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Friday Footnotes: PwC Isn’t Getting a Redemption; Just Say No to NOCLAR; Oh, Layoffs? | 3.15.24

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.

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Big 4

The high price of PwC’s failed redemption story [Sydney Morning Herald]
“I’m extremely proud of the contribution every individual at PwC Australia makes to this firm and their ongoing commitment to producing exceptional results for our clients.” This was the brave part of the statement PwC boss Kevin Burrowes made on Wednesday as he announced another 366 partners and employees would be cut at the embattled firm to right-size the shrinking business. The whole point of hiring a big four audit firm such as PwC is to attach your financial results to a brand whose reputation is beyond question. PwC’s reputation is far from that, and it will suffer further this year at the hands of the incredibly influential Canberra politicians who helped bring the malfeasance by those partners to light.

KPMG layoffs
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Deloitte fights for another shot at $789M SHARKCAGE cyber contract [Washington Technology]
Deloitte wants back into the competition for a $789 million Navy contract that was captured by Accenture. The Navy wants to build a new IT environment for sensing, detecting and analyzing activities across its networks. Accenture won the contract known as SHARKCAGE in February. After going through the debriefing process, Deloitte filed a protest raising challenges to four non-price factors the Navy used in evaluating proposals.

EY’s new boss shuffles leadership roles and plans cost cuts [Financial Times]
EY’s new boss Janet Truncale has set out her leadership team for the Big Four accounting firm, moving an architect of its failed split from his executive role and signalling plans to cut costs across the global firm. Truncale named four global managing partners to help run EY when she takes over as chief executive and chair in July, according to an email to partners this week, which said the wider global executive team would be “the same size or smaller” in the future. Andy Baldwin will leave his current role as global managing partner for client service and instead become a senior adviser, according to the email.

Accounting giant renews lease in downtown S.F. — but for less than three years [San Francisco Chronicle]
Accounting giant KPMG has renewed its lease at its longtime San Francisco office building after considering other locations. The New York-based company extended its 125,000-square-foot lease at 55 Second St. through September 2026, a spokesperson confirmed. It has occupied its namesake building since 2003, but in the wake of remote work, was considering smaller offices elsewhere. The company also looked at 50 Fremont St., which is owned by Salesforce, but didn’t pursue a move, a person familiar with the company said.

Former EY partner shares how he climbed the corporate ladder to walk away from it all and become a math teacher [Business Insider]
Deepak Swaroop spent nearly 20 years working at EY in London, 10 of which as a partner— a position known to attract an average salary of £803,000, about $1 million. Swaroop has an MBA and has completed courses in executive management at Harvard and AI at MIT. In 2020, he left the high-flying world of finance behind to become a high school math teacher, taking a considerable pay cut in the process.


The auditor’s role in supply chain due diligence [Compliance Week]
A recent New York Times report detailed alleged examples of migrant children working for U.S. suppliers of well-known consumer products, including Oreos, Gerber baby snacks, and McDonald’s milk, in violation of child labor laws. Social compliance audits have become a multibillion-dollar global industry, as corporations hire firms—sometimes confidentially—to perform hundreds of thousands of workplace safety inspections each year and solve potential public relations issues when supply chain or labor matters surface. The NYT report’s focus was that private auditors from large firms failed and consistently missed child labor law violations. Auditors moved quickly and left before children arrived for overnight shifts, or they were not sent where minors worked. Children used fake identification; auditors came up against language barriers; or subsuppliers in the supply chain were not audited (e.g., a company obtains milk from a dairy farm processor; the auditors audit the processor but not the dairy that supplies the milk).

State CPA institute says proposed rule change would put audit professionals at risk [Central Penn Business Journal]
A new proposal by the Public Company Accounting Oversight Board (PCAOB) has the Pennsylvania Institute of Certified Public Accountants up in arms. Allison Henry, vice president of professional and technical standards, PICPA, said the newly proposed NOCLAR (non-compliance with laws and regulations) rules are “outright unreasonable and would expand the scope of auditors so immensely that even the best, most experienced audit professionals would be at risk of increased legal liability and failure to meet compliance guidelines.” Not to mention the extreme increase in costs to businesses which Henry said could at least triple

Why SPACs Fail to Meet Audit Quality Control Standards [The CPA Journal]
The explosion in special purpose acquisition company (SPAC) mergers with private companies to form public companies during 2020 and 2021 highlighted a variety of concerns with this new form of ownership, including when to reclassify equity warrants to liabilities, whether error corrections due to reclassifications should be treated as revisions or restatements of financial statements, how to comply with SEC and PCAOB regulations, and how to judge the impact on audit quality control deficiencies. Marcum LLP is the dominant player in this market, with one-fifth of its total audit fees of $184 million attributable to revenue from auditing SPACs. Among the 11 audit quality control deficiencies cited in the SEC’s legal settlement with Marcum include the acceptance and continuance of clients and engagement, engagement performance, and quality controls. The SEC is working on proposals that would enhance disclosures to better protect investor interests.

Bill to let state agencies bypass State Auditor and hire private CPAs tabled [RadioIowa] A bill that would have let state agency budgets be audited by private CPA firms rather than the State Auditor’s Office has stalled in the Iowa House. “The auditor bill didn’t have support in this committee and also one of the big concerns was the expense of hiring outside firms,” Bloomingdale, a Republican from Northwood, told reporters after the meeting. State Auditor Rob Sand, the only Democrat elected to statewide office, has said the bill would have let state government “insiders” pick “lapdog CPAs” who’d cover up corruption.

Iowa Poll: Most Iowans dislike plan to allow outside audits, cutting out state auditor [Des Moines Register]
A majority of Iowans oppose a Republican-led bill that would allow state agencies to outsource their annual audits to private CPAs, circumventing the state auditor, a position held by a Democrat, a new Des Moines Register/Mediacom Iowa Poll finds. Fifty-one percent oppose the proposal, compared with 43% who are in favor. Seven percent are not sure.


Sen. Rasmusson wants to remove barriers for college students to become accountants [Detroit Lakes Tribune]
On March 7, the Minnesota Senate State and Local Government and Veterans Committee heard legislation , authored by Sen. Jordan Rasmusson (R-Fergus Falls), to provide an alternative pathway to obtaining certified public accountant licensure. By bringing CPA requirements closer to previous standards, SF 1660 would remove unnecessary barriers for Minnesotans to enter this high-demand profession. This legislation is supported by State Auditor Julie Blaha and the Minnesota Society of CPAs. “In 2006, Minnesota’s CPA licensure requirements were increased to require an additional year of college,” Rasmusson said in a news release. “Yet this change has not produced the positive benefits that were promised, and instead, has created artificial barriers for Minnesotans to become CPAs. In fact, the current extra year of college has no requirement that it be in accounting classes, meaning it could be courses on golf or fine arts. My legislation removes these barriers to help our students, accounting firms and Minnesota clients who need CPAs.”

Spreading a contagious love for accounting [Santa Monica Daily Press]
This is technically an ad from Santa Monica College — it says as much at the bottom — but it has some fun quotes about brainwashing and relevance to the accountant shortage.
They say the secret to being an outstanding teacher is to love what you teach. Students will sense that affection and perhaps come to share it. That’s exactly what happened to Omari Gordon in Santa Monica College Accounting Professor Greg Brookins’ Accounting 1 class. “Professor Brookins ‘brainwashed’ me,” says the 30-year-old Atlanta native. Brookins has been “brainwashing” — in the best possible way — students for 25 years. The beloved accounting professor begins each semester detailing his early years in the trade. “My experiences as an accountant were fun,” Brookins says, referring to his time with Big Four accounting firm Ernst & Young and Fox Entertainment and of traveling around the world on business — Caracas , Rio de Janeiro , Panama , Rome , Tokyo, and Seoul —all before he turned 30. His professor’s enthusiasm proved contagious to Gordon, who will be transferring to Cal State Northridge as an accounting major.

Lightsabers and wrestling belts: Marquette Business’ Michael Browne has a system to teach accounting to anyone [Marquette Today]
Many of the students who come to Michael Browne, instructor of practice in accounting in the Graduate School of Management, to learn how to read balance sheets will not be using that knowledge on the CPA exam. They’ll likely never even step foot in an accounting firm, unless they’re a customer. Those learning from Browne these days include physicians and chemists, state government workers and liberal arts majors; all of them going for advanced business degrees. “The way we approach it is that we’re not trying to prepare these students to be CPAs,” Browne says. “We’re trying to teach them how to understand what the numbers are and analyze them to make good business decisions.”

College is still worth it, research finds — although these majors have the lowest rate of return [CNBC]
For decades, research has showed that earning a degree is almost always worthwhile. Recent college graduates working full-time earn $24,000 more a year than those with just a high school diploma, according to newly released data from the Federal Reserve Bank of New York. Additionally, finishing college puts workers on track to earn a median of $2.8 million over their lifetime, compared with $1.6 million if they only had a high school degree, according to “The College Payoff,” a report from the Georgetown University Center on Education and the Workforce.

Rider University launches CPA Apprenticeship Program [Rider University]
The Rider University CPA Apprenticeship Program allows new graduates of accounting programs to earn, at a reduced cost, the required credits to obtain CPA licensure in New Jersey through coursework and real-world professional experience. “Our new program is a novel and powerful tool to bridge the gap between academic learning and real-world accounting experiences,” says Dr. Evelyn A. McDowell, the chair of Rider’s Department of Accounting. “We’re proud to offer recent graduates a low-cost alternative to advancing their careers.” To become a CPA, individuals must earn 150 credit hours in addition to working one year under the supervision of a licensed CPA and passing the CPA exam. Through Rider’s new program, recent graduates can fulfill those credit hours through as many as five online courses while also working at least 34 hours per week with participating firms. Each course is worth six academic credits, offered at a lowered cost of $250 per credit, and will be supervised by faculty from Rider’s accounting program, which is one of only 2% of programs worldwide with accreditation from the AACSB International.


Perspectives from the Profession – The Continuing Evolution of Accounting Firm Ownership Models [INSIDE Public Accounting]
Charles Weinstein, CEO, Eisner Advisory Group LLC, wrote a little something for IPA
The accounting profession has undergone unprecedented changes in recent years: new work models driven by the pandemic, game-changing technologies such as artificial intelligence and generational workforce differences. Yet, the traditional organizational model at most accounting firms has been largely undisturbed by these disruptive forces. In fact, the traditional accounting partnership model is essentially the same as it was in the mid-nineteenth century! If accounting firms are to remain relevant to the evolving needs of clients, employees and the public, firms need to at least consider whether adopting a different business model may be the right path forward.

Tax alert: What the new guidance for Section 174 means for businesses [Atlanta Business Journal]
The $78 billion H.R. 7024 bill’s impact on businesses relying on R&D and R&E credits is multifaceted, intertwined with the complex interplay between Section 41 and Section 174. While the bill primarily addresses Section 174 (R&E) by deferring the changes brought about from the TCJA to tax years beginning after Dec. 31, 2025, the interconnected nature of these sections means the temporary fix has implications for both. For smaller companies burdened by increased tax liability due to the amortization required under Section 174, the bill provides temporary relief for domestic R&E, potentially easing immediate cash flow challenges; however, the sunset provision in 2025 adds a layer of uncertainty to their long-term planning, especially considering the inseparable relationship between Sections 41 and 174.

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ADM announces plan to address accounting issues, posts earnings miss [Reuters]
Global grains merchant Archer-Daniels-Midland, opens new tab announced a plan to fix accounting issues that caused it to correct certain transactions in six years of financial results on Tuesday, though the plan will take time to implement. ADM confirmed some employees have received grand jury subpoenas from the Department of Justice which is investigating its accounting practices, after Reuters reported FBI agents delivered subpoenas in Illinois last week. The subpoenas show that a criminal probe into ADM’s accounting, first reported by Reuters last month, is escalating fast and directly relates to accounting issues that the company said in January were the subject of an internal probe. ADM said some sales between business units within the company were not recorded at amounts approximating market value and corrected certain segment-specific financial information for previous financial statements from 2018 to 2023. The filing showed that ADM had overstated the Nutrition segment’s annual operating profit by as much as 9.2% in that time.

PwC’s Global NextGen Survey 2024: Success and succession in an AI world [PwC]
For those that get it right, generative AI will shape future success. And we believe that the next generation of family business leaders (a group we call NextGen, which refers to members of the next generation of a business-owning family who are between ages 18 and early 40s and are aiming to become responsible owners, influential board members or visionary leaders) hold the key to this transformation. Our global survey of more than 900 NextGen suggests not only that they are more optimistic about generative AI than the incumbent generation, but that they understand the urgent need to shift responsibility for AI out of discrete silos and to deploy it to support enterprise-wide adoption in their companies.

Elm City rejects accountants’ plea for file access [The Wilson Times]
Some local drama in North Carolina Residents booed and stormed out of the room Tuesday when the Board of Commissioners ignored Town Attorney Slade Rand’s recommendation to restore an accounting firm’s electronic access to town financial records so it can reconcile Elm City’s books for past-due annual audits. “If you table this for another month, you’re jeopardizing your timetable,” Rand said. “I urge you to go ahead and give them the access they need to go in there and do what they need to do, at least to finish 2022.” A vote to provide Greg Isley, CPA, with access to the documents deadlocked 2-2 with Commissioners Gil Wheeler and Zachary Mercer in favor and Commissioner Bridget Wimberley and Mayor Pro Tem Tammie Atkinson opposed. Mayor Tawanda Moore cast the tiebreaking vote to defeat the motion. “We need to get going,” Wheeler said. “It’s like a stall tactic. There’s no issue with Greg Isley’s firm. I don’t even know why it’s an issue now. It’s baffling to me. We are in jeopardy of being taken over by the state. What’s going to happen is the town is going to sit in neutral for a couple years. They take over most everything, the hiring and firing, and when they get it straight, they give it back to you. I think we need to go ahead and give them whatever access they need to keep going.”