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February 6, 2023

Friday Footnotes: PwC and Luanda Leaks; EY Seeks Belonging; Pentagon’s Sloppy Accounting | 1.24.20

PwC under growing scrutiny as scandal engulfs Isabel dos Santos [The Guardian] PwC, the global accounting firm battling to distance itself from a financial scandal engulfing Africa’s richest woman, Isabel dos Santos, was auditing the books of Angola’s state oil company during a period that is now under criminal investigation. Critics say PwC’s work for Sonangol, the government-owned oil group that underpins Angola’s economy, raises conflict of interest concerns because the firm appears to have been retained to check the company’s accounts while at the same time collecting fees to advise on a major restructure.

Heads could roll at PwC over Isabel dos Santos links, says chairman [The Guardian] BoMo says PwC will investigate whether any individuals at the partnership should lose leadership positions, have their bonuses docked, or lose their jobs.

“We’ll look at the individual behaviours, as to whether they come out of leadership roles or have compensation implications, or maybe even [come] out of jobs,” Bob Moritz said, on the sidelines of the World Economic Forum in Davos. “We’ll wait for the investigation, I don’t want to rush. But we need to move with speed to take action to regain confidence.”

PwC executive leaves firm after Dos Santos revelations [BBC] Jaime Esteves was the head of tax at PwC in charge of Portugal, Angola, and Cape Verde before leaving the firm. PwC helped Ms Dos Santos with auditing, consultancy, and tax advice for her companies.

KPMG is pursued over auditing of Goals Soccer Centres [The Times] KPMG is facing legal action over its auditing of Goals Soccer Centres, months after the chain collapsed following an accounting fraud going back almost a decade. Deloitte, which acted as administrator to Goals, is understood to be chasing KPMG over an alleged misdeclaration of the company’s VAT liabilities for several years.

EY holds ‘belonging’ workshops after discrimination claims [Financial Times] EY is sending staff to workshops on “belonging” after a string of complaints about discrimination and inappropriate behaviour at the accountancy group’s deals unit. Steve Ivermee, head of Transaction Advisory Services, urged employees to attend sessions “to hear your experience of our culture and to share and learn from each other’s experiences of belonging.”

Peterborough businesswoman Kathryn Windrem has passed away [kawarthaNOW] Windrem was a certified general accountant and partner at BDO LLP in Peterborough for more than 35 years. She was a past chair of the policy board at BDO Canada LLP.

Grant Thornton CEO Kevin Ladner Reappointed for Second Term [Grant Thornton Canada] In a unanimous decision, the Partnership Board of Grant Thornton LLP in Canada reappointed Kevin Ladner as executive partner and CEO for a second term of five years, effective April 1, 2021.

Pentagon Racks Up $35 Trillion in Accounting Changes in One Year [Bloomberg] The Pentagon made $35 trillion in accounting adjustments last year alone — a total that’s larger than the entire U.S. economy and underscores the Defense Department’s continuing difficulty in balancing its books. The Defense Department acknowledged that it failed its first-ever audit in 2018 and then again last year, when it reviewed $2.7 trillion in assets and $2.6 trillion in liabilities. While auditors found no evidence of fraud in the review of finances that Congress required, they flagged a laundry list of problems, including accounting adjustments.

Goodwill Sparks Deep Division, at Least on Balance Sheets [Wall Street Journal] A brewing battle over how to treat more than $5.5 trillion in assets on company books is pitting investors against businesses, investment advisers against academics and even banks against their own trade association.

How International Auditing Rules Are Shaping Standards in the U.S. [Wall Street Journal] A Q&A with International Auditing and Assurance Standards Board Chairman Tom Seidenstein, who said about audit firms not being required to care about IAASB standards:

It’s like the ultimate market test of the relevance of your standards if people want to adopt. And so it’s a privilege that we have. We have to convince people that it’s continually worth doing. I’m committed to the cause that global standards make sense set by an independent body, but that’s not always the international consensus, so we really have to earn our keep. There’s a number of issues in a number of jurisdictions today that are raised about the value of the audit. Our strategy really has to be focused on it.

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