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November 29, 2022

Friday Footnotes: KPMG Is Twice as Bad as Other Firms; Upskill or Die; Hella M&A | 10.21.22

a judgmental old cat

Big 4

KPMG flunks US overseas audit inspections twice as often as rivals [Financial Times] US regulators were twice as likely to find flaws in audits conducted by the overseas affiliates of KPMG than those of any other Big Four accounting firm, an analysis of inspection data shows. The findings raise further questions over KPMG’s ability to enforce common standards across its global network after a string of run-ins with regulators and internal controversies.

Deloitte & Touche LLP CEO Lara Abrash Wants Her Teams To Swing For The Fences [Forbes]
Abrash sees plenty of opportunities to develop her risk-taking potential both at work and at play. As the Chair and CEO of Deloitte & Touche LLP, Abrash leads a team of some 16,000 who, she says, look to her to set “an inspirational vision, get people excited and let people know that they can be their authentic selves” while fulfilling the organization’s mission. Abrash says she took a “massive risk” by modernizing Deloitte’s technology capabilities. The risk proved successful and helped Deloitte improve its operations even as it contributed to earning Abrash recognition as one of the American Institute of Certified Public Accountants’ 2022 Most Powerful Women in Accounting. When she’s not leading those 16,000 members of her Deloitte team, Abrash is wearing a different hat – literally a different hat – as the manager and first baseman of the Cougars, a competitive women’s softball team in New York City. Abrash contends that while managers needn’t be the best player on the team, they have to be the player whom teammates trust and respect to do the right thing by the team when the pressure’s on.

PwC Adds More Minorities to Ranks While Partner Promotions Lag [Bloomberg Tax]
The ranks of Black and Latino staff at PwC LLP have steadily increased amid efforts to better recruit and retain a more diverse US workforce, the firm said in an annual sustainability report. The total number of Black PwC professionals rose slightly to 7% of the firm’s US workforce in its most recent fiscal year while White employees declined to 57%. The number of Hispanic or Latino professionals held steady while the firm’s Asian staff grew slightly to 21% compared to a year earlier, according to the latest diversity data PwC published Monday.

EY Liverpool welcomes new recruits from local universities and colleges [EY] This needed an announcement? EY in Liverpool has welcomed ten new recruits onto its graduate and apprenticeship programmes, with students joining from local universities and colleges. The new joiners continue the expansion of EY’s workforce in the city, which has doubled in size to over 80 professionals in the last five years, since Office Managing Partner Jenn Hazlehurst took over leadership of the practice.

Practice Management

Understaffed? 5 tips for keeping your firm running smoothly [Accounting Today]
Amy Vetter gives advice to understaffed firms (so basically all firms).

Upskilling required by firms to offset ‘threat’ of accounting automation [AccountancyAge]
Accounting firms must respond to the quickening pace of automation in the sector by adapting their approach to skills development and service delivery, according to Russel Frayne, head of UK digital accounting solutions at Azets. Frayne argues that “significant investment” will be required to offset the “prominent threat” of innovative technologies. “I believe in the not-too-distant future, as the challenge dawns on smaller professional services firms, the capability to go it alone will not be feasible in what will be a very competitive marketplace. “More consolidations, acquisitions and blended services will be more prevalent in order to benefit from economies of scale and more mature operating models of larger firms.”

The Haves And The Have Nots [Above the Law]
An interesting and possibly relevant discussion about how law firms treat professionals who aren’t lawyers with disdain. The problem is deeper than mindset; it’s structural. The basic makeup of law firms differs from that of most other businesses in ways that often cause us to systematically overvalue the importance of attorneys and undervalue the business professionals and staff that keep the firm’s engine humming. Most of the large, nonlegal businesses we’re used to thinking about, talking about, or advising are made up of discrete departments focused on specific tasks. By working together, administrators, sales departments, recruiters, and managers collectively power the entire company. The owners, hoping to keep the profits coming in, pass some of those benefits back to these key team members who made it all happen. What makes law firms unique, however, is that practicing lawyers are in many key firm positions. Lawyers are often a company’s management, sales team, recruiters, and product all rolled into one. And on top of that, they usually own the company itself. In structure, law firms are less like a Fortune 500 outfit and much more like a collective of plumbers or carpenters. For all the marble in our offices, we’re tradespeople at heart, working not in steel or wood, but in PDFs and privilege logs.

The Serious Questions

Accounting Firm Mergers

INSIDE Public Accounting has several accounting firm mergers and acquisitions to report:
Cherry Bekaert Adds Risk and Compliance Advisory Firm
EisnerAmper Merges in Maryland Firm
Herbein + Company Acquires Organizational Psychology Firm
UHY Acquires Michigan Firm

And one more to add to the bunch from CPA Practice Advisor:
CLA to Combine with Top 200 CPA Firm Concannon Miller

7 tips for communicating with staff during M&As [Journal of Accountancy]
Consulting firm Mercer has done extensive research about the keys to communicating with staff during mergers and acquisitions. By the time it comes to communicating with employees, senior leadership has typically been aware of an impending merger or acquisition for weeks, Los Angeles-based Mercer partner Jason Jaross said. “They need to remember that and go back to that very first moment they learned about it. That’s what it will be for everyone else in the room,” he said.

Job Market

Not just IT giants Infosys, Wipro! Big Four firm Deloitte too has delayed offer letters [Business Today]
Don’t panic yet, it’s in India. Job claimants are awaiting offer letters from one of the Big Four accounting firms, Deloitte, after getting placed in the company as early as October 2021, Business Today has learned. A distressed job claimant told Business Today: “I got the selection letter from Deloitte in October 2021 and have been waiting for the offer letter and joining date since then. It’s been more than one year now.” Another job claimant, who was placed in October 2021, has also not received an offer letter. “I also got placed in October 2021 but have not received the offer letter yet,” the candidate said.

Circle K planning to eliminate corporate accounting jobs in Columbus and other North American locations [The Republic]
Circle K is eliminating potentially dozens of corporate accounting jobs from its US Midwest Region office on West Jonathan Moore Pike in Columbus, The Republic has confirmed. “After a long and careful review, we have made the difficult business decision to transition certain accounting processes to a third-party provider that can perform these functions using the latest tools, resources and technology,” wrote Chris Barnes, director of communications for Circle K and its multinational parent, Alimentation Couche-Tard, based in Laval, Quebec, Canada.

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Accountants Behaving Badly

Accountant jailed for two years, stripped of CPA designation, for $1.3M theft from Gander Aviation [CBC]
Templeman was general manager of Central Holdings Inc., which operates under the name Gander Aviation. The company is what’s known as a full-service fixed-base operator at Gander International Airport, providing a range of services from refuelling and catering to ramp parking and de-icing. Between January 2016 and mid-November 2018, Templeman fraudulently claimed expenses — and received reimbursement for — $1,284,842. A discipline decision released by the CPA association says Templeman concealed the theft “by causing customer payments to be misapplied to customer accounts, and by registering domain names and creating email addresses resembling customer email addresses to perpetuate false communications with his employer.”

Danbury Grocery Store Accountant Sentenced After IRS Scam [Patch]
Lizbel Sanchez, also known as Lizbel Diaz, 47, pleaded guilty to one count of willful failure to collect or pay over taxes in April. According to court documents and statements made in court, Sanchez is a minority owner of Danbury Food Corp, which operates a C-Town grocery store in Danbury. Sanchez was responsible for DFC’s accounting and financial records, and for collecting and paying over certain federal taxes from DFC’s employees, namely federal income taxes and Federal Insurance Contribution Act taxes, which include Medicare and social security taxes. She also was responsible for ensuring that DFC, as an employer, paid its own share of FICA and its Federal Unemployment Tax, which were based on its employees’ taxable wages.

Music accountant accused of stealing $1m from bands including Peking Duk [Sydney Morning Herald]
A music industry accountant who gave evidence for the prosecution at the recent embezzlement trial of Guy Sebastian’s former manager has been accused of siphoning off more than $1 million from several prominent Australian bands including ARIA award winners Peking Duk. Damien Luscombe was stood down from his role as a partner and business manager at White Sky Music accounting services last week after the company claims it discovered a series of discrepancies in the accounts of at least two major clients.

Woman accused of embezzling over $27,000 [Daily Sentinel]
An employee at a Utica law firm is accused of altering the payroll to give herself more than $27,000 in bonuses over the past year, according to the Utica Police Department. Police said Karen Durant, 42, of Ilion, would intentionally alter her salary and give herself bonuses between $500 and $2,000 over multiple payroll weeks over the past year. The theft was discovered when an accounting firm conducted an audit on the law firm’s finances, and the firm contacted law enforcement in early September.

Other Stuff

Managers’ Strategic Use of Concurrent Disclosure: Evidence from 8-K Filings and Press Releases [The Accounting Review]
Some new research: This study examines managers’ strategic use of concurrent disclosures around the announcement of negative material events. We predict and find that managers disclosing negative 8-K news are more likely to issue a concurrent press release about an unrelated event relative to a press release providing additional context for the 8-K triggering event in order to increase investor information processing costs. This strategy appears distinct from the bundling of news to deter litigation. We find that managers more commonly issue concurrent unrelated press releases when they have stronger incentives to impede the pricing of negative information, and that doing so is associated with a reduction in the speed with which prices reflect the news. Our findings shed light on a previously unexplored tool managers use to exploit investors’ processing capacity constraints to “hide” negative news.

Tyler Perry Terminated Accountants After Finding Out He Was Owed $9 Million From the IRS [WBLS]
“I didn’t go to college, but I paid for Harvard many times over in the mistakes that I made,” he added. Perry explained this situation as he was telling the story of being audited by someone from the IRS when he discovered that the agent was really into learning what he was doing with his money. “So this audit went on for three years,” the actor said. “I’m spending hundreds of thousands of dollars in accounting with accountants for the audit and I am getting so mad, and so frustrated.” He continued, “We get to the end of the audit and they, the IRS, owed me $9 million.” He went on to talk about his decision to fire his accountants after the mishap. “Everybody gone! I had to stop going to H&R block for my taxes at some point. I learned in progress and it’s okay.”

Forvis names Fran Randall to governing board [Virginia Business]
Just weeks after promoting Fran Randall as its Richmond market leader, accounting firm Forvis has also appointed her to its governing board. “Fran has a boundless passion for our team members, our clients and the communities we serve,” Forvis CEO Tom Watson said in a statement. Randall joined Dixon Hughes Goodman in December 2019 and has led the core international tax services team of 40 workers across the company, has expertise in international and domestic taxation, tax research and project management.

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