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Monday Morning Accounting News Brief: Bullying at KPMG; Germany Bans EY; It’s All the Firms’ Fault! | 4.3.23

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Hey and happy Monday. Let’s get the big news out of the way and work our way down.

Daily Mail Australia spoke to a former KPMGer who says she reported bullying and then promptly got fired:

Speaking under the condition of anonymity, a 35-year-old woman now claims she was subject to bullying by her colleagues within months of being employed as a manager in KPMG’s tech department at the firm’s Sydney office last August.

She says she was harassed by her co-workers, who isolated her from work projects and made belittling comments about her physical appearance.

The woman claims she filed a complaint to KPMG’s administration team in February and was told her claims would be investigated while she was away on two weeks of already scheduled annual leave.

However, when she returned to work on March 7, she was told she had been made redundant and would have to leave by the following day.

‘I had a panic attack. I was trembling, my mind went blank,’ she told Daily Mail Australia.

‘It was the first day I arrived back, I was expecting justice, support.

‘I was so astonished. I felt suicidal.’

When the woman asked why she was only given one day’s notice, she was told her position was deemed no longer required while she was on leave.

She said staff also told her they interviewed employees but found nothing to substantiate her claims of bullying.

According KPMG policy, staff made redundant can apply to be selected for another position within the company.

The woman said she submitted her resume to the HR team for another role that afternoon but was told three days later her skillset was unsuitable. As the application delayed the redundancy process, her employment was terminated on March 13.

EY fined, banned from some audits in Germany over Wirecard scandal from Reuters:

Germany’s accounting watchdog on Monday handed the 2016-2018 auditor of Wirecard, named in the company’s annual reports as EY, a 500,000 euro fine ($541,650.00) and banned it from taking on new audits for companies of public interest for two years.

EY said in an email that it had been informed by watchdog APAS that an investigation into the company had been completed, but that it had not been briefed on the details of the decision.

APAS said in a statement that it had imposed sanctions on Wirecard’s auditing company and five individual auditors, without referring to EY by name. Wirecard’s annual report names EY as the auditor for that period.

Wirecard filed for insolvency in June 2020, owing creditors almost $4 billion, after disclosing a 1.9 billion euro hole in its accounts that EY said was the result of a sophisticated global fraud.

The ban forbids the auditor from participating in tenders for audits of certain companies for two years. This includes all listed companies as well as the majority of the financial sector consisting of banks and insurance companies.

You need to read this AT Opinion piece on why the pipeline sucks. FINALLY someone who isn’t a Redditor or on the GC payroll says it:

The Big Four firms get away with the artificially low pay because of the monopoly they have on new graduates. This monopoly exists in the accounting profession because virtually every young graduate wants a Big Four firm experience on their resume, and they’re willing to accept the low pay. No other profession has this problem, which is due to the fact that there are so few “Big” firms. Think about it — law, engineering, finance — in no other profession do so few firms dictate for so many.

This low pay for new undergrads comes despite the fact that the larger firms continue to place unreasonable time demands on their staff. There is simply no way to have any reasonable work-life balance when the culture at the larger firms demands 3,000-plus hours every year. Again, the larger firms get away with it because they can. The model that the larger firms use is churn, burn and replace: Young professionals who burn out in one or two years are replaced by new hires in the following years — it’s that simple.

Researchers are digging into how the pandemic — more specifically, remote work as a result of the pandemic — affected early-career auditors from Journal of Accountancy:

We interviewed six experienced auditors — four employed by Big Four firms and two employed by top 10 firms (by revenue) — to understand how ECAs struggled, succeeded, adapted, and persisted in working fully remotely during the pandemic. We interviewed experienced auditors because we believe those who supervise and review ECAs’ work are in the best position to provide direct evidence of successes and failures. This is especially true because these particularly experienced auditors knew the performance of pre-pandemic ECAs as a point of reference. Note that our sample size is small and limited to large firm auditors, and therefore it is not representative of ECAs as a whole. We also received indirect information from ECA supervisors, not ECAs themselves. However, our interview data provides a preliminary window into this cohort of professionals beginning their careers at such a tumultuous time.

Our interviews provide some interesting insights into the challenges and positives of beginning an audit career remotely. It should interest firms as they continue to offer remote work opportunities for ECAs. This article provides an account of interviews conducted as part of a larger academic research project. All quotes are anonymous, except for firm size identifiers noted.

Audit client turnover 2022: Deloitte gains among Big Four, Marcum biggest winner from Compliance Week:

Audit Analytics on Friday published its 2022 summary of auditor changes reported in Securities and Exchange Commission filings. Among the Big Four, Deloitte’s net gain of one client (25 gains, 24 losses) led the way, followed by PwC breaking even (15, 15).

KPMG saw a net loss of five clients (16, 21), and EY paced last with nine net losses (16, 25).

New Baker Tilly CEO Eyes More Acquisitions, Southeast Expansion from Bloomberg Law:

Baker Tilly’s new CEO Jeff Ferro says the company will continue its highly acquisitive streak, expanding into new markets in the Southeast and beefing up its presence in major metros after the abrupt departure of its former CEO Alan Whitman in March.

Ferro, who has committed to a two-year term as interim CEO during an executive search, told Bloomberg Tax that Baker Tilly aims to solidify its presence in Florida and Georgia, and “double down” in major metro areas like New York, San Francisco, and Los Angeles. Potential mergers with “four or five” other firms have been discussed with senior leadership, he said. The firm also plans on executing its “break the mold” strategy hatched under Whitman, implementing programs like placing new hires in an innovation lab to cull suggested changes and improvements.

EY has released the results of its 2023 Empathy in Business Survey. When EY invoked empathetic leadership last year it did not go well. This year,

Last year:

This year:

As many employees face downsizings, restructurings and a looming global recession, most say that empathic leadership is a desired attribute but feel it can be disingenuous when not paired with action, according to the 2023 Ernst & Young LLP (EY US) Empathy in Business Survey.

Some other stuff that may be of interest to you:

  • What to do if your company backtracks on remote working [Yahoo! Finance]
  • Crowe welcomes and celebrates 44 new partners and principals [PR Newswire]
  • PwC completes People Force acquisition [Personnel Today]
  • Layoffs destroy workers’ trust, but there are ways employers can reduce the damage, a PwC survey shows [Insider]
  • Three Men Indicted for Multimillion-Dollar Accounting Fraud Scheme at U.S. Navy Shipbuilder [Dept of Justice]
  • How universities are working to boost the CPA pipeline [JofA]

Hope everyone has a great week, I mean that. If you bear witness to any shenanigans, do reach out and let me know.