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Friday Footnotes: Rettig Is Out at IRS; KPMG and Deloitte Suck at Auditing; Desperate For Accountants | 10.28.22

A happy Halloween dog

Sorry Footnotes is late today, it won’t happen again. Our newsletter is always on time.


Iowa addresses accountant shortage, expands eligibility for state jobs [KCRG]
Accountants and auditors with the Office of Auditor of State no longer need a four-year degree. “There’s currently a nationwide shortage of accountants and auditors, and Iowa’s no exception,” said Jennifer Bradley, Vice President of Academic Affairs for Kirkwood Community College.

IRS ‘fully committed’ to better customer service as agency hires 4,000 new workers [CNBC]
The IRS said it has passed a milestone of hiring 4,000 new customer service workers as the agency prepares for the 2023 tax filing season. Hired over the past several months with funds allocated by the Inflation Reduction Act, these workers have been trained to assist taxpayers, including phone support, which has struggled with high call volumes during the pandemic.


Regulator Warns Hong Kong Companies About Auditor Resignations [Wall Street Journal]
They are talking about audit firm resignations, not auditors quitting just before the finish line. Hong Kong’s accounting regulator is sounding the alarm over a surge in auditor resignations a month before or after a company’s reporting period ends. So-called “late auditor resignations,” which increased to 107 during the nine months ended Aug. 31 from 71 in the same period a year earlier, can jeopardize audit quality, the Accounting and Financial Reporting Council said Thursday. The resignations leave companies with little time to plan and conduct proper audits before deadlines for announcing audited financial results, the AFRC said, adding the resignations raise concerns about whether stakeholders are adequately informed about circumstances behind the exits.

Big Four Shunned SPAC IPOs But Now Flock to Audit New Companies [Bloomberg Tax]
When SPACs became Wall Street’s favorite way to take companies public, the Big Four accounting firms steered clear, leaving audit work to smaller outfits churning out hundreds of fast, cheap audits of the blank-check vehicles. For those freshly minted public companies that emerged from the boom, it’s been a different story. The largest firms — Deloitte & Touche LLP, PricewaterhouseCoopers LLP, KPMG LLP, Ernst & Young LLP and their affiliates— audit almost two-thirds of the approximately 330 companies that went public through special purpose acquisition companies since 2020 and are still trading today, according to Bloomberg data. EY and its affiliates lead the Big Four in the de-SPAC client market, with 65 companies that went public via SPAC on its roster. The Big Four’s embrace of the market is no surprise; it makes sense for firms to follow the money and accept buzzy clients in emerging industries. But a disproportionate number of those new companies come with financial reporting red flags compared to the broader public market, according to investment research software firm Bedrock AI.

Audit quality plummets at Deloitte, KPMG: ASIC [Australian Financial Review]
The standard of audit work completed at two of Australia’s biggest blue chip accounting firms – Deloitte and KPMG – has drastically declined over the past year, prompting the need for immediate action, the corporate watchdog has found. Deloitte failed to do enough work on half the audits reviewed by the Australian Securities and Investments Commission last financial year, while KPMG fell short on 48 per cent. Both firms needed to take “continued deliberate and concerted action” to improve the quality of their work, ASIC said, amid unprecedented scrutiny of audit quality following amid high-profile scandals such as the Wirecard saga, parliamentary inquiries and possible regulatory reform.

NatWest ditches EY as auditor in blow to firm’s radical break-up plan [Financial Times]
NatWest will drop EY after a competitive tender process that has run since June, five people briefed on the decision told the Financial Times. The changeover could be announced as soon as Friday morning alongside the bank’s quarterly results, three of these people added. The decision, likely to be worth about £400mn over 10 years, comes as EY’s senior bosses aim to convince clients, regulators and their own partners that the firm will still be able win big audit mandates and robustly inspect companies’ accounts if it goes ahead with a plan to spin off its consulting business. EY’s partners are set to vote on the proposal in the coming months.

BDO auditor fired for altering files earmarked for inspection [Financial Times]
BDO has fired one of its accountants for tampering with files earmarked for inspection by UK regulators in the latest case of an auditor losing their job for retrospectively altering paperwork. The BDO auditor’s interference with the files was uncovered during a routine inspection by the Financial Reporting Council following the audit of an unnamed UK public body. The FRC found that the auditor, who was a member of staff at BDO but not a partner, made changes to the audit file after the regulator notified the firm of the review.


If you’re looking for a new gig, here’s a remote tax job you may be interested in.

IRS Considering Parameters When Corporate AMT No Longer Applies [Bloomberg Tax]
The IRS is considering what rules will apply when a company’s book income falls below what is required in President Joe Biden’s tax-and-climate law to be subject to the corporate alternative minimum tax, an agency official said Thursday.

Rettig out as IRS commissioner [The Hill]
The Treasury Department on Friday announced the departure of IRS Commissioner Charles Rettig, an appointee of former President Trump whose term is set to end in mid-November. Before Congress approves a new permanent IRS head, the agency will be headed by deputy commissioner Douglas O’Donnell as acting chief, the Treasury said.

As Seen on the Internet

From r/accounting, the class of 2020 is growing up and getting bitter. As is tradition in public.

And on Tax Twitter, a new contender has entered the ring:

Law & Order

Judge Sentences South Bay Accountant to Life in Federal Prison for Producing Child Sexual Abuse Material of Filipino Victims [Department of Justice]
A South Bay man was sentenced today to life without parole in federal prison after he admitted to producing thousands of sexually explicit images and videos of nearly three dozen children, one of whom was exploited over the course of at least two years and performed sex acts online in exchange for money. Billy Edward Frederick, 52, of Redondo Beach, was sentenced by United States District Judge Dale S. Fischer, who said that “to say his conduct is despicable is an understatement.”

Dallas tax attorney helped clients hide $1B from IRS, prosecutors say [KDFW]
Joseph Garza was arrested Tuesday. Prosecutors said the 79-year-old used a tax fraud scheme that included creating multiple shell companies to funnel more than $200 million in unpaid taxes to his clients. The shell companies had no legitimate purpose other than to move money, prosecutors said.

‘Exceptional’ trainee accountant jailed for deleting dashcam footage after hitting body in road [North Wales Live]
A trainee accountant has been jailed for deleting dashcam footage after his car hit a body in the road. Adrian Jones believed he had killed the person – but he was already dead from an unrelated collision moments earlier. Jones, 24, described as an “exceptional young man” acting out of character, admitted perverting the course of justice. A judge at Mold Crown Court told him he had “undermined the very system of criminal justice” and sent him to prison for six months.

Survey Says

Whatever happened to all that talk of hybrid working? [KPMG UK]
As we began to emerge from two years of lockdowns and restrictions, all the talk was that the success of remote working during the pandemic would permanently transform how and where we work. The results of our latest CEO Outlook suggest that might not be the case – or at least how CEOs see it. More than three in five (62 percent) UK CEOs predict that, over the next three years, employees whose roles were traditionally office-based will be back in the workplace full time. So, has all the talk of remote and hybrid working gone out of the window?

Other Stuff

FT investigates KPMG Saudi Arabia [FT News Briefing podcast]
One of the world’s biggest accounting firms, KPMG, is under scrutiny for working conditions in Saudi Arabia. Earlier this year, a popular director at KPMG in Riyadh named Danie de Waal unexpectedly died. There’s no evidence of foul play, but after his death, expats from that office raised the alarm about working conditions. The FT’s special investigations editor, Madison Marriage, looked into this.

New SEC rule requires executives to give back bonuses when accountants screw up [CNN Business]
The Securities and Exchange Commission voted Wednesday to adopt a new rule that would require public companies to take back executive compensation when their financial statements contain errors. These “clawback” requirements are intended to hold corporate executives financially accountable for any reporting errors, whether they are the result of fraud or simple accounting mistakes. The rule was mandated by Congress as part of the 2010 Dodd-Frank Act in response to the last financial crisis, but it faced resistance from corporate leaders and Republican lawmakers, delaying implementation. Last year, SEC Chair Gary Gensler revived the initiative as part of his larger crackdown on corporate misconduct. SEC commissioners voted to approve the rule 3-2 Wednesday, with all the Democrats approving the plan and Republicans dissenting. “I believe that these rules, if adopted, would strengthen the transparency and quality of corporate financial statements, investor confidence in those statements, and the accountability of corporate executives to investors,” Gensler wrote in a statement ahead of the vote.

Accountant, 31, who left her corporate job to start a fashion brand is now selling her crop tops and maxi skirts every MINUTE – and counts Bec Judd as a fan [Daily Mail]
Grace Warnock, 31, left her job as an accountant to become her own boss and the founder of RAEF THE LABEL while raising three young children aged six, five and 10 months old. After launching in July 2021 Grace experienced almost immediate traction with her audience loving the uber wearable prints and on season trend pieces of a phenomenal quality. ‘I am a fully qualified accountant with a minor in marketing,’ Ms Warnock told FEMAIL.

In Pictures: Plenty Of Glitz And Glamour On Show On The PwC All-Stars Red Carpet []
Swear to God the site this was published on is called “Balls”: After a couple of years in which we were robbed of a black tie event, the glitz and glamour typically associated with the PwC All-Stars was very much back on show at the Convention Centre Dublin this evening. With the coronavirus pandemic meaning that no in-person awards were possible in 2021 or 2022, GAA stars and their plus ones did not have the opportunity to walk the red carpet on the big night. However, it didn’t take them long to get back into the swing of things. There was no shortage of eye-catching looks on display in Dublin, with this being some of the best of them.