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.
Cranium launches out of KPMG’s venture studio to tackle AI security [TechCrunch]
Several years ago, Jonathan Dambrot, a partner at KPMG, was helping customers deploy and develop AI systems when he started to notice certain gaps in compliance and security. According to him, no one could explain whether their AI was secure — or even who was responsible for ensuring that.
“Fundamentally, data scientists don’t understand the cybersecurity risks of AI and cyber professionals don’t understand data science the way they understand other topics in technology,” Dambrot told TechCrunch in an email interview. “More awareness of these risks and legislation will be required to ensure these risks are addressed appropriately and that organizations are making decisions on safe and secure AI systems.”
Dambrot’s perception led him to pitch KPMG Studio, KPMG’s internal accelerator, on funding and incubating a software startup to solve the challenges around AI security and compliance. Along with two other co-founders, Felix Knoll (a “growth leader” at KPMG Studio) and Paul Spicer (a “product owner” at KPMG), and a team of about 25 developers and data scientists, Dambrot spun out the business — Cranium.
Build ChatGPT into Excel [Journal of Accountancy]
Note that this process currently works in Microsoft Excel 365, Microsoft Excel 365 for Mac, and Excel for the web. The demonstration shown here was done using Microsoft 365 for a PC. Other devices may work differently.
Client warns consultants about using ChatGPT-like bots for proposals [Australian Financial Review]
Consulting firms risk misrepresenting what their firms can and cannot do when using artificial intelligence chatbots to develop sales proposals, a procurement specialist has warned. Firms could inadvertently create proposals that falsely claim their experts have a capability they do not possess, or might omit a capability the firm’s professionals do have, the specialist said, asking not to be identified because they are not authorised to speak to the media.
PwC offers cutting edge AI technology with ContractPodAi [ERP Today Magazine]
PwC has entered into an alliance with ContractPodAi, allowing the firm to offer a cutting edge AI-powered legal contract management platform. The alliance is part of PwC UK’s technology-driven strategic plan to reframe the way traditional tax, legal and people services are delivered.
If Your Job Exposed to ChatGPT? [Wall Street Journal]
A tap story from WSJ says accountants and writers are among the jobs that could be most affected by AI tools (*gulp*)
March people moves: KPMG, Deloitte, PwC make senior hires [AccountancyAge]
Musical chairs across the pond.
Big Four Auditors and Consultants Need Liability—And a Divorce [Bloomberg Tax]
Part of the problem is the revolving door of personnel between the major accounting firms and the banks they purport to audit. Signature and First Republic were both led by former KPMG partners, and KPMG was the auditor for Silicon Valley Bank for nearly 30 years. Could relationships form that give rise to conflicts of interest when it comes to telling a colleague of nearly three decades that there might be precariousness hiding in their books? I can imagine it.
Further, accounting firms have no incentive to draw attention to potential problems, rather than just explicit and clear problems, because it may trigger just what happened anyway. Banks with high average deposits and relatively few depositors are especially at risk, as they may be a conference call with a few dozen participants away from seeing a sizable percentage of their deposit base pull their money.
How Professional Services Firm EY Is Making Government’s Online Presences Accessible To All Citizens [Forbes]
Early last month, London-based professional services company EY released a report which examined why digital accessibility is so important to invest in and how companies can best achieve it. The report, underwritten by EY, is called Delivering Digital Access and Equity in the Public Sector (PDF). It surveyed 178 governmental leaders (federal, state, county, and municipal), customer experience, and IT professionals to uncover what, if any, strides are being made to amplify digital accessibility for the disabled contingent of the citizenry.
Independence Matters: Avoiding Pitfalls for the Unwary [The CPA Journal]
Auditor Independence is integral to the financial reporting system and trust in the capital markets. But recent cases against large audit firms underscore the challenges firms face in ensuring independence and the seriousness with which the SEC enforces its regulations. In the author’s opinion, too many auditors misinterpret the SEC’s independence rules, which results in a checklist mentality to compliance that misses the true spirit of the SEC’s independence requirements.
SNP auditor’s resignation adds to party’s crisis amid finances investigation [The Guardian]
The accountancy firm that audits the Scottish National party’s accounts has resigned, adding to the party’s crisis following the police raid on the home of its former chief executive Peter Murrell. Murrell was arrested on Wednesday morning by police investigating the SNP’s finances. He was later released without charge pending further inquiries. The BBC, which first reported Johnston Carmichael’s resignation, said it had been told the firm resigned before Murrell’s arrest.
Exclusive: Revolut audit queries, skittish regulators complicate its UK licence bid -sources [Reuters]
After the accuracy of Revolut Ltd.’s accounts drew scrutiny from regulators, the firm’s plan to secure a U.K. banking licence is facing delays, according to two people familiar with the company.
Last month, audit firm BDO issued a so-called qualified opinion for Revolut’s 2021 accounts. While BDO said Revolut’s financial statements gave a “true and fair view of the state of the group,” it cautioned in the same filing that some information related to revenues may have been “materially misstated.”
Media coverage of BDO’s warning on March 1 prompted immediate questions from financial regulators, a March 6 letter to Reuters from Revolut shows. In the letter, Revolut requested changes to Reuters’ article on the financial statements, which the news agency declined to make. Revolut’s lead counsel for disputes and investigations, Conal McFadyen, said the firm “had multiple enquiries from our regulators in the U.K. and overseas” seeking further explanation about the auditor’s opinion.
Firm sets retirement age at 85 to avert staffing crisis [Accounting Today Voices]
Accounting Today ran an April Fool’s joke
On Saturday, April 1, it was reported that, while the accounting profession struggles with an ongoing talent shortage, local CPA firm Watts, Taber and Fiske has found a viable option for staying independent: It raised its minimum age for partner retirement from 62 to 85, giving the firm an extra 23 years to search for the right talent to succeed its hard-working senior partners.
While hoping to maintain their original age of 62, so that retiring partners could pass the torch to a promised line of up-and-coming CPAs, WTF realized that the pipeline was less than empty and they needed a new strategy.
“We thought we’d be able to promote Kayleigh and Brian, but it turns out they’ve decided they just want to work 45 hours a week while they raise their children. And that’s obviously inconsistent with the expectations of an equity partner,” said managing partner Bill Billings.
Atlanta Deloitte executive: Now more than ever give workers ‘what they’re looking for’ to grow career (Podcast) [Atlanta Business Chronicle]
“I think leaders are underestimating just how much employees are struggling at this point,” said Ed Heys, managing partner of the Atlanta office of Deloitte. But he is encouraged by data that show a growing number of leaders are taking on well-being as part of their responsibility.
‘Status quo is the riskiest option’: One leader’s proven approach [Journal of Accountancy podcast]
Joey Havens, CPA of Horne: Theory says, for example, that if you have flexibility, just tell people you have flexibility. Flexibility is your policy. You’ll be on track. But flexibility is dead when leaders continue to control the where, when, and how. It’s dead on arrival when leaders don’t demonstrate flexibility. It’s dead on arrival when there’s too many exceptions to it.
Client Choice Awards: The leading accounting and consulting firms [Consulting.com.au]
Professional services firm RSM has won the accounting and consulting Client Choice Award for providers generating upwards of $200 million, as well as taking home the awards for best ‘Professional Services Firm’ and best overall ‘Provider to Government & Community’.
Declines in Loan Values Are Widespread Among Banks [Wall Street Journal]
Banks reporting large fair-value discounts on their loans could face earnings or liquidity pressure. They could face pressure to pay higher rates for deposits and other funding sources, while yields on fixed-rate loans they own stay low. “If liquidity issues arise for these banks, they may need either to issue additional debt capital at higher interest rates or to sell those loans to become more liquid,” said Tom Linsmeier, an accounting professor at the University of Wisconsin and former member of the Financial Accounting Standards Board. The 435 banks in The Wall Street Journal’s sample included 100 where the combined unrealized losses on loans and held-to-maturity securities were equivalent to 50% or more of their total equity.
Fake Accountant Admits Stealing $1.5 Million In Scam That Targeted NJ Schools, Nonprofits: Feds [Hudson Daily Voice]
For nine years, Yezenia Castillo falsely claimed to be an accountant, offering her serves to non-profits throughout the state, Sellinger said. Upon being hired, Castillo would charge money for services she never performed or transfer client funds to her own accounts, Sellinger said. Castillo also took money to pay their taxes, but instead pocketed the money, Sellinger said. Castillo would falsify receipts to continue her scheme and ended up defrauding more than 100 victims, Sellinger said. Castillo faces up to 20 years in prison and a $250,000 fine. She is scheduled to be sentenced in August.
First black female chartered accountant publishes first book [News24]
The first South African black female chartered accountant, Nonkululeko Gobodo, from Corana locality in Mthatha but residing in Johannesburg, has published her first book titled Awakened To My True self. She said this book is about her life, as she was the first black South African female to obtain the qualification of chartered accountant in 1987. “People are always surprised when they hear about my journey, to the extent that they used to ask me about writing my book. I ended up writing this book with the aim of telling my story,” said Gobodo.