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. See ya.
I Love Accounting. So I Had to Leave. [GC]
Benjamin Wann, CMA, CSCA, MBA, PMP, CPA wrote a little something about the thing we all love to hate.
At its core, accounting is a challenging career that requires growth and learning and can usually pay pretty well. There’s lots to do, and it requires developing expertise and finding ways to solve puzzles. Organizations need folks who can understand broad frameworks and rules and interpret that to produce all sorts of things they need. So far, so good. Even better, because it’s a challenging job that requires lots of training and experience, the supply of good accountants is never high enough to meet demand. So, the pay should be good, too, right? Errngh. Like anything nice, someone typically finds a way to make it soul-crushing.
Traders Do Less Crime at Home [Bloomberg Opinion]
Matt Levine quotes “Work-from-Home and the Risk of Securities Misconduct,” by Douglas Cumming, Chris Firth, John Gathergood and Neil Stewart:
In the wake of the global pandemic, a challenge for CEOs and boards is to set a stakeholder-acceptable organizational balance between remote and traditional office working. However, the risks of work-from-home are not yet fully understood. We describe competing theories that predict the effect on misconduct of a corporate shift to work-from-home. Using internal bank data on securities traders we exploit lockdown variation induced by emergency regulation of the Covid-19 pandemic. Our difference-in-differences analysis reveals that working from home lowers the likelihood of securities misconduct; ultimately those working from home exhibit fewer misconduct alerts. The economic significance of these changes is large. Our study makes an important step toward understanding the link between the balance of work locations and the risk that comes with this tradeoff.
The Return to the Office Has Stalled [Wall Street Journal]
When average city office-occupancy rates at the start of the year surpassed 50% for the first time during the pandemic, many landlords viewed this milestone as a sign that employees were finally resuming their former work habits. Those office-usage rates have barely budged as most companies have settled into a hybrid work strategy that shows little sign of fading. About 58% of companies allow employees to work a portion of their week from home, according to Scoop Technologies, a software firm that developed an index monitoring workplace strategies of close to 4,500 companies.
Deloitte’s 2023 Gen Z and Millennial Survey reveals workplace progress despite new setbacks [PR Newswire]
Released on May 17, Deloitte’s 2023 Gen Z and Millennial Survey explores how the disruptive events of the last three years have shaped respondents’ lives and views. As the COVID-19 pandemic recedes, the report looks at how Gen Zs’ and millennials’ experiences in the workplace have evolved and finds that, while the pandemic clearly left significant negative legacies, it also ushered in some positive workplace trends. The survey looks broadly at the progress these generations feel their employers have made, where there is still work to do, and where potential setbacks may occur. It also explores how Gen Zs and millennials continue to make lifestyle and career decisions based on their values. Now in its 12th year, the survey gathers insights from more than 22,000 Gen Z and millennial respondents across 44 countries. Their responses reveal that, while they acknowledge some positive change, they remain deeply concerned about their futures. The report underscores continuing concerns about personal finances, climate change, and mental health, and examines Gen Zs’ and millennials’ shifting relationship with work.
How the tax leaks scandal forced PwC out of the shadows [Australian Financial Review]
A brutal news cycle shredded any hope PwC had that this would be a circuit breaker. Labor senator Deborah O’Neill, who helped reveal the extent of the tax leaks, homed in on the review. “Let’s call it what it is – an exercise in damage control. Those who breached trust must be subject to Commonwealth and regulator review … not what PwC is proposing,” Senator O’Neill said on Monday afternoon. Greens senator Barbara Pocock called the inquiry “totally inappropriate for what is needed” and commented that the firm promising to release a summary of findings was “not the same thing as making the findings available to the public”. Current and former partners were no less damning. A current partner says the review timeline is “a joke”. He told AFR Weekend that waiting that long for recommendations amid such a crisis was light years away from what the firm would advise its own clients to do in the same circumstances. A former partner agreed, saying it would be “stupid” to wait four months until Switkowski reported back to take further action, such as retiring more partners. “They still don’t realise how bad it is. They take very incremental steps in a crisis,” he says.
Special Report: KPMG Canada beats Big Four accounting rivals in net new client gains [Canadian Accountant]
For the second year in a row, KPMG Canada has surpassed its Big Four rivals in net new audit client gains, helping to offset the loss of a controversial company as an audit client. While KPMG gained more clients than it lost, Ernst and Young LLP was the only member of the Big Four accounting firms to post positive net new audit fee gains for all of 2022, according to Audit Analytics.
Crypto’s Most Influential Companies Often Follow Their Own Rules — Even After FTX’s Collapse [Bloomberg]
Bloomberg News surveyed 60 major crypto companies in the first quarter — spanning the breadth of exchanges, mining companies, analytics businesses and token issuers — to gauge the state of governance and controls in the sector. 1 Many of these companies, which include the likes of Binance, Coinbase Global Inc., Tether and OpenSea, oversee the flow of tens of billions of dollars in assets daily. And while a fair number do adhere to traditional standards, many operate outside the norm. Each received the same set of questions, aimed at measuring what share of crypto’s upper echelon employs a third-party auditor and has an independent board. More than half of the firms provided full or partial responses, while 17 declined to participate and eight didn’t respond at all. For some that declined, such information was publicly available. Around half of the businesses surveyed currently engage an independent auditor to assess their finances, the findings showed. Meanwhile, 63% of the companies had an independent board of directors – meaning that they had at least one non-executive member. Nearly all of the 60 firms surveyed have raised outside investment since their founding, according to PitchBook or other publicly available information.
Chinese companies switch auditors to avoid U.S. delisting risk [Nikkei Asia]
More than a dozen U.S.-listed Chinese companies have switched from auditors in their home country to ones in the U.S. and Singapore since 2022, reducing the risk they could be thrown off American exchanges, a Nikkei Asia analysis shows. As the HFCAA was being implemented and strengthened by additional legislation, some U.S.-listed Chinese companies moved to avoid the delisting threat by switching their auditing work to companies in the U.S. and Singapore, which has not fought PCAOB inspections. The U.S. Securities and Exchange has identified 174 U.S.-listed Chinese companies with auditors who required inspection. Of these, 24 have changed auditors since 2022, according to a Nikkei analysis of corporate filings, with 15 switching from companies in China or Hong Kong to ones in the U.S. or Singapore.
PCAOB Revises Standard-Setting Agenda and Adds Rulemaking Projects to Enhance Investor Protection [PCAOB]
The staff of the Public Company Accounting Oversight Board (PCAOB) this week posted a revised standard-setting agenda that includes the addition of two projects slated for short-term action. The PCAOB also announced four new projects aimed at improving PCAOB rules to protect investors. The rulemaking projects focus on enhancing investor transparency and enforcement of PCAOB rules and standards. Both the standard-setting and rulemaking projects can be found on the Standard-Setting, Research, and Rulemaking Projects page. “The PCAOB is pursuing one of the most ambitious standard-setting agendas in its history, and the updates reflect the solid progress that we are making to carry out that agenda,” said PCAOB Chair Erica Y. Williams. “Our new rulemakings also show our commitment to making enhancements that will allow the PCAOB to execute our mission to protect investors more effectively and efficiently.”
Deloitte delight over new Circular Quay office digs in Sydney [Consulting.com.au]
“It’s finally happened. After 28 years in our spiritual home at Grosvenor Place, we have moved into the world’s best building at Quay Quarter Tower,” stated Sydney managing partner Andrew Pellow. “It’s taken several years, designed during Covid for a new hybrid and modern way of working, to create an incredibly special space. But the one thing that was missing until this week was the energy created by our people, seeing everyone come in, talk, work together and reconnect.”
FORVIS accounting moves to PNC Tower in downtown Louisville [Lane Report]
The new space offers a more centralized and accessible location, which will allow the firm to better serve clients throughout the region. Additionally, the new office is closer in proximity to other professional services firms which will enable team members to build stronger relationships and create more opportunities for collaboration. The new office is being designed to provide team members with more community and collaboration spaces and will feature functional workspaces with state-of-the-art technology. It will also have the ability to host in-person events and seminars in the new space.
Mergers & Acquisitions
Another Chicago accounting firm merges in private equity-related deal [Crain’s Chicago Business]
Private equity-backed consolidation of the accounting industry is making further inroads in Chicago. Morrison & Morrison, with 40-some professionals, said it would merge with New York-based EisnerAmper, which two years ago became the first accounting firm to turn over a stake to a private-equity firm. Since then, similar deals have included this year’s acquisition of local accountancy NDH by a Dallas-based private equity firm and last summer’s absorption of Shepard Schwartz & Harris by private-equity-owned Citrin Cooperman of New York.
Greer CPA firm acquired by Greenville company [Greer Today]
Greer is in South Carolina FYI
Copper Advisors, a full-service accounting firm in Greenville, has acquired the full-service tax and accounting firm of Edwards & Hedrick CPAs in Greer. The acquisition expands the services footprint of Copper Advisors beyond Greenville to include the Greer market. Retirement plans for both Bobby Edwards and Joe Hedrick, former partners with Edwards & Hedrick, prompted them to sell the CPA firm to Copper Advisors. Additionally, Dan Cruice is joining Copper Advisors to manage the Greer office. Cruice joins Copper Advisors from Elevate Financial where he has built relationships with clients throughout the Upstate and beyond with his 19 years of experience.
Don’t Let Employment Issues Derail Your Accounting Firm’s Deal – Part 1 [Lexology]
In Part 1 of a two-part series, Russell I. Shapiro and Laura B. Friedel share tips on transferring employees from the seller to the buyer to help accounting firms avoid situations where employment issues could derail – or devalue – a potential merger or acquisition. You can read Part 2 here, where they share tips on potential diligence deal killers, restrictive covenants, and other potential issues.
Pentagon Says Accounting Mistake Frees Up $3 Billion More for Ukraine [New York Times]
Pentagon officials realized their mistake almost two months ago, according to a senior White House official, who spoke on the condition of anonymity to discuss accounting processes. Administration officials said their mistake was one of improper valuation, explaining that they had been calculating the price of each item based on how much it would cost to replace it with new equipment, instead of its sale value, which is lower. They plan to make the same change in an assessment of their remaining authority to send Taiwan weapons from existing Pentagon stocks, according to administration and congressional officials.
Financial Accounting Foundation Appoints Baker Tilly’s Jere Shawver as Chair of Private Company Council [Business Wire]
Baker Tilly US announces Jere Shawver, Managing Partner – Assurance and Risk, has been appointed by the trustees of the Financial Accounting Foundation to a three-year term as chair of the Private Company Council, beginning January 1, 2024. Shawver has over 40 years of experience advising companies on financial reporting, accounting and business matters across a wide range of industries, including manufacturing and distribution, construction and real estate, higher education, hospitality, government contracting, and technology. He is responsible for managing Baker Tilly’s assurance practice and risk management, which includes Baker Tilly’s Office of General Counsel.
RSM US promotes Sergio de la Fe to enterprise digital leader [Consulting.us]
RSM US, a national mid-market accounting and consulting firm, has appointed Sergio de la Fe as enterprise digital leader. He is based in Miami. In his new role, de la Fe will oversee the firm’s internal digital transformation strategy and execution. He will also serve as a member of RSM’s executive leadership team. He has more than 28 years of experience in professional services, including nearly 14 years at RSM. He joined the firm as a partner and most recently served as national leader for the industrials sector and enterprise accounts – overseeing go-to-market strategy and implementation for the consulting business.
One last thing…
Now that conferences are back, we’re running a deal on virtual or in-person conference and webinar promos to get the word out for you. Check it out! To invite GC to attend your event, email [email protected].