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Friday Footnotes: Inside PwC Cheating; Audit Market Monopoly; AI Anxiety | 12.15.23

four huskies running in the snow
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. Comments are closed on Friday Footnotes and the Monday Morning Accounting News Brief by default. If you have something to say about any stories linked here you are welcome to contact the editor or hit us up on Twitter @going_concern. See ya.


What went wrong at PwC Canada: Accounting firm agrees to pay $1.45-million to settle exam cheating scandal [Canadian Accountant]
The Canadian member firm of PricewaterhouseCoopers International has agreed to pay the Chartered Professional Accountants of Ontario $1.45 million over its failure to prevent cheating on internal exams. As reported by Canadian Accountant, PwC Canada has already paid Canadian and US audit regulators more than one million dollars in fines, after disclosing widespread sharing of answers by its accountants on internal training tests. According to the CPA Ontario settlement agreement, PwC self-reported that 445 of its professional staff across its Ontario offices, primarily in its assurance practice, participated in answer sharing during mandatory internal training assessments between 2016 and 2020. This included training on accounting and auditing standards, audit strategy, planning, procedures and documentation, professional integrity and independence matters, and specific issues that arise in audits. The 15-page settlement agreement provides the most insight yet into the exam cheating at PwC. While mostly confined to assurance staff, the conduct was widespread, ranging across positions and locations, and not only openly known but accepted as part of the PwC culture.

Hot Takes

Consulting Firm PwC’s Business Class Ban: Environmental Step or PR Stunt? [View From the Wing]
Some interesting comments here like this one from Captain Freedom: “PwC will still be flying the same number of managers & VPs in business class, otherwise they will simply jump to another firm. Its employees are the product and no one is remotely productive on a coach class BA flight where you can’t open a decent notebook pc with a built-in 10 key. There’s a reason the Big Four firms often schedule key staff up to 3,000 hours annually for hundreds of dollars (or GBP) per hour. No one wants business advice from someone who just arrived via the midnight flight on easyJet.”

More Media Megadeals in 2024? Top Accounting Firm Thinks It’s a Good Bet [The Hollywood Reporter]
This year saw a slowdown in terms of media and telecommunications sector dealmaking, but there are signs of a recovery in M&A activity, top accounting and consulting services firm PricewaterhouseCoopers said in a Wednesday report. Deal talk has returned to the sector with a vengeance, driven by recent talk that Paramount Global and its parent company National Amusements could be in play. And bankers are licking their chops ahead of April 8, 2024 when the Reverse Morris Trust lock-up period of the deal that created Warner Bros. Discovery ends, meaning that the company can get involved in possible M&A without having to worry about a tax penalty.


Transparency isn’t the only condition leaders need to build trust [Fortune]
This week I’ve been attending the PwC Trust Academy in Phoenix, Ariz., a multiday conference PwC hosts as part of its “New Equation” global strategy, which aims to help business leaders earn trust in an evolving multi-stakeholder world. It’s a striking location. From my window I can watch the sunset over the sands of the desert, glinting off the towering slides of the hotel’s mini waterpark. But PwC, which covered my travel and room for the trip (and is also a Trust Factor sponsor), didn’t bring people to this oasis for the pool. “The firm belief that sits behind the New Equation is that all companies will need to do two things as the world turns: build trust with their stakeholders, and deliver sustained outcomes,” says J.C. Lapierre, PwC U.S.’s chief strategy and communications officer, who spearheaded the Trust Academy in 2021. There are approximately 80 attendees joining this iteration of the invite-only event—guests Lapierre describes as mostly “C-suite or C-suite rising”—for two and a half days of expert seminars, workshops, and discussions on the practice of building trust.


UK watchdog to focus on competition in company audits [Reuters]
Britain’s accounting watchdog said on Thursday it would focus on studying competition next year as KPMG, EY, Deloitte and PwC – dubbed the world’s Big Four – continue to dominate auditing of big UK companies, limiting choice in the market. The Financial Reporting Council (FRC) said a key area of policy work in 2024 would be market studies, even thought it has yet to obtain powers like the UK Competition and Markets Authority to force through remedies. Market studies would help drive improvements in the audit market, the FRC said. “These will enable us to explore issues relating to the audit market in more detail, generating richer information about these matters and potential proposals for action if we identify concerns,” the FRC said in its annual “snapshot” of the audit market.


How to cope with the triple threat of 2024 [Accountants Daily]
Accounting firms navigated an unpredictable environment this year marked by the explosion of generative AI tools, an increasingly competitive talent landscape and pressure to control costs amid stubborn inflation and rising interest rates. As 2024 approaches, Ignition’s latest survey reveals accountants will face what we’re calling triple threats: too much work, too few people and too late to move on tech. In a survey of 136 accounting professionals, 58 per cent named recruiting staff and ongoing personnel shortages as a top business challenge heading into 2024. This was followed by lack of time to implement technology (49 per cent), inefficient or manual processes (40 per cent) and too much client work (38 per cent). Against a weaker economic outlook and tighter labour market, these challenges could eat into the profits of many firms.

Leading West Auckland Accounting Firm Trials 4 ½ Day Working Week [SCOOP]
A 4.5 day workweek required a press release?
The largest accounting firm in West Auckland, UHY Haines Norton (Auckland) Limited, has announced they are trialing a four-and-a-half day working week. The firm’s three offices (located in Henderson, Kumeu and Helensville) will be closed from 12:30pm every Friday afternoon. UHY Haines Norton’s Managing Director Sungesh Singh says as a management team they have looked at ways to prioritise the wellbeing of their staff, and noted the success of shorter working weeks in other businesses both nationally and internationally. “We appreciate how tough the last few years have been on our staff with the impact of covid, lockdowns, floods and cost of living,” Sungesh says. “Our team have been tremendous in their work ethic and dedication to our clients, and this shorter working week trial is a way of enhancing their work-life balance.”

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Study: 69 Percent of Accountants Said AI Has a Positive Impact on the Profession [Moss Adams]
Artificial intelligence (AI) tools in accounting are going mainstream, according to a survey by Moss Adams. The study reveals a large majority of accountants believe the technology will enhance rather than eliminate jobs and benefit the profession overall, driving productivity and business growth. “AI is here, and accountants are actively embracing the technology,” said Bill Armstrong, chief innovation officer of Moss Adams. The survey of corporate tax and auditing professionals, conducted by OnePoll, revealed 83 percent of respondents are aware of AI in their workplace, and 79 percent of those say it’s beneficial to have AI assist them with their job. “Although concerns about ethics and job replacement persist, a majority of the participants trust AI in both professional and non-professional contexts and appreciate its potential to improve employee satisfaction by providing new opportunities for learning and growth,” Armstrong said.

The promise and peril of AI at work in 2024, according to Deloitte’s Tech Trends report [ZDNET]
At the end of each year, Deloitte releases its annual Tech Trends report to help business and IT leaders learn about how emerging technologies might impact their businesses, and how to best deploy these tools. Unsurprisingly, generative AI was a major topic of Deloitte’s 15th annual report. Within the first 60 days of ChatGPT’s release to the public, OpenAI garnered 100 million users. For comparison, it took TikTok, a major leader in the social media space, nine months to reach that milestone. The heightened level of interest was likely fueled by how intuitive ChatGPT is to use, allowing everyone, regardless of technical skill, to take advantage of the tech. What’s more, the use cases for the chatbot were evident. “People who have, from their desk and keyboard, watched mechanical muscles automate manufacturing and automate spreadsheet analysis, suddenly, they’re finding mechanical minds beginning to automate what they do,” said Mike Bechtel, chief futurist with Deloitte and co-writer of the report. “I think that’s why this arcane evolution of transformer models has become a bonfire of interest among gen pop.”

Employees, anxious about AI, blame a lack of guidance [CIO Dive]
A year after generative AI burst onto the market and into the workplace, employees with experience using the technology report new anxieties fueled by lack of guidance from leaders, according to survey results from Ernst & Young. About two-thirds (65%) of the 1,000 office/desk workers surveyed said they’re anxious about not knowing how to use AI ethically. More than 3 in 4 employees are concerned about the legal risks, and a similar number are anxious about cybersecurity risks, the findings, released Dec. 6, showed. Respondents said they would be more comfortable if workers from all levels were involved with their company’s adoption of AI and if senior leadership promoted responsible and ethical use of the tech, the findings showed. “Employees play a crucial role in the successful integration of new technologies, so leaders must prioritize alleviating fear-based obstacles for their organization to harness the full potential of AI,” EY said in a statement.


EY to closes doors in city amid weak market [The Standard HK]
Ernst & Young’s legal affiliate in Hong Kong is shuttering next month amid a weakening market. LC Lawyers, the Hong Kong law firm member of the Big Four auditor’s global network, will cease operations on January 23, according to its managing partner Rossana Chu, one of the firm’s four legal experts, declined to comment.

The 10 Biggest New York City Office Leases of 2023 [Commercial Observer]
New York City’s leasing stats this year might be worse than in 2022, but at least the top deals are bigger. Last year ended with KPMG’s 456,518-square-foot deal at 2 Manhattan West clinching the No. 1 spot.

Financial Reporting

Building Trust in Sustainability Reporting: The Urgent Need for Integrated Internal Control [IFAC]
Through an integrated internal control environment based on an integrated mindset, companies will achieve greater connectivity of functions, processes and systems leading to enhanced data quality to improve decision making on strategy, risk, opportunity management and governance-related matters. This is the foundation for transitioning to a more sustainable business model and enhancing investor and stakeholder confidence in sustainability performance. Learn about integrated internal control, how it can be achieved, the role of the finance function and the importance of the professional accountant’s skillset in achieving it.