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.
Happy National Leave Your Accountant the Fuck Alone Day, everyone! Hopefully clients observed this sacred holiday.
Rules and Regs
At September 19 Open Meeting, PCAOB to Consider Proposed Changes to Board Rule on Contributory Liability for Firm Violations [PCAOB]
We’ll be sitting in on this and reporting back so you don’t have to.
The Public Company Accounting Oversight Board (PCAOB) will hold an open meeting on Tuesday, September 19, 2023, at 10:00 a.m. ET. At the meeting, the Board will consider issuing for public comment a proposal to amend PCAOB Rule 3502, Responsibility Not to Knowingly or Recklessly Contribute to Violations. The rule governs the liability of associated persons who contribute to a registered public accounting firm’s primary violation of the laws, rules, and standards that Congress has charged the Board with enforcing.
Grayscale CFO says FASB met the crypto moment [CFO Dive]
In an interview this week with CFO Dive, McGee was reluctant to acknowledge that the new standard that FASB voted on this month wasn’t perfect. If he had a critique, he said, it was that the new standard is narrow in terms of the scope of assets it will impact: bitcoin and ethereum are addressed by the new accounting rules that were nearly finalized in a unanimous board decision but not non-fungible tokens. He said that it would have been “marginally better” if it included wrapped tokens or tokens with enforceable rights.
Audit
Comments Raise Concerns About PCAOB’s Proposal To Expand the Scope of Audits and the Role of Auditors [JD Supra]
In June 2023, the Public Company Accounting Oversight Board (PCAOB) proposed sweeping amendments to its auditing standards. Comment letters raise serious questions about the consequences of the proposed changes. Nearly 140 comments were received, including some after the August 7, 2023, deadline, and the proposals have proven controversial. A number of accounting firms,1 public companies, professional membership associations and other key stakeholders raised concerns. In addition, in a rare occurrence, PCAOB board members Christina Ho and Duane DesParte — the only two certified public accountants on the board — issued public dissents when the PCAOB issued the proposal. Following is a summary of the key areas of comment.
Jackson’s Internal Audit Division disbanded [WLBT]
A city the size of Jackson, Mississippi no longer has an Internal Audit Division, which operated under the mayor’s administration. The division is responsible for reviewing city finances and making sure departments are complying with city, state, and federal laws. The administration did not present a budget for Internal Audit during the hearings. Council President Aaron Banks said the administration and Internal Audit have not participated in Internal Audit Committee meetings since 2017. The council defunded the division and placed the workers under the Clerk of Council. “Last Thursday, someone in administration on the executive side made the decision to lock them out of their computers and to lock them out of their computers where they still were employed by the executive branch, and that to me rings bells because that means there’s the hiding of information,” said Banks. On Tuesday, the four employees with backgrounds in accounting and auditing were approved by the council for positions as Chief Deputy Clerks.
Audit profession must ‘face up’ to common issues causing accounts delays, experts say [AccountancyAge]
A recent string of high-profile audit delays highlights how staffing issues, remote work and economic volatility are impacting auditors’ ability to deliver for clients in a timely fashion, industry experts have argued. This reaction comes after the fashion retailer Superdry suspended trading in its shares in August having missed its account publication date, stating that normal procedures were taking longer than usual. According to Theo Theodoulou, chair at accountancy network Kreston Global, while each delayed publication of financial accounts rests on its own details, such as the concerns driven by debt restructures at Superdry, staffing and economic issues are big industry concerns. “General weaknesses at the moment are the significant lack of audit resources, the pressure from regulators to enhance quality and the turbulence in the markets and a combination of all these will impact the completion of the audit work in a timely manner.”
A refresher on fraud and the responsibility for its detection [Journal of Accountancy]
Remember, there is no substitute for the AICPA Professional Standards, and this discussion is not intended to cover all the requirements contained in the relevant sections of that authoritative guidance.
Firm Watch
Cherry Bekaert Acquires Outsourced Accounting Firm [INSIDE Public Accounting]
Raleigh, N.C.-based IPA 100 firm Cherry Bekaert (FY22 net revenue of $349 million) is merging in Cordia Partners of Vienna, Va. As part of the deal, the firm will also acquire Corida’s executive recruiting arm, Cordia Resources. Founded in 2006, Cordia Partners provides outsourced accounting, business advisory consulting and digital transformation services to small and mid-sized businesses. Cordia Resources, meanwhile, provides recruiting and staffing solutions for local and national clients.
Sioux Falls CPA firm marks century in business [SiouxFalls.Business]
The fourth-generation Sioux Falls firm Nelson & Nelson CPAs celebrates 100 years in business, providing tax, accounting, payroll and bookkeeping services. James Nelson started the firm in the city in 1923. After serving in the Korean War, James’ son, Wes Nelson, joined the firm in 1957. Wes’ son, Chuck Nelson, joined the firm in 1983, and Chuck’s daughter, Jillian Nelson, joined the firm in 2013. Nelson & Nelson serves clients in more than 40 states and many countries. Chuck Nelson credits the firm’s success to the individual attention and personal services it provides to clients, building many long-standing relationships. Nelson & Nelson CPAs is the oldest existing accounting firm established in South Dakota.
CFOs
Optimism on the rise among large-company CFOs, according to survey [Journal of Accountancy]
CFOs haven’t felt this good about the economy in more than a year. Fifty-seven percent of North American CFOs rate current economic conditions as good or very good — up from 34% last quarter — according to Deloitte’s 2023 Q3 CFO Signals survey. That’s the highest mark since the first quarter of last year, when 64% of CFOs were positive about the economy. CFOs are also optimistic about their own companies’ financial prospects and their expectations for year-over-year growth. The recent Business and Industry Economic Outlook Survey by AICPA & CIMA, together as the Association of International Certified Professional Accountants, also showed rising sentiment. Forty-five percent of CPA decision-makers were optimistic about their organization and 29% were optimistic about the U.S. economy — both increases over the previous quarter. That survey uses responses mainly from private companies, with just 12% having revenue above $1 billion.
Office Space
Sources: Accounting firm BDO scouting for new, smaller office [Pittsburgh Business Times]
Sources familiar with the search indicate the Pittsburgh office of BDO USA LLP is actively searching for a new office, looking to scale down from the more than 67,000 square feet originally leased at Heinz 57 Center on Smithfield Street downtown into a new office footprint perhaps less than a third of that size. Sources familiar with the search say BDO is now scouting for in the range of 15,000 to 20,000 square feet amid all the ongoing societal shifts to hybrid and remote-work arrangements. BDO first entered the Pittsburgh market about 10 years ago when the Chicago-based CPA firm merged with Pittsburgh regional Alpern Rosenthal.
KPMG to move out of 1601 Market St. after more than 20 years, cut space by 38% [Philadelphia Business Journal]
KPMG plans to leave its current home at 1601 Market St. next year and relocate to new offices at 1735 Market, reducing its space by 38% in the process. The Big 4 accounting firm will make the move when its lease at 1601 Market expires on June 30, 2024. It currently occupies 134,000 square feet but will downsize to just 97,000 at 1735 Market, also known as the BNY Mellon Bank Center. It will take the entire third, fourth and sixth floors in the 54-story building.
Technology
EY Unveils Fruits of $1.4 Billion Artificial-Intelligence Investment [WSJ CIO Journal]
Consulting firm EY said it recently completed a $1.4 billion investment into artificial intelligence, the latest among a series of peers to make a billion-dollar announcement regarding the rapidly developing technology. In addition to the $1.4 billion investment, announced Wednesday, the professional-services company said it has created its own large language model, EY.ai EYQ, and that it would train its 400,000 employee workforce on AI. EY declined to comment on the exact amount it would spend on AI going forward, but said that the amount is more per year than it has spent over the past five years. Future investment includes continuing to refine its large language model.
There is only one way to overcome workers’ fear of AI, says PwC’s Tim Ryan [CNBC]
Ryan said he’s seen this cycle before. When he took over the top spot at PwC in 2016, the firm was in the midst of its own aggressive tech transformation. Workers, he said, were worried their jobs were going away as a result. He knew the only way to quell that worry was to train them on the new technologies PwC was using. Ryan said he sees that same job loss worry bubbling up again, but this time more intensely since AI is dominating the conversation. However, he’s not “in the camp that foresees the elimination of large parts of the workforce. I don’t think AI is a mass job eliminator.”
The Use of Data Analytics in Auditing [CPA Journal]
The accounting press has heralded the growing and transformational use of data analytics in accounting—auditing in particular. A recent poll regarding top priorities for audit leaders conducted by Gartner showed that “top focus areas for audit leaders in 2022 are attracting talent with nontraditional audit skills and effectively leveraging more advanced data analytics application.s” “The demand for accountants with data analytics skills is growing rapidly, providing for exceptional career opportunities,” Vasarhelyi et al. noted in a 2017 CPA Journal article. The authors reported that “because the insight extracted from data can provide for a meaningful competitive advantage, organizations are allocating increasing amounts of resources to analytics initiatives.” There has been little said, however, about what firms are actually doing in this vein.
Talent
The recruiting strategies one Houston accounting firm is using to attract experienced talent [Houston Business Journal]
To attract experienced professionals, Pannell Kerr Forster of Texas is positioning itself as unique in its profession by offering a big-firm feel with a small-firm culture. It is committed to providing team members with rich professional experiences that expand their abilities and unlock their ambitions. It’s also committed to the work-life balance and health and well-being of its employees. “Public accounting can be a challenging profession and, rather than continue to see people opt out of it altogether, we have created a culture to help people continue to develop their skills, have work-life balance and focus on their health in a holistic way,” said Sonia Freeman, PKF Texas chief culture officer. “From the inception of the firm in 1986, culture has always been our top priority.” At PKF Texas, showing appreciation for team members can be as simple as getting people together for a friendly dart competition, playing sports or buying lunch and dinner for employees during busy season.
How Purdue University managed to—shocker!—turn accounting into a sexy study path to fill the gaping void in the market [Fortune]
The business world needs more CPAs. And to build a pipeline, professors at Purdue University are on a mission to shatter the stereotypical image of an accountant. And part of the plan includes tailgating at football games. “Every year, the accounting area buys 200 football tickets to a game,” Koharki says. “So this year, it’s September 22, a Friday night game against Wisconsin. We set up a tailgate, where we have 100 of our freshmen students and 100 members of our advisory board firms. We tell students, ‘You’re going to a game afterward, so don’t don’t bring a resume.” Just come, talk, and ask questions, he tells them. But an integral part of the plan has to do with accounting professors meeting with the university’s student academic advisors at least once a semester. “I think it’s mostly making sure they can correctly advise students about an accounting career, particularly things like the CPA exam,” says Troy Janes, a CPA and clinical full professor of management and director of the master of science (MSA) program at Purdue.
Scotland: Accountancy giant PwC ramps up graduate intake in [The Herald]
Dude was so excited to get this story out he didn’t type the rest of the headline
Accountancy giant PwC has ramped up its intake of graduates in Scotland. The firm has announced that 90 students have taken up roles at its offices in Glasgow, Edinburgh, and Aberdeen – 12.5% more than last year. The majority of the new recruits (43) have joined in Edinburgh, with 37 adding to the team in Glasgow and 10 linking up in Aberdeen. The remaining 21 will work in either the tax or risk departments across a range of roles. PwC said the recruitment increases its headcount in Scotland by 7.8% to 1,249 partners and staff.
Wondering where all the accountants have gone? Check out Accountingfly’s top remote accounting candidates of the week to find your next great hire.
PwC ‘rule of three’ forces partners who leave in groups to pay [Australian Financial Review]
PwC Australia’s leadership is trying to stem a rising tide of partners leaving by enforcing a rule that obliges senior staff involved in a “group departure” to a rival firm to pay back the fees they generated in the previous year. The agreement also gives PwC the power to force leaving partners to repay expenses such as the cost of “redundant office space” and other items caused by the departure. Informally known within the big four consultancy firm as the “rule of three”, the clause is designed to deter groups of partners moving to rivals by making it financially onerous for leavers and the new firm trying to take them on.
Feels
No regrets: Reflections on a family-owned CPA firm’s ‘great run’ [Journal of Accountancy podcast]
For Kevin Martin, CPA, the many happy memories of his father — also a CPA named Kevin Martin — outweigh the grief that accompanied the elder Martin’s death in 2019.
Like chicken soup for a cold, Colorado exec says we learn recipe to prevent suicide [CBS Colorado]
September is Suicide Prevention Month. It is a hard truth that Colorado ranks fifth in the nation for its high suicide rate. In 2022, 1,287 died by suicide in our state. A Colorado woman who has experienced heartbreaking personal loss is determined to save lives by sharing the simple steps each of us can take to support people who are struggling with their mental health. Lisa Hackard is a partner at the global accounting firm KPMG.
Other Stuff
Deloitte denies TPP reporting platform scrapped over ‘political pressure’ [Focus Taiwan]
International consultancy company Deloitte on Thursday denied that it withdrew from a contract it signed with the Taiwan People’s Party (TPP) to create an online “whistleblowing” system to ensure probity from TPP officials as a result of “political pressure.” The TPP announced Thursday Deloitte’s termination of the contract, one day after it unveiled the system amid a recent spate of news reports about its members having criminal records or alleged links to criminal gangs. According to TPP Deputy Secretary-General Osmar Hsu (許甫), the company “came under immense pressure” over the whistleblowing system, prompting it to terminate the deal. In response to Hsu’s remarks, Deloitte denied political pressure was the reason behind its withdrawal from the deal. The company pulled out of the deal because the scope of services defined by the TPP “exceeded what it originally intended,” Deloitte said in a statement.
