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January 27, 2023

Friday Footnotes: How EY Fights Poaching; Lack of Staff Is Closing Doors; Accounting to Biglaw? | 11.25.22

a dog in fall leaves

Big 4

FRC to fine Deloitte £440k over 2018 audit [Accountancy Today]
The Financial Reporting Council’s Audit Quality team has issued a notice of a proposed sanction on Deloitte, proposing a regulatory penalty of £440k after it was determined that the Big Four firm failed to comply with the auditing framework in its audit of a listed company’s 2018 financial statements. According to the FRC, it found serious failings in the reviewed audit, which demonstrated a “significant departure from the standards expected of a registered auditor”.

KPMG Australia appoints first-ever head of metaverse future [Accounting Today]
KPMG has appointed software engineer and tech entrepreneur Alyse Sue as its new head of metaverse future, with the goal of creating a multimillion-dollar business based on metaverse technology and cryptocurrency over the next two years. Sue rejoined the Big Four firm after working as a senior consultant on the KPMG Innovate team between 2012 and 2015 before focusing on her own startup projects.

WATCH: EY global head of assurance talent on the firm’s impending split [AccountancyAge]
EY’s global head of assurance talent Dilek Cilingir on how the firm prevents poaching (timestamped):

Rising star PwC partner Shao Hong implicated in $3.3 million fraud [Consultancy.com.au]
A prominent partner of PwC in Australia has been accused of participating in a $3.3 million fraud perpetrated by her husband, according to a report from news publication the Australian. Shao Hong, noted as PwC’s first Chinese-born audit partner on her ascension to the top ranks in 2018, is alleged to have joined or willfully ignored her husband Di Wu’s activities in setting up an elaborate system of fake and altered invoices to defraud his employer.

Audit

Audit reform causing work to ‘cascade down’ through the market [AccountancyAge]
UK audit reform is inadvertently creating opportunities for challenger firms to pick up clients from the Big Four, according to James Hadfield, head of Menzies audit service. Changes are being introduced to better allow mid-tier firms to compete for Public Interest Entities (PIE) audits, and Hadfield believes these are already having another indirect impact. The accounting veteran adds that a wider lack of staff is causing some to “close their doors to new business,” thus narrowing clients’ options and raising audit fees.

FRC sets out good practice for audit scepticism [Accountancy Today]
The Financial Reporting Council (FRC) has published a new report setting out examples of good practice to improve auditor scepticism and challenge. According to the FRC high-quality auditing is about having the “right mindset and behaviours” as well as having “technical skills and expertise”. It said that a critical attribute of an auditor’s mindset and behaviour is “exercising professional scepticism and challenge” when performing audits. FRC considers four key elements of a good environment for scepticism and challenge: the learning environment, culture and operating model of the audit firm, as well as the interactions that the audit firm has with parties in the wider ecosystem.

Tax

Shakira Claims She’s Victim of Smear Campaign in Spain Tax Fraud Case [TMZ]
The singer filed legal docs Friday in Spain, answering allegations she failed to pay more than $14 million in taxes for income earned from 2012 through 2014. Shakira says during that period, she was NOT a resident of Spain. According to the laws of the country, she’s required to pay taxes if she spends 183 days or more there in a single year.

Republicans Preview Their Efforts to Block Forthcoming IRS Funding [Government Executive]
Republicans have threatened to upend the infusion of cash allocated to the Internal Revenue Service by the Inflation Reduction Act since virtually the moment President Biden signed it into law.

TIGTA: Taxpayers would benefit if IRS used digital communications tools appropriately [Journal of Accountancy]
TIGTA issued the audit report of the Taxpayer Digital Communication (TDC) program — titled More Should Be Done to Increase Use and Availability of the IRS’s Taxpayer Digital Communication Tools — earlier this month. “Without commitment by IRS leadership to significantly expand the TDC program into IRS functions and operations that work directly with taxpayers, the IRS may be unable to meet the stated rights, goals, and objectives of the Taxpayer Bill of Rights, the IRS Strategic Plan, and the Taxpayer Experience Strategy,” said the audit report from Heather M. Hill, deputy inspector general for audit.

If the idea of slogging through yet another busy season fills you with dread both existential and tangible, you might be interested in this remote Tax Manager position that promises 40-hour weeks year-round.

M&A

Two Albany accounting firms to combine forces [Times Union]
Two leading Albany-based accounting firms, BST & Co. CPAs, LLP and O’Connor & O’Connor CPAs, announced this week they will be combining forces in a new merger. The partnership, which will add four accountants to BST’s team of more than 100 employees, will mark the second merger for BST in less than two years. (Last year, BST merged its wealth management division with The Affinity Group to create Affinity BST Advisors.) Ron Guzior, BST & Co. managing partner, said the 75-year-old accounting and management consulting firm is looking forward to partnering with O’Connor & O’Connor, which has been offering accounting and business advisory services to Capital Region clients for more than half a century.

Law & Order

‘First’ Accounting Firm in Metaverse Sucked Into FTX Meltdown [Bloomberg Tax]
An accounting firm that touts itself as the first to open its headquarters in the metaverse was accused in a lawsuit of turning a blind eye to a pattern of racketeering at FTX, the cryptocurrency exchange that collapsed causing billions of dollars in losses. Prager Metis CPAs LLC, an auditor for FTX, was sued by an investor who claims to have lost almost $20,000. Stephen Pierce also sued Armanino LLP, an auditor for FTX US, FTX’s co-founder Sam Bankman-Fried and others — accusing all of them of a racketeering conspiracy.

Trump reported losing nearly $1B over 2 years on tax returns: accountant testifies [New York Post]
Former President Donald Trump reported losses on his tax returns each year for a decade – including close to $1 billion in a two-year span alone, his onetime accountant testified at trial this week. Donald Bender, a partner at accounting firm Mazars USA, took the stand in Manhattan Supreme Court Tuesday as part of the criminal tax fraud case against the Trump Organization. From 2009 to 2018, Bender said he filed 76-year-old Trump’s taxes and “There are losses for all these years.” Bender – who was called as the first defense witness and was given immunity for testifying before a grand jury – admitted upon questioning from prosecutors that in 2009 and 2010 alone Trump reported losing close to $1 billion.

Bermuda theft: Accountant faces losing pension for £1.7m theft [BBC]
Jeffrey Bevan made more than 50 fake payments to himself after moving with his family to work as a payment manager for Bermuda’s accountant general. The 55-year-old, from Cwmbran, Torfaen, spent the cash on cars and properties and gambled away £500,000. He was jailed in 2018 for seven years and four months. Having served half his sentence Bevan was released from prison this week but returned to court as prosecutors sought to recoup more money from him. It is understood they are seeking funds from Bevan’s pension now he is 55.

Career

Ask A Legal Recruiter: Can Someone Lateral From An Accounting Firm Into Biglaw? [Above the Law]
Question: I’m curious to know what the market is right now for laterals in Biglaw, specifically tax. Can someone lateral from an accounting firm into Biglaw?
Recruiter Jessica Chin Somers: There is always a need for good tax lawyers in Biglaw, especially tax lawyers with law firm experience and good JD and LLM grades. However, because tax is a niche practice, it is not as easy to get many offers. Some tax practices really want candidates with specific types of tax experience (for example, securitization tax or bankruptcy tax) and so they will wait forever for the right candidate. Some transactional practices have a strong preference against tax planning candidates.

In the wake of “quiet quitting”, fairness & respect seen as drivers of young accountant retention [Thomson Reuters]
The term quiet quitting has replaced the Great Resignation as the in-vogue term in the second half of 2022 to describe worker attitudes and actions in the post-pandemic world. Indeed, the term has been consuming the majority of media discussions of trends in work, particularly among younger workers.

Yet, despite all of the relatively negative workplace trends covered, the results from a Thomson Reuters Institute pulse survey taken in August didn’t uncover the depth of negativity among younger workers employed at tax & accounting firms the media would have you believe. In fact, more than half of all young workers surveyed in the US and Canada reported that they are highly satisfied across a number of workplace factors, including: i) individual factors such as a feeling that I can be myself at work, opportunities for growth and career progression, flexibility, and a feeling that I am treated fairly and with respect; and ii) firmwide factors such as their firm’s collaborative culture, current leadership, and direction and strategy.

Diving deeper into the data, you can see some differences in the top satisfaction factors between the US and Canada. In the US, for example, the top drivers of high satisfaction were a mixture of individual and firm factors, with individual factors sitting in the first and third spots. A large majority of respondents (79%) said they were very satisfied with the feeling that I can be myself at work; and 76% were very satisfied with the idea that I am treated fairly and with respect — and 78% said they were very satisfied with their firm’s reputation.In Canada, on the other hand, the top drivers of high satisfaction were solely individual factors — I am treated fairly and with respect was cited by 76% of respondents and flexibility was cited by 74%.

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