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Friday Footnotes: Firms Get a Jump on Hiring; RTO Firms Outsourcing 🙄; BDO Settles 401(k) Suit | 12.22.23

yellow lab in front of Christmas tree

Programming note: we’ll be putting some things up next week (posts, not Christmas trees) so should you swing by you’ll have something new to read. Barring any huge incident like an accounting firm getting raided by the FBI on Christmas Day, there will not be any breaking news. Tips are still welcome, nay, encouraged, and we’ll be monitoring the tipline. Don’t hesitate to reach out.

Have a happy, safe, and restful holiday. Love you, mean it.

Talent

The Race Is On to Hire Interns for 2025. Really. [Wall Street Journal]
PwC and other companies say that the early deadlines help them scoop up talent that could go to competitors. PwC posted its summer 2025 internships for areas including tax and consulting in September, the earliest the firm has ever advertised internship positions, said Rod Adams, who leads hiring for the U.S. and Mexico. One key reason: PwC is trying to compete for top talent amid a dwindling number of accounting majors. In some cases, the companies hoarding intern talent more than a year in advance have cut full-time jobs, or have made job offers to students, only to defer start dates for those new graduates. Major consulting firms don’t have enough work for their existing staff and are facing slowing revenue growth, and Ernst & Young last week began laying off partners. This year, PwC delayed about 600 full-time consulting hires’ start dates from August 2023 to January 2024.

City accountant looks to outsource paperwork to India [The Telegraph]
One of the UK’s largest accountants Evelyn Partners is considering outsourcing its services to India as the firm outgrows its new City headquarters. It is understood that outsourcing would leave the firm less reliant on recruiting additional accountants from the tight labour market, which has seen large audit and consulting firms struggle to recruit new talent. Outsourcing would also reduce pressure on Evelyn Partners’ head office in London, with the firm understood to be struggling to find space for workers amid expansion efforts. It comes despite the accountant relocating more than 1,600 workers to the newly-refurbished office near St Paul’s Cathedral in May 2022. Evelyn Partners, which expects employees to work from the office three-days a week, is understood to be considering securing extra space in the City to meet rising demand for desks.

Deloitte’s Kwasi Mitchell on 2024: It’s our job to make college students less nervous about the future of work [Business Insider]
Kwasi Mitchell, Deloitte’s chief purpose and DEI officer, said leaders need to be better teachers.
Going into 2024, Mitchell is worried about college students’ confidence in the workplace.

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News

Wirecard investor lawsuit against EY filed in Munich [Reuters]
A new investor lawsuit is claiming more than 700 million euros ($771.40 million) in damages from accounting firm EY for its role in auditing the books of Wirecard before its collapse in 2020, a shareholder group said. The 80,000-page suit represents 13,000 individual and institutional investors and was filed in a Munich court on Friday, the DSW shareholder protection group said. It is one of several lawsuits EY is facing in the matter. EY declined to comment. EY has previously rebuffed the claims against it for damages in relation to Wirecard.

$100m Defence contract with KPMG rife with governance failures, review finds [ABC News Australia]
A $515 million project to unify and exploit the vast troves of data held by the Department of Defence is in disarray after external consultants discovered a raft of serious governance failures, including the authorisation of a six-figure payment to controversial accounting firm KPMG for work the government knew had not been delivered.

Pamela C. Dyson Named PCAOB Chief Information Officer [PCAOB]
The Public Company Accounting Oversight Board (PCAOB) announced Wednesday the appointment of Pamela C. Dyson as its Chief Information Officer (CIO), effective immediately. As CIO, Ms. Dyson will serve as the Director of the PCAOB’s Office of Data, Security, and Technology (ODST), reporting to the PCAOB’s Chief Operating Officer. She will be primarily responsible for advising and assisting the Board on all aspects of technology, including the PCAOB’s strategy for enterprise information technology and data, change management, and process improvement initiatives. Evan Lee, who was named Acting Chief Information Officer in July 2023, will resume his role as Deputy Director, Architecture and Engineering.

Firm Watch

Accounting firm BDO USA settles 401(k) lawsuit [Pensions & Investments]
The accounting firm BDO USA LLP has agreed to settle a lawsuit by three former employees who alleged that the company and its fiduciaries mismanaged a 401(k) plan in violation of ERISA. The former employees sued in April 2022 alleging the plan offered retail-priced mutual funds instead of institution-priced mutual funds, retained poor-performing investments, charged excessive record-keeping fees and charged excessive investment management fees. The BDO USA LLP Retirement Plan, Chicago, had $1.4 billion in assets as of Dec. 31, 2022, according to the latest Form 5500.

Long Beach hires accounting firm KPMG to craft strategic plan for 2028 Olympic Games [Long Beach Press-Telegram]
Long Beach has hired KPMG, an assets management and accounting firm, for $572,000 to develop a strategic plan and offer resources to guide the city with the planning and implementation of its role in Los Angeles’ 2028 Olympic and Paralympic Games. Long Beach officials recently contacted the Olympics organizing committee, known as LA28, to go over elements of its initial commitment. The following phase was to bring an “experienced consultant” onboard to support internal efforts and get the community engaged, said Jorge Godinez, an assistant to the city manager at a City Council presentation on Dec. 19. Godinez said KPMG is a firm with a track record and experience helping cities organize large sporting and entertainment events on a global scale.

PwC Refuses Australia Senate Request for Tax Leak Documents [Bloomberg Tax]
Pricewaterhouse Coopers Australia has refused to provide the Senate with documents relating to an ongoing investigation of a senior partner leaking confidential government tax information. PwC declined a request by Sen. Deb O’Neill—member of the governing Labor Party and head of the joint house finance committee—for notes relating to a 2019 meeting between deputy tax commissioner Jeremy Hirschhorn and then- PwC CEO Luke Sayers. The tax office says that Hirschhorn urged Sayers to personally review internal emails relating to the tax leak in the meeting. Documents related to the Senate inquiry were released Friday.

Audit

At PwC, it’s the revenge of the auditors [Australian Financial Review]
For decades, Sue Horlin watched her PwC consulting colleagues bring in the prestige clients, high-profile assignments and the big fees. But this year’s catastrophic tax leaks scandal has reset the table at the big four accounting giant and now audit and assurance – long the humbler, more straight-forward and less risky arm of the firm – is expected to be the growth engine and the governance model for the future. “It has been a really challenging year. And I felt that both emotionally and professionally… and [so have] all of our people,” she tells The Australian Financial Review. “[But] we are, in the assurance practice, still winning work … we, I’m proud to say, are still delivering great quality work and great quality service for our assurance clients.”

PwC pushes to loosen rules on independent board members [Financial Times]
PwC is asking audit regulators around the world to reconsider strict rules on conflicts of interest to allow it to hire more independent board members, as the Big Four accounting firm seeks to improve its governance following a scandal at its Australian business. “By adding independent, external voices to our boardroom discussions, it not only makes debate less insular, but ultimately enhances the performance of the boards themselves,” PwC global chair Bob Moritz told the Financial Times. “Given some of the structural complexities and the varying regulatory requirements on a country-by-country basis, our industry faces some inherent challenges in bringing in a sufficient number of qualified independent candidates,” Moritz added.

Burned Investors Ask ‘Where Were the Auditors?’ A Court Says ‘Who Cares?’ [Wall Street Journal]
One of the country’s most influential courts has asked the nation’s top securities regulator for its views on an uncomfortable subject: whether audit reports by outside accounting firms actually matter. The court already ruled that, at least in one case, they didn’t. That case, where an insurer overstated profits and an auditor signed off on its books, led to an investor lawsuit against the auditor that was dismissed. In its ruling, the court said the audit report was so general an investor wouldn’t have relied on it. The decision could have broad ramifications for the Securities and Exchange Commission, which oversees corporate financial disclosures, and for the auditing industry, which charged about $17 billion last year for blessing the books of publicly listed companies in the U.S.

Reaction:

Rules

New Crypto Accounting Rules Unlikely to Bring ‘Sea Change’ in Corporate Adoption [Unchained]
New US accounting standards published last week by the Financial Accounting Standards Board (FASB) could spur some companies to add crypto to their balance sheets, but it’s unlikely to result in a dramatic shift in corporate treasury strategies, accountants from major consultancies told Unchained. “You’ll see some companies who hesitated or kept it in a very small amount on their balance sheet be able to become a little more free with it and add it to their balance sheet in a more meaningful way,”  said Tony Tuths, digital asset tax practice leader at professional services firm KPMG and principal within the firm’s alternative investment tax practice.

Tax

IRS Urges Businesses To Come Clean With New ERC Voluntary Disclosure Program [Forbes]
Citing the Employee Retention Credit—or ERC—as a “major concern,” the IRS has announced a voluntary disclosure program for businesses who want to pay back the money they received after filing ERC claims in error. The program will run through March 22, 2024. It’s the latest step in a campaign to stamp out bad actors and offer a fresh start to victims of aggressive ERC promotion schemes. To promote those ends, it offers substantial relief to eligible small businesses, while requiring them to provide information about the marketers and advisors who led them astray on the ERC.