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.
Tax
IRS chief confident tax experts will make the ‘financial sacrifice’ necessary to work for his agency [Government Executive]
While IRS’ answer rate at its call centers has skyrocketed and dozens of Taxpayer Assistance Centers have reopened after hiring surges aimed at taxpayer services, Republicans on the Government Operations and the Federal Workforce and Health Care and Financial Services subcommittees, which jointly held the hearing, said their constituents were still waiting too long for assistance. They also expressed doubt IRS would deliver on its promise to not increase audits on those making less than $400,000 per year, promising to hold IRS Commissioner Danny Werfel accountable. “My colleagues on the other side of the aisle believe more money and more power is the solution,” said Rep. Lisa McCalin, R-Calif., noting the Democrats’ signature tax and climate law “dumped” $80 billion into IRS accounts. “The IRS needs stronger leadership, not more money and not more audits.” Werfel said he would continue to focus on three areas to convince lawmakers his transformation of IRS was working: improving customer service, boosting enforcement of high-earning tax cheats and reducing tax scams.
IRS plans to test modernized taxpayer data system after 2024 filing season [FedScoop]
The Internal Revenue Service plans to begin running a modernized system for taxpayer data after the current filing season in April, with a goal of having it up and running by the next tax season, IRS’s top official told lawmakers. “In April, so after this filing season, we are going to turn on … that modern system for the first time and we’re going to run it in parallel with our legacy system, work out any kinks, and hopefully get it up and running in filing season ‘25,” IRS Commissioner Daniel Werfel said at a Tuesday hearing before two House Oversight subcommittees. “So we are making progress.” His comment was a response to a question from Rep. Maxwell Frost, D-Fla., about the replacement of the 60-year-old Individual Master File (IMF), the system that scores and processes tax submission data, and whether the agency has the funding to stay on track for the goal to replace it.
Americans want IRS modernization — why doom Direct File before it has a chance to succeed? [The Hill Opinion]
Our government historically has taken a highly linear path to technology development: Academics and elected officials study an idea, Congress passes a law directing that a piece of technology be created, public agencies lay out a plan on paper, and then an outside vendor follows the plan to a tee. The rollout of Healthcare.gov — which even its greatest champions would call an unmitigated disaster — finally put this outdated approach to bed. The IRS Direct File pilot, despite the criticism, illustrates just how much the government has learned about product development. The development of new technologies is complex and unpredictable, and mechanisms that seem reasonable on paper often fail to work in practice. The tech world knows this, as do the U.S. Digital Service and 18F, both launched in 2014 to provide experienced capacity to agencies developing new technology products, like the high-profile COVIDtests.gov.
IRS encourages employers to electronically file payroll tax returns [IRS Newsroom]
The Internal Revenue Service today reminded employers that the best way to file their next quarterly payroll tax return by the Oct. 31, 2023, due date is electronically. While paper filing is available, the IRS strongly encourages e-filing. E-filing is the most secure, accurate method to file returns, and saves time.
Financial Literacy
Giving the next generation a bright financial future [CPA Canada]
Since some of the most critical financial literacy education starts at home, in honour of financial literacy month, Pivot spoke with some CPA parents about the lessons they’ve shared with their kids to set them up for their financial futures and what actions can help the generations to come be more financially literate.
News
Berkshire Sued for Changing Accounting Rules in $10 Billion Pilot Acquisition [Bloomberg via Yahoo! Finance]
Warren Buffett’s Berkshire Hathaway faces accusations it violated the terms of a more than $10 billion acquisition of truck-stop-chain Pilot Travel Centers by changing the accounting methods used to value part of the deal, according to an unsealed lawsuit. Berkshire originally acquired about 39% of Pilot Flying J — a truck-stop provider closely held by Cleveland Browns owner Jimmy Haslam and his family — for $2.75 billion in 2017. The deal called for Buffett to buy a controlling share by this year. The billionaire paid $8.2 billion for another 41% stake in January, meaning he now owns 80% of the business, according to the suit. The deal also gives the Haslam family the right to sell the remaining 20% of the company to Berkshire on January 1, 2024, using the valuation methods applied to the other purchases. But the family says Buffett’s lieutenants have changed the accounting rules covering the largest US truck-stop business, cutting the value of the so-called put right.
Top Texas accounting firm makes local acquisition in expansion bid [San Antonio Business Journal]
Whitley Penn, a public accounting firm, has made a local acquisition as it bolsters its presence in the Lone Star State.
The Fort Worth-based accountant, boasting a net revenue of almost $200 million, acquired San Antonio-based Fisher Herbst & Kemble, an audit, tax and consulting services firm. The former FHK office will become Whitley Penn’s San Antonio office, according to managing shareholder Bob Herbst. The combined firm will be worth $218 million in 2023, and will include 90 partners, he said.
Cranium announces $25M in funding led by Telstra Ventures, KPMG and SYN Ventures [ROINJ]
Short Hills-based Cranium.ai Corp., which was spun off as a separate company from KPMG LLC in April, on Wednesday announced it has raised $25 million in new funding for innovation, research & development and business expansion. Telstra Ventures led the round with participation from KPMG LLP and SYN Ventures. Both participating investors previously provided seed funding when Cranium emerged from stealth six months ago and spun out of KPMG’s startup incubator, KPMG Studio, with additional investment from SYN Ventures.
David Ibels tragic death: KPMG partner found in a Brisbane park left behind a high-flying barrister wife, loving daughter [Daily Mail]
A successful KPMG partner whose body was found in a national park appeared to have it all. He was married to a high-flying barrister, with whom he had a young daughter, and lived in a multimillion-dollar home. David Ibels, 43, was last seen near the Mount Tamborine area, south of Brisbane, in the early hours of Saturday morning. His Porsche Cayenne station wagon was found near Springbrook National Park on Sunday, which prompted a desperate and thorough search of the area. Rescue teams, which included police, two crews from Queensland Fire and Emergency, and about 20 staffers from KPMG, found Mr Ibels’ body at about 2pm that same day.
Consulting
Big four advisory cuts do not reflect mid-tier market [AccountancyAge]
Ad? Or reality for mid-tiers? You decide.
The recent reductions in advisory services by KPMG and Deloitte do not reflect the entire accounting industry, according to Lee Humble, UK head of corporate finance at Azets. Last week (October 17), it was reported by the Financial Times that KPMG would cut 7% of its deal advisory team weeks after it was revealed that Deloitte would cut 800 advisory roles. “Risk remains high across a lot of sectors and every transaction needs a considered and methodical approach, but there is a hunger out there from acquirers and investors,” said Humble. Despite a tough time in the deal advisory market, Humble stated that Azets has experienced record results in the first quarter of the current financial year and has increased its finance team to support the demand for its services.
KPMG UK launches Advisory – a new business that unifies Deals and Consulting [KPMG]
The combined business simplifies the firm’s organisational structure and better meets KPMG UK’s client needs with an ‘end-to-end’ service under one roof. The combination is already working successfully in other KPMG member firms and aligns to KPMG’s multi-disciplinary model, enabling its people to access greater professional development and broader experience. The new Advisory business will be led by Lisa Fernihough and will start serving existing and new clients from 1 January 2024.
In Memoriam
We’re heartbroken to share that we lost our Head of Accounting, Josh Lance, to cancer. Josh wasn’t just an amazing accountant; he was an incredible person with a big heart and sharp mind.
If you knew Josh, you know he gave his all—to his work, his family, and to the accounting… pic.twitter.com/DRLApOUzdY
— Ignition (@ignitionapp) October 22, 2023
Joshua Lance: Remembering a bright light lost [Journal of Accountancy]
Many in the accounting profession are mourning this week after we lost one of our best and brightest. Joshua Lance, CPA, CGMA, founder and owner of the virtual firm Lance CPA Group, passed away Saturday after a nearly yearlong battle with cancer. He was 40 years old. I served with Josh on the Illinois CPA Society Board of Directors and regularly attended the same accounting events. He was a man who made his mark on the profession and in his community in many positive and lasting ways.
Talent
PwC Australia spin-off Scyne Advisory cuts 78 jobs [Reuters]
PwC Australia said on Thursday that dozens of staff who had been set to move across to spin-off consultancy Scyne Advisory will no longer have roles at the new firm and have been told to look for jobs internally. PwC Australia sold its government advisory business, responsible for a fifth of revenues, to private equity group Allegro Funds for a nominal A$1 in August after government agencies cut ties over a national scandal involving leaked tax plans. Over 1,500 people out of PwC Australia’s more than 9,000 staff were expected to move to the new firm, PwC said in September.
Managing busy season with a shortage of accountants [Thomson Reuters]
There it is, folks
Here’s another way to manage busy season with a shortage of accountants: hire some! Here are Accountingfly’s top remote candidates of the week. This time of year is the best time to start thinking about bringing on tax talent, don’t wait until it’s too late or it’ll be like getting stuck with Smarties because you didn’t buy Halloween candy until after work Halloween night.
Deloitte is a Swiss Job Creation Engine [Finews.com]
According to a statement Wednesday, Deloitte Switzerland achieved net revenues of 597.2 million Swiss francs ($669.1 million) in the financial year ending in May, corresponding to 9.7 percent growth. The company said it created over 300 new jobs and describes itself as the largest of the Big Four consulting firms in Switzerland, ahead of Pricewaterhouse Coopers (PWC). Last year, it had 2,727 employees, of which 2,049 were in Zurich and 450 in Geneva, with the rest spread out between Basel, Bern, and Lugano.
Ex Oliver Wyman Italy CEO Scardovi joins Deloitte [Reuters]
Claudio Scardovi, the former head of Oliver Wyman in Italy, has joined Deloitte Financial Advisory as equity partner to strengthen the firm’s M&A and private equity advisory services, Deloitte said on Wednesday. After stints in KPMG and Accenture, Scardovi founded Intervaluenet, which was taken over in 2002 by management consultancy firm Oliver Wyman. Scardovi led Oliver Wyman Italia as chief executive for the following five years.
Law and Order
SEC Enforcement Chief: Pending Supreme Court Case on In-House Proceedings Will Not Pause Charges Against Accountants [Thomson Reuters]
The Securities and Exchange Commission (SEC) will not hesitate to file charges against accountants and auditors in district courts instead of using in-house administrative proceedings, said the agency’s Enforcement Director Gurbir Grewal at a conference on Oct. 25, 2023. This comes as the commission is locked in a battle in a Supreme Court case—SEC v. Jarkesy—about the constitutionality of the SEC’s use of in-house judges. Arguments are set for Nov. 29. Critics of the SEC believe that the administrative enforcement program is unfair. By contrast, federal courts afford greater protections to defendants. “We are not going to just stop holding auditors and other gatekeepers responsible when they fall short of their professional obligations just because there is some uncertainty in the court,” said Grewal at Securities Enforcement Forum hosted by Securities Docket in Washington. He spoke via a livestream.
Education and Academia
CSUMB duo sowing the seeds of accounting [CSUMB]
A former student sent us this link and said: “Not sure if this counts as a tip but wanted to get recognition for a couple of professors from my old school, CSU Monterey Bay. Instead of just recognizing the pipeline issue they’re being proactive and going out with current and former students to local community colleges and high schools to get more students interested in the accounting profession. I think it’s pretty cool and would love to see more professors/universities doing something similar.”
The business world is crying for accountants and a pair of CSU Monterey Bay professors is are taking action. A year ago, Gary Schneider and Shaowen “Sharon” Hua began visiting high school math and economics classes, pitching the profession of accounting – many times to students who knew little or nothing about such work.
School of Business Students Return to NYC to “Meet the Firms” [Ithaca College]
Last month, Ithaca College School of Business students went to New York City and spent a busy 36 hours meeting alums, learning career possibilities, and touring major firms. On the second day of the trip (after some NYC bagels enjoyed right around the corner from our hotel), we visited KPMG Global Mobility Services. At KPMG, one of the “Big Four” accounting firms, we were welcomed by a group of central New York college graduates (a mixture of Ithaca College and SUNY Geneseo alums).
Audit
Party City Taps BDO As Auditor After EY ‘Going Concern’ Spat [Bloomberg Tax]
No, it had nothing to do with us.
Party supply retailer Party City Holdco Inc. appointed BDO USA PC to vet its books after long-time auditor Ernst & Young LLP abruptly quit while the company was in the throes of bankruptcy proceedings. The company’s board of directors approved hiring BDO in July but the engagement became official on Oct. 21, the company said in a securities filing after market close on Thursday. EY had audited Party City for 25 years but quit in June.
Quiz: Test your knowledge of the new QM standards [Journal of Accountancy]
Every firm that performs engagements in accordance with the Statements on Auditing Standards (SASs), Statements on Standards for Accounting and Review Services (SSARSs), or Statements on Standards for Attestation Engagements (SSAEs) must implement the new quality management standards, which replace the current policies-based quality control standards with a risk-based system of quality management. Think you already have a good grasp on quality management? Gauge your knowledge with this JofA quiz on the quality management-implementation journey.
Letters to the Editor (Not That Kind)
Two letters published by the Whidbey News-Times regarding the Oak Harbor, Washington mayoral race that may be of interest to the readership:
1. Letter: Wright has right credentials to be mayor (Oct 18, 2023)
Editor,
I am rising in support of Ronnie Wright for Mayor of Oak Harbor. His entire personal and professional life stands as a quiet example of excellence, responsibility, humility, and as a person of trust. He brings a lengthy history of ethical professionalism, meticulousness, and healthy sense of fairness. He has long held a position of trust in our community as a devoted and respected family man, CPA, and business owner.
I know there are many individuals and businesses on our island who absolutely trust him as a CPA, year after year, with the proper and fair handling of their financial affairs, be it state and federal tax filings, financial planning, trusts, retirement planning, and more. I know this for a fact, as I am now one of his clients. His help with my financial affairs has proven invaluable and I trust his advice implicitly.
Some time ago, I learned that Mr. Wright holds Enrolled Agent credentials from the IRS, and I was curious to know what that meant. I found out this is the highest credential IRS grants to a select few exceptionally well qualified tax professionals. It authorizes the holder to represent clients before the IRS, and getting one is a big deal. There are only 1300 Enrolled Agents in Washington State.
2. Letter: Mayoral candidate is not a CPA (October 25, 2023)
Editor,
I noted a letter submitted by Brian Peterson regarding Ronnie Wright refers to Mr. Wright as a CPA. According to the Washington State Board of Accountancy, Mr. Wright is not a Certified Public Accountant and should not be relied on as such. A CPA has at least a bachelor’s degree, has passed the rigorous CPA exam, is licensed by the state, is required to acquire 40 hours of continuing education each year, and must comply with the ethics and other requirements set out in the State Accountancy Act (RCW 18).
While I have not known Mr. Wright to hold himself out as a CPA, according to Mr. Peterson, others do so and it is important to correct the misconception.
Georgia A Gardner, CPA
LOL get ’em Georgia