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.
Consulting firms’ problems fuelled by pursuit of growth [Australian Associated Press via Yahoo! News]
When Erin Twyford tried to leave her office job at 5pm, her co-workers were appalled. “They said, ‘you can’t be seen as the first person to leave’,” she said. “I saw real worry on their face, like I might be reprimanded because I’m leaving at an appropriate time.” She was an audit intern at consulting giant Deloitte when the long hours and high-pressure environment had already begun to weigh on her, and it was then she knew she did not want to be an accountant. “You’re supposed to be the workhorse for several years because there’s this big shiny trophy at the end of making partner where hopefully things calm down – at least that’s the story that you’re told,” she told a Senate committee on management and integrity within consulting services. “I did not want to live under that culture, but that was the culture they sort of indoctrinated in me.”
Trump lawyers rip ex-accountant for claiming memory loss 90 times at NY civil fraud trial [New York Post]
Donald Trump’s lawyers on Thursday ripped the former president’s accountant for claiming “I don’t know” or “I don’t remember” dozens of times during his testimony at trial in the New York attorney general’s $250 million civil fraud case. Donald Bender, a partner at accounting firm Mazars USA, had been under tense cross-examination by Trump’s attorneys since Tuesday afternoon when they called him out over his apparent memory loss during the final hours on the witness stand. Bender occasionally tried to defuse the obvious tension and deflect the lawyers’ questions by cracking jokes. At one point, Trump attorney Clifford Robert asked Bender to speak into the microphone and the accountant replied: “I am as close as I can be without kissing it.”
TSA backtracks on $93M award to Deloitte after protests [Washington Technology]
The Transportation Security Administration is backing away from a $93 million award to Deloitte after receiving complaints about how the agency evaluated proposals. Deloitte won the blanket purchase agreement in September to support TSA’s Security Operations Center. One competitor in Maximus quickly filed a protest raising several questions about Deloitte’s proposal. Maximus complained about Deloitte’s past performance and whether the company met the corporate experiences requirements. Maximus also alleged that TSA applied unstated criteria as it evaluated proposals around cyber threat scenarios and emergent threat management. Within weeks of Maximus’ Sept. 18 protest, TSA told the Government Accountability Office that it planned to take corrective action. TSA cancelled the award to Deloitte with plans to reopen discussions with all bidders, request revised proposals, conduct a new evaluation and make a new award decision.
Chief executives really need to lengthen their attention spans [Financial Times Opinion]
Chief executives like to think they aim high. “Go big or go home” and similar slogans gained currency late in the last century and still capture the imagination today. Yet many US corporate chiefs have actually prioritised the opposite approach for much of that time: they put more emphasis on hitting near-term earnings targets at the expense of spending on long-term success. That is almost certainly a mistake. Studies by McKinsey, the CFA Institute and others consistently show that companies that invest less in long-term growth relative to their peers end up underperforming over the medium or long haul. The bonus is largest for companies that continue to invest during difficult periods like the one we are in now.
PwC tax leak scandal has exposed partnerships as regulatory havens [Australian Financial Review Opinion]
The loopholes that allow large accounting firms that look, act and behave much like corporations without being regulated in the same way should now be closed.
The Yeezy standard for accounting [Financial Times Opinion]
German sportswear maker Adidas set up a partnership in 2015 with the rapper and fashion designer to produce Yeezy sneakers. While Adidas did not make a secret of the fact that the shoes, with their futuristic design and price tag of more than €230, were highly successful, it never disclosed the brand’s revenue and profits. But investors belatedly learnt just how important Yeezy was when shares in Adidas tanked after the sportswear group pulled the plug on the partnership after a series of antisemitic remarks by West, also known as Ye. It was later disclosed that the shoes accounted for more than 5 per cent of the group’s overall revenue and about a quarter of its overall operating profit. The episode has been painful for Adidas and its shareholders, but it also raises questions more broadly on just how much companies should disclose on the profitability of specific products, regions and brands.
Why No One’s Going Into Accounting [Wall Street Journal]
WSJ crunches some numbers, we love that.
Salaries have risen for young people in finance, marketing, logistics and consulting in recent years. Even young teachers have seen a slight uptick. At the same time, the median, inflation-adjusted pay for young accountants has stagnated, according to a Wall Street Journal analysis of salary data compiled by the Census Bureau. This pay disparity is a major reason why fewer people are choosing accounting careers, threatening to worsen an already dire shortage of accountants. Some of the nation’s largest college accounting programs, such as Florida Atlantic University and the University of Maryland, have seen their enrollment or number of undergraduate majors decline by double-digit percentages in recent years. That has led to even greater workloads for existing accountants, and more than 300,000 have left the profession between 2019 and 2022, according to the Bureau of Labor Statistics.
Speaking of talent, if you’re in the market for fresh blood and wondering where all the accountants have gone check out Accountingfly’s top remote accounting candidates of the week. The four professionals highlighted this week bring with them a combined 29 years of experience, great tech stacks, and have worked with a wide variety of clients and industries.
Ex-Uber CFO rejoins KPMG as ‘emerging giants’ leader [CFO Dive]
Former Uber CFO Francois Chadwick has rejoined KPMG to lead its “emerging giants” group within its private enterprise practice, the Big Four accounting firm confirmed to CFO Dive in an email. Chadwick started in the new position Oct. 1, KPMG said. KPMG will look to tap Chadwick’s industry knowledge as the 30-year finance veteran returns to the firm after stints in top financial positions at companies including Volta Charging and rideshare Uber.
Accounting giant PwC relocates Phoenix office to trendy corridor [Phoenix Business Journal]
PwC officially opened its 15,720-square-foot office Oct. 2 within The Grove. The prominent mixed-use campus, located at the northwest corner of 44th Street and Camelback Road in Phoenix, houses companies such as JLL, Clayco, Common Bond Development Group, Sendoso and Clear Sky Capital. The new office was designed by Cleveland-based Vocon. It supports about 350 professionals, the company told the Phoenix Business Journal.
Workers have a $1.4 trillion message for the Fortune 500: We’ll return to office if you pay for the commute, childcare, and lunch and coffee too [Fortune]
Workers don’t want to give up the benefits and flexibility of working from home, Owl Labs’ CEO, Frank Weishaupt, tells Fortune. “Going to the office can be slightly daunting for employees when it means spending more money on food or giving up the comfort of taking a video call in a private, quiet space.” As a result, they’re asking for designated private spaces, lenient dress codes, and free or subsidized transit costs and meals to ease the transition. The perks they’re after aren’t wellness rooms or ping pong tables. What they really want is to save money. Nearly two in five (38%) hybrid workers told Owl Labs they’d be more likely to go to their office voluntarily if their companies shelled out for their commuting costs. That’s the most desired perk by a wide margin, and it’s no wonder why. “Working remotely is often a money saver because it reduces commuting costs to zero, while also making lunch, coffee, et cetera, much more affordable,” George Anders, LinkedIn’s senior editor at large, told Fortune earlier this year.
Return-to-office mandates: See where you fall on the employee disengagement spectrum [Fortune]
Whether you’re an advocate of full-time in-office work or complete flexibility, we can all agree that decreasing employee engagement is a profit killer. A recent survey by McKinsey reveals the staggering cost of disengagement. A mid-size S&P 500 company risks losing between $228 million and $355 million annually due to low engagement. Over a span of five years, this sums up to a potential loss of $1.1 billion per company. In recent months, return-to-office mandates have been a key driver of worker disengagement. After trending up from 35% to 36% in 2020, employee engagement in the U.S. dropped to 34% in 2021 and 32% in 2022. Gallup found in its 2022 assessment of employee engagement.
KPMG CEO Outlook: Hybrid working debate and ethics of gen AI [Technology Magazine]
Almost two-thirds of business leaders predict a full return to in-office working by 2026, according to KPMG’s annual survey of more than 1,300 CEOs of the world’s largest businesses. The KPMG 2023 CEO Outlook survey, conducted in August and September of this year, also revealed that geopolitics and broader political uncertainty are the greatest risk to business growth today.
How do different accounting firms use AI? [Thomson Reuters]
See how both the Big 4 and smaller firms are utilizing AI in their workflows.
Mike Lindell’s Attempt to Stop IRS Audit Doomed to Failure [Newsweek]
Pillow salesman Mike Lindell, a supporter of former President Donald Trump, is facing an “employee tax withholding audit” for allegedly failing to pay employee tax, he has revealed. Lindell told Steve Bannon’s War Room video podcast he believes political opponents have launched “an all-out attack” on his company, MyPillow. He said they are trying to shut down his call centers, which he described as simply “home moms” working remotely. He suggested that they are independent contractors and not employees.
Why CFOs must steer benefits audits to avoid fines, penalties [CFO Dive]
With the final deadline for employee benefit plan audits approaching, CFOs should play a front-and-center role in ensuring that third-party auditors are furnished with plan data, ideally with access to trustee technology platforms, Stacy Farber, a partner at Farmington Hills, Michigan-based accounting firm UHY LLP, told CFO Dive. The Employee Retirement Income Security Act (ERISA) of 1974 generally requires plans with more than 100 participants to obtain an audit of the plan’s financial statements annually and file form 5500 containing the financial details with the Internal Revenue Service. Under ERISA, an employee benefit plan includes pensions, 401(k) and A 403(b) plans.
Recent IRS Snapshot Suggests Audit Interest in Timing of Employer Deductions of Retroactive Contributions to 401(k) Plans [JD Supra]
The IRS recently released an Issue Snapshot, Deductibility of employer contributions to a 401(k) plan made after the end of the tax year, to review the timing rules for employer contribution deductions under Code section 404(a)(6) and the limits on “annual additions” under Code section 415. The SECURE Act may have heightened the interest of IRS agents in auditing employer deductions of retroactive contributions to 401(k) plans. The rules are relatively complex and sometimes misapplied.
Maryland congressional leaders ask IRS to waive tax penalties for college trust account holders [Baltimore Sun]
A handful of members of Maryland’s congressional delegation are asking the Internal Revenue Service to waive rules that would financially burden families who paid into the college trust program Maryland 529. In August, State Treasurer Dereck Davis announced that his office would allow Maryland 529 account-holders to electronically view their account balances and accrued interest earnings, modernizing a troubled agency that had almost entirely relied on paper documents since its 1997 inception. Davis said he would allow families to roll their money over from the prepaid trust to the agency’s Maryland College Investment Plan, which is overseen by accounting firm T. Rowe Price and operates similarly to a 401(k) plan. But now, under federal tax rules, more than 3,000 people might be levied a 10% penalty if they roll their money over from the trust to the investment plan because federal law limits 529 accounts to one rollover per beneficiary within a 12-month period without incurring a penalty.