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Monday Morning Accounting News Brief: Audit Fees Are Up; Salary Expectations Are Too High; Sus SEC Shizz | 11.7.22

Posted on by Adrienne Gonzalez
sleepy dog with an alarm clock in bed

Several of America’s largest accounting firms have explored the possibility of taking private equity cash in recent months, as money from buyout funds adds fuel to a mergers and acquisitions boom across the industry, reports FT. CFO.com wrote about the accountant shortage and suggested four ways to address it, not one of them was “pay people more” but it did say that expectations must be tempered: “Twenty-two percent of candidates in our survey have too high a salary expectation,” said said Brandi Britton, executive director for finance and accounting at talent solutions Robert Half International. “They come out of universities expecting $100,000 since they have a couple of friends getting that in other professions. Some level-setting is needed.” An employee of Deloitte’s India office has been found to be the mastermind of a computer hacking gang that targeted British businesses, government officials and journalists. In Kuwait, KPMG is teaching kids about internet safety and how to avoid cyberbullying (how to avoid cyberbullying: turn your device off). Average audit fees rose a slight 2.5% from $2,600,677 in 2020 to $2,666,659 in 2021, reflecting increased demands on auditors during the pandemic, according to a study released Monday. The professor who wrote Accounting for Slavery: Masters and Management spoke at Kellogg School of Management last week; the book’s topic is exactly what you think it is. An article about ESG as the next big accounting trend. Internal auditors’ representatives in Washington are launching a political action committee in hopes of expanding the influence of the industry — some of whose products are poised to be at the center of contentious policy battles in Congress beginning next year.

A bit late on this but SEC Commissioner Hester Peirce used the words sus and yeet in a speech about standard setting and regulation:

The Supreme Court’s dictionary debates in Yates make me think about how the task facing legislators is somewhat akin to that facing people charged with keeping dictionaries up-to-date. Whether you are responsible for writing laws or dictionaries, you try to be responsive to current events while maintaining a longer-term view. How do you figure out which words are just fads and which merit inclusion in the official dictionary, where they will stay for decades or centuries to come? What will our grandchildren think twenty years from now when they are perusing a dictionary’s digital pages and come across words we added this year? Metaverse, booster dose, side hustle, altcoin, pumpkin spice, use case, and greenwash made the list. Those words and phrases likely have staying power. But sus, yeet, and adorkable—all new slang words in this year’s Merriam-Webster’s dictionary—will we still be using those in twenty years? If so, the English language will be janky and in need of MacGyver[ing]—two other words on this year’s list. Consider that in 2002, brain-box, mizzle-shinned, and celly made it into the dictionary. I may be the first person to have spoken those words in 2022. Revisiting dictionary entries after the cultural moment they reflect has passed probably makes sense.

If you can make more slinging ice cream than you can for a Big 4 firm it’s time to get out:

It’s almost here!! People who took the CPA exam on October 1 should be getting their scores any minute now. Or this evening, anyway. They’ll probably still be angry about it, justifiably so. NASBA is tweeting stupid platitudes this morning instead of score releases, Reddit is predictably upset.

A few things we’re working on this week:

  • We’re going to jump off the FT article about accounting firms and private equity linked above with a rumor
  • We’re still digging into some kind of situation at BDO USA, it’s a big situation OK.
  • An underused CPA exam prep tool you may want to try out
  • I’m cleaning up the archive — do me a favor and let me know if you come across any broken links please

 

Some old white guys talking about diversity:

OH and my handlers demand I tell you that you should subscribe to our newsletter for headlines delivered to your inbox twice a week. Give me a shout if you see anything interesting while traversing through the internets and have a great week, everyone!

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Fund Manager Blames Just-in-Time Inventory and the Accountants Who Push It For High Food Prices

Yes, you read that headline correctly. Not inflation, not emerging nations, not more people on this planet than we have food to feed them and not Ben Bernanke’s penchant for leaning on the PRINT MORE button but inventory. Well, a specific inventory method and the accountants who encourage companies to use that particular method.

The Guardian has the story:

Speculators, the weather, biofuels and the growing appetite for meat in developing countries have all been blamed for the high food prices that have hit countries such as Kenya, Somalia and Ethiopia particularly hard.

But what about the accountant accountants. Greg Smith, managing director of Global Commodities, an Australian investment fund, said fund managers were being unfairly scapegoated. He argued that measures to curb speculative activity, such as limits on contracts and higher margins (less reliance on borrowed funds when making trades), would not deal with the fundamental problems, such as the weather and, more pertinent from Smith’s viewpoint, just-in-time inventory.

“We have volatility in food prices because of inventory shortages,” said Smith, who was attending the fourth annual world agriculture investment summit in London, bringing together investment managers, policymakers and NGOs. “What we need is more inventory instead of this just-in-time approach. We need to look at how we increase buffer stocks of grain. After the second world war, governments would have three to six months of supply of grain. Now it’s two or three weeks.”

Smith feels the accountants bear the brunt of the blame for this just-in-time issue as they are the ones who try to convince companies to adopt this particular inventory method in the interest of cost cutting.

While they don’t specifically come out and blame the accountants like Smith, Oxfam recently published a paper called Preparing for Thin Cows in which they question the current view on food reserves. “International institutions have warned G20 leaders that renewed food price volatility is now a high risk. However, the same institutions have summarily dismissed food reserves as one of the ways to stabilise prices,” said the report’s co-author Thierry Kesteloot. “Food reserves were largely dismantled in the 1990s and have been ignored ever since as too expensive and ineffective.”

Check out this 2008 piece from The Hightower Report which foretells the problem with the just-in-time idea. “The combination of oversupply, ultra high interest rates and new business practices quickly turned the idea of owning extra inventory into financial heresy of the highest order. Accountants, bankers and MBAs descended on America’s businesses to preach the gospel of wringing every last ounce of unnecessary corn, wheat, cotton, copper or wing nuts out of every conceivable supply ‘pipeline.’ To a large degree, the gospel of just-in-time inventory control has prevailed right up to the present – or at least into 2007.” The article blames a global attitude that inventory can easily be had should it be needed – thereby eliminating the need to keep excess reserves – for just-in-time’s popularity.

Problem being this attitude assumes an unrealistic scenario in an inflationary environment in which 40% of the U.S. corn supply is used as “fuel” (ask Joe Kristan about ethanol if you’re not hip) and completely ignores unforeseen issues like, oh, I don’t know, drought and higher demand in emerging nations for corn-fed meat.

There’s a problem alright, just not sure if it’s with the accountants.

Promotion Watch ’10: Rothstein Kass Names Four New Principals

Jeff Kollin, Camille Asaro, Frank Attalla and Navin Sethi come on down!


Asaro and Kollin rep the New York office, Attalla in Roseland, NJ and Sethi gets the nod in San Fran.

Ms. Asaro and Mr. Attalla are members of the Rothstein Kass Financial Services Group. Mr. Sethi, a tax Principal is a member of both the Financial Services Group and the firm’s Commercial Services Group. Mr. Kollin has been named Principal and Head of the Financial Services Advisory practice within Rothstein Kass Business Advisory Services, LLC, a Rothstein Kass affiliate. Rothstein Kass simultaneously announced the promotion of Rich Sumida to Senior Director at Rothstein Kass.

Son of the Kass (presumably, the firm is 50-ish) takes the mic:

“The collaborative culture at Rothstein Kass has ensured that our professionals are able to continually enhance their skills and expertise throughout their careers. Our ‘one-firm, one-floor,’ philosophy remains a cornerstone for our success. Staff at all organizational levels gain invaluable experience working side-by-side with seasoned industry veterans in support of our clients. The companies we serve, in turn, benefit from the continuity, proficiency and knowledge that result from our ability to hire and retain superior talent across practice areas and office locations,” said Steven A. Kass, Co-CEO and Co-Managing Principal of Rothstein Kass. “Camille, Frank, Navin and Jeff are engaged, insightful and dedicated members of the Rothstein Kass team, and have demonstrated exceptional leadership qualities during their time with our firm. On behalf of our entire organization, we would like to congratulate our new Principals on their achievements and thank them for their contributions to our success.”

Not much to add here other than 1) congrats to the new RK principals and 2) the “one-firm, one-floor philosophy” could have really helped a certain Crowe Horwath partner.