to an audit, only 30% of those respondents say that they attain “limited” or “reasonable” compliance with coming audit standards, KPMG found in a survey of 750 companies across regions, industries and revenue sizes. “While most companies have been doing some voluntary reporting on sustainability issues, they typically didn’t subject that reporting to the same rigor, controls and oversight that will be needed to meet the new regulatory requirements to be assured,” Mike Shannon, KPMG’s global head of ESG audit, said Monday in a statement.
The IIA Applauds Improvements in PCAOB’s Updated Confirmations Auditing Standard [PR Newswire]
The Institute of Internal Auditors (The IIA) – the internal audit profession’s leader in standards, certifications, education, research, and technical guidance worldwide – applauds the Public Company Accounting Oversight Board (PCAOB) for incorporating requested changes in the final issuance of their revised auditing standard, “The Auditor’s Use of Confirmation, and Other Proposed Amendments to PCAOB Standards.” The updated version, issued on September 28th, removes problematic language which could be construed as indicating that internal auditors are not inherently trustworthy and unable to exercise due care in the performance of their duties. The IIA took issue with these perceived attacks on the internal audit profession’s integrity and publicly opposed the draft in a comment letter [PDF] submitted to the PCAOB earlier this year. The IIA also discussed the rationale for their feedback in various meetings with the Board’s members.
SPAC Audit Kings: How Soaring IPO Market Ensnared Marcum, Withum [Bloomberg Tax]
The fortunes of two mid-sized accounting firms rose and fell with the SPAC craze, sending auditors into overdrive as they vetted the financial statements of a surge of blank-check companies hunting for Wall Street’s next big deal. Those two firms, Marcum LLP and Withum Smith+Brown PC, reaped millions in special purpose acquisition company audit fees. As their revenues soared, so did their workloads. Missed deadlines and pervasive errors mounted as overloaded partners churned out audit after audit, a Bloomberg Tax analysis found. Now that work is under scrutiny as regulators pursue SPAC auditors for shoddy work and craft rules to put tighter restrictions on blank check companies. Those rules from the Securities and Exchange Commission, aimed at preventing future investor losses, could be coming as soon as this fall.
Expanding Audit Practices Too Quickly Opens the Door to Danger [Bloomberg Law]
Bloomberg Tax reported in October that more than 90% of SPACs were trading below their initial price of $10 a share, and one in six was trading below $1. Objectively, if 90% of SPACs have lost value, you should expect a raft of lawsuits addressing this problem. Something systematic is going on here, either in misunderstood risk by investors or a lack of disclosure by companies. But no rational person wants to invest in a space where 90% of the companies lose value. And CPAs in this space know what that means in terms of legal exposure. Rapid growth is great news for accounting firms. But when it takes place in situations of significant information asymmetry between companies and investors, CPA firms should beware. SPACs are a classic example because no one even knows what company will be plugged into the SPAC when the initial investments are made.
PCAOB fines Deloitte affiliate $900,000 [CFO Dive]
The Public Company Accounting Oversight Board fined Colombia-based Deloitte & Touche S.A.S. $900,000 for lax quality controls, a failure to ensure auditor independence and other errors in a 2016 audit. After providing the audit, several employees at the firm, also known as DT Colombia, obtained more evidence, “substantially” altered documentation and performed additional work on the audit, the PCAOB said Wednesday. DT Colombia’s quality control system failed to prevent or detect the violations.
People
Using belonging to navigate gender imbalances in local and global tax & accounting markets [Thomson Reuters]
How can tax & accounting firms better use concepts like “belonging” and “inclusion” to help guide women through the gender imbalances that still exist in the workplace?
Jayapal, Warren Call on IRS to Address Revolving Door Between IRS and Giant Accounting Firms After Troubling Inspector General Findings [Rep. Jayapal]
United States Representative Pramila Jayapal (D-Wash.) and United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Finance Committee, sent a letter to Daniel Werfel, Commissioner of the Internal Revenue Service (IRS), following the release of a troubling report from the Treasury Inspector General for Tax Administration (TIGTA) regarding its investigation into conflict-of-interest issues at the IRS. The lawmakers are calling on Commissioner Werfel to take additional action to address the abuse of the revolving door between giant accounting firms and the IRS, which threatens the important work of the agency. “We are pleased that the IRS agreed with and moved to implement the two recommendations from TIGTA’s review. However, we believe additional action is necessary and have introduced legislation to stop big corporations from manipulating the government and the American tax system with revolving-door schemes… Even without new legislation, however, the IRS has the power to address conflict-of interest issues at the agency,” wrote the lawmakers.
If you’re hiring, here are the top remote accounting candidates of the week for September 28. Here’s just one such candidate:
CPA with 15+ Years at One Firm, Strong Advisory Skills
- FT Advisory & Tax (Permanent)
- Experience (years): 15+, all in public accounting, all at the same firm
- Work experience (highlight): Responsible for managing client accounts, prep, review, and audit of financial statements, review of bookkeeper work, payroll management, and outsourced CFO and Controller functions; also significant tax responsibility including preparing and reviewing 1040, 1041, 1065, 1120, 1120S, and 990 tax returns; also more complex tax returns (multiple partnerships, corporations with locations in multiple states, etc.)
- Tech Stack: Lacerte, ProConnect, ProSeries, TaxWorks, QBO, QBD, Enterprise, MS Office, Accounting CS, Creative Solutions Accounting, Asset Keeper, etc.
Firm Watch
Armanino Welcomes Janover, Strengthening its New York Presence and Adding Experienced Leaders with a Client-Focused Approach and Emphasis on Innovative Problem Solving [Business Wire]
Armanino LLP announced that Janover, a New York-based CPA and Advisory firm, is joining Armanino. With offices in Manhattan and Garden City, New York, Janover’s dedicated accounting professionals will seamlessly integrate into Armanino’s plethora of national tax, audit, business management and consulting services while significantly strengthening the firm’s presence in the greater New York area. This is the fourth such deal for Armanino in 2023 and the second in New York since 2021, as part of the firm’s strategy to identify top talent in key markets.
