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Friday Footnotes: IRS Dirty Dozen; PwC Cover Up; Make Accounting Sexy…Again? | 3.29.24

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Ed. note: Remember, it’s April Fools’ weekend. Use that skepticism while you’re out wandering the internet the next few days.

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.

Tax

Dirty Dozen: Beware of aggressive promoters who dupe taxpayers into making questionable Employee Retention Credit claims; risks continue for small businesses, special withdrawal program remains available [IRS]
As part of this year’s Dirty Dozen, the Internal Revenue Service continues to warn businesses and others to stay clear of unscrupulous and aggressive promoters of questionable claims for the Employee Retention Credit (ERC). These questionable ERC claims often put unsuspecting businesses and other entities in jeopardy of penalties, interest and potentially even criminal prosecution for claiming the ERC when they don’t qualify and aren’t entitled to it. In day two of the Dirty Dozen series, this latest warning comes as the IRS continues to take special steps to counter aggressive marketing around the ERC, sometimes referred to as the Employee Retention Tax Credit or ERTC. Since the IRS announced a moratorium on processing new claims filed after Sept. 14, 2023, the agency’s compliance efforts on ERC claims have topped more than $1 billion so far since last fall as work continues on a number of efforts to counter questionable claims.

Accountants Behaving Badly

Accountant to the stars jailed for fleecing $2m [AAP via Yahoo! News]
Over the course of 11 years, Damien Luscombe carefully swindled more than $2 million from some of Australia’s most well-known musicians and restaurateurs. The partner and business manager at accounting firm White Sky oversaw the day-to-day accounts of 11 high-profile clients, including performers Gotye and Peking Duk. They trusted him with their finances but he betrayed them, instead transferring money that should have gone into their accounts into his own. In sentencing Luscombe to a six-year jail term, County Court Judge George Georgiou said the 38-year-old knew what he was doing was wrong. “You engaged in an elaborate and carefully planned fraud,” the judge said on Wednesday. “The fact you were able to engage in this deception … speaks of its relative sophistication.”

You may remember Gotye as someone that we used to know 13 years ago.

Big 4

EY drops appeal against German sanctions over Wirecard audits [Financial Times]
EY has abandoned an appeal against unprecedented penalties imposed following its audits of fraudulent payments company Wirecard, as the Big Four firm seeks to draw a line under years of crisis in Germany. Germany’s audit watchdog Apas last year banned EY from taking on new listed audit clients for two years and levied a €500,000 fine over alleged flaws in its audits of Wirecard, which collapsed in June 2020. EY Germany said on Tuesday that, while it “does not agree with all findings” by Apas, it has decided to “fully comply with the sanctions” in a move that “will bring a conclusion to these proceedings”. The ban on new clients was on hold pending the appeal, which EY has withdrawn and so is likely to take effect immediately, a person familiar with the matter said.

haha April Fools’ right? RIGHT?

Just fire us already
byu/StevieGagain indeloitte

Senate committee report accuses PwC of trying to cover up tax leaks scandal [The Guardian]
A senate committee has accused consultancy firm PwC of attempting to cover up the tax leaks scandal and criticised extensive leadership failures by the firm’s former executives. A second interim report by the Senate standing committee on finance and public administration, titled “the cover up worsens the crime”, has accused the firm of withholding information about the conduct of its international partners. The report, tabled in the Senate, focuses on the scandal unleashed after a former partner was banned for sharing confidential Treasury information about multinational tax laws with colleagues, who then sold the information to US companies as part of an initiative dubbed “Project North America”. Since then, the Australian firm has been forced to divest its entire government consulting business for just $1, been referred to the federal police and the national anti-corruption commission for investigation, and retrenched hundreds of staff.

KPMG accused of misconduct that cost First Nation millions [Cabin Radio]
The Łútsël K’é Dene First Nation is launching a lawsuit against global accounting firm KPMG over its role in an alleged multi-million-dollar fraud. The First Nation and its chief say KPMG’s staff helped the chief executive of the First Nation’s business arm, Denesoline Corporation, misappropriate vast sums of money between 2016 and 2023. The chief executive in question, Ron Barlas, was removed from the role once a separate civil case against him began last year. That case continues. Barlas denies the allegations. In a statement to Cabin Radio, a KPMG spokesperson rejected the allegations and said: “We will be vigorously defending ourselves.”

KPMG hands CEO Yates another three years [Financial Review]
The board of KPMG Australia has extended the leadership term of Andrew Yates for another three years, to June 2027. The decision, announced on Wednesday, comes after Mr Yates was repeatedly criticized during his multiple appearances at the Senate inquiry into consulting and amid a flat consulting market. KPMG Australia chairman Martin Sheppard said the unanimous board decision was made after “a rigorous process that included an independent external assessment, and a thorough review of performance on a range of metrics”.

Talent

Out of balance: Accounting workforce shortage persists [Virginia Business]
Virginia Business wrote a thorough piece on the accountant shortage with some figures specific to VA.
While the tech industry is busy laying off workers, accounting firms are hustling to find people to fill their ranks, an ongoing problem. In Virginia, the mean salary for entry-level accountants was $51,121, according to the Virginia Society of CPA’s 2020 Compensation & Benefits Survey, which was conducted before more recent wage spikes. “Salaries increase from there,” the report states, “with first-level supervisors making a mean of $75,110 and partners a mean of $210,780.” The payoff comes from working a few years and gaining experience, industry experts say. But all levels — from entry to experienced — are seeing wage increases.

Making accounting sexy again [The Economist]
In tiktok parlance, “accountant” is code for a sex worker. Now proper beancounters want to reclaim the title and make it appealing to prospective recruits, on the popular short-video app and elsewhere. The American Institute of Certified Public Accountants (aicpa), the profession’s main trade group in America, has a TikTok feed laden with career tips and young accountants (the real sort) living their best professional lives. It has 27,000 followers—and its work cut out.

Earlier:

If you’re looking for talent look no further than Accountingfly’s top remote accounting candidates of the week. Browse the candidates below and sign up for Always-On Recruiting to get a fresh batch of candidates in your inbox every week at no cost.

The Benefits Of Working At A Privately Held Company, According To A Deloitte Executive [Forbes]
Forbes’ Jack Kelly spoke with Wolfe Tone, the vice chair and United States and global leader at Deloitte Private and also dude with the coolest name in professional services.

Firm Watch

National Accounting Firm’s Selection of Waterfront Site Part of National Shift to Amenity-Rich Workplaces [CoStar]
National accounting firm Carr, Riggs & Ingram signed a 15,508-square-foot lease in the Two Lakeway building at Lakeway Center in the Metairie area of New Orleans. The deal, as voted on by local judges with knowledge of the market, has won a CoStar Impact Award. The national accounting firm’s relocation to The Feil Organization’s Two Lakeway resulted from the building’s onsite amenities, views and customization options for the space build-out, part of a national shift among office tenants taking advantage of current conditions to secure high-quality workplace environments.

Armanino Appoints Shrenik Shah as Managing Director to Spearhead Armanino’s India Office [Business Wire]
Armanino LLP announced it has hired accounting industry veteran, Shrenik Shah, as Managing Director. This hiring will directly support Armanino’s ambition to provide clients with a global talent pool and act as the anchor in the firm’s India office. Shah joined in January and is now spearheading the India office recruitment and key office initiatives. Shah, a seasoned professional with over two decades of experience in accounting and consulting, will play a pivotal role in identifying and spearheading strategic growth initiatives, recruiting talent and developing the firm’s office to enhance the services Armanino provides to its clients. Shah joins Armanino after previously leading Citrin Cooperman’s India office, where he successfully scaled their initiative from launch to over 300 employees.

Consulting

The Top Colleges for High-Paying Careers in Finance, Tech and Consulting [Wall Street Journal]
The top private colleges for high-paying jobs in consulting are Harvard, MIT, Yale, Princeton and Stanford. The top public schools are the U.S. Military Academy, the Georgia Institute of Technology, Michigan, UC Berkeley and Virginia.

via WSJ

McKinsey amps up pressure on staff to perform as the consulting business slows [Business Insider]
Consultants at top firms are feeling the heat to prove their worth — or suffer the consequences. Management consulting firm McKinsey & Co. has sent some senior staffers in North America memos warning them that the clock is ticking on getting a promotion, Bloomberg reported, citing sources familiar with the matter. The memos were sent to engagement managers and associate partners — who typically have eight or more years of experience in the field, according to McKinsey’s own job postings — to remind them that it takes an average of two and half years to be promoted in these roles, Bloomberg reported.

China’s spy agency warns foreign groups are using consulting ‘as a cover’ to steal secrets [South China Morning Post]
China’s top counter-espionage agency warned that overseas entities have obtained commercial and state secrets under the guise of consulting as Beijing pushes to alert professionals to risks amid a sweeping national security drive. In a post on its official WeChat account on Thursday, the Ministry of State Security said that overseas spy agencies had used consulting activities “as a cover” for their attempts to steal classified information, posing “major risks to national security”. The article was accompanied by a six-minute video, which the ministry said was based on a real case where overseas agencies instructed a consulting company to steal classified information from a Chinese company that wanted to invest abroad. In the video, a man travels in time to remind his past self to stay alert and avoid leaking information related to the economy, technology and military to the consultancy.

Audit

For India to have global-sized audit firms, regulations must change: Grant Thornton Bharat CEO [Financial Express]
India has over 1,000 chartered accountant (CA) firms, which is disproportionately high as compared to matured markets. However, domestic audit firms across the board are facing the regulatory heat of late. Vishesh C. Chandiok, CEO of Grant Thornton Bharat, speaks to Manu Kaushik on the audit regulation, the issues concerning it and the way forward for the profession.

Are Audit Firms Spread Too Thin? [MSCI]
Financial statements are essential to everyday investment decisions, and investors rely on external auditors to confirm their accuracy. Our recent research highlighted challenges impacting the global audit industry, including overreliance on a small group of audit clients. An emerging threat — a decline in practicing chartered accountants amid falling interest in accounting as a career — may exacerbate these problems. For this blog post, we looked at audit firms across both developed and emerging markets to assess the current state of play in the industry, and to identify potential areas of concern and the impact these could have on investors.

People

CEO comes back from brain injury to build accounting firm [Accounting Today]
As Women’s History Month draws to a close, BookSmarts Accounting CEO Jenny Groberg’s story shows how female accountants are creating spaces for themselves to advance a profession that’s still largely dominated by men. She founded her Utah-based firm in 2008. “It was just out of necessity in order to support my husband’s medical schooling,” she told Accounting Today. “He wasn’t able to work, so I had to get a job.”

News

Could AI take the grind out of accountancy? [BBC]
Owen Hewitt, is a trainee chartered accountant at accountancy firm haysmacintyre. He’s two years into his training with more exams coming up this year. What’s unusual about him and his peers, is that they will be the first generation of accountants to use artificial intelligence (AI) right from the beginning of their careers. Mr Hewitt is hoping that AI will take over some of the more tedious parts of the job. “These (AI) can remove the burden of the more time-consuming tasks, like analysis of financial data,” says Mr Hewitt.

PRF Update: HRSA Sends Out “Audit Reporting Requirement Attestation” Notice Mandating Quick Action [National Law Review] HRSA’s “Audit Reporting Requirement Attestations” arrived in inboxes on Friday, March 22, 2024, and require a response by Friday, April 5, 2024. The government is under pressure to show that the money distributed under the CARES Act and the American Rescue Plan was used responsibly. These notices are frustrating and frightening, and a two-week turnaround may seem a bit callous, but the situation could certainly be worse—the government could have simply demanded a return of the funds. If an organization expended more than $750,000 in a single fiscal year and does not comply with the new deadlines, it is in violation of the terms and conditions and the government may request that the money be returned. From the government’s perspective, providers and entities receiving these notices may be delinquent and in breach of the terms and conditions of the various government relief programs authorized by the CARES Act and the American Rescue Plan. Organizations that expended $750,000 or more in a fiscal year from the Provider Relief Fund (PRF) and/or certain other federal funds were required to submit Single Audits first in 2021, but the Government gave an extension until 2022.

FF12 finds Wichita business impacted by failed accounting firm [KWCH Wichita]