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Monday Morning Accounting News Brief: Capping Busy Season Hours FTW; Open the Books on Audit Firms? | 4.15.24

white shih tzu pup at a coffee shop with vintage clock on table

Hey and welcome to Monday, APRIL 15! You made it! Well, almost. We’re so proud of you. Now, some news.

Jack Castonguay (who we miss terribly on Twitter) wrote a little something for Bloomberg Tax about the PCAOB’s latest proposal that would make traditionally secretive audit firms’ business much more public:

The business model for public accounting firms is changing rapidly as they search for outside investors and private equity firms rush to the front of the line.

Regulations need to change to match. In response, the Public Company Accounting Oversight Board has drafted a rule that the accounting firms can have public trust or private financials—but they can’t have both.

Public accounting firms operate in a unique space in our society. They’re private entities specifically designed to serve the public interest. The audit opinions they issue typically have meaning and value because the firms operate with public trust. Without public trust, the opinions aren’t worth the paper they are written on or the PDFs they are contained in.

One of the best ways to maintain that trust is through transparency. In the public company audit arena, this transparency is maintained through PCAOB inspections of auditors. The PCAOB inspects the work of the inspectors (auditors) who are inspecting the books of listed companies.

But what about the books of the auditor? How do regulators and the public know that accounting firms are operating with the best interests of the public at the forefront of their work, as they are expected to do? Right now, they don’t.

Yet this shows why the new draft disclosure rule from PCAOB would require listed public accounting firms to disclose “cyber breaches, material threats to their business, changes in firm ownership, and significant financing” is needed.

This might be a timely rule given the recent explosion of private equity interest and investment in firms. Or it could just be the PCAOB trying to make itself look useful again.

On a somewhat related note, Australia’s Accountants Daily reports the International Ethics Standards Board for Accountants (IESBA) announced it will “probe firm culture amid accounting ‘trust crisis’.” Way to blow it for everyone, PwC Australia.

Accounting is facing a “global trust crisis” in the wake of high-profile failures, the global ethics standard-setter says, vowing to review firm culture and tightening “limited” rules in a new strategy document.

The International Ethics Standards Board for Accountants (IESBA) said in its three-year Strategy and Work Plan 2024-27 released last week that it was a matter of public interest to prioritise ethics.

Without explicitly referring to PwC’s actions in Australia, it said “Public trust in the accountancy profession continues being buffeted by recurring high-profile corporate failures and ethical lapses in firms.”

“A number of these events have resulted in government inquiries, significant regulatory penalties and other significant adverse consequences,” the document read, raising questions about “whether firms have the right culture, governance and tone at the top to drive ethical behaviour consistently across all their professional activities.”

The IESBA’s code forms the basis of accounting ethics rules in over 130 jurisdictions, including Australia. As a result, IESBA chair Gabriela Figueiredo Dias said the body would be “proactively positioning [itself] as a part of the solution for the global trust crisis.”


“Putting ethics at the center of every business judgment and decision is the surest way to earn, restore and strengthen public trust in all that an organization does. The external landscape continues to evolve, presenting new dynamics and challenges, but good ethical behavior acts as a constant amidst the uncertainty. It is about integrity, expected behaviors and mindset, and making the right decision,” said Gabriela Figueiredo Dias, IESBA Chair. “Our new strategic plan reflects the IESBA’s unwavering determination to face the external environment head-on, broaden the reach and scope of our work, and set the highest standards of ethical conduct for professional accountants and others who play a role, large or small, in the financial and non-financial information supply chain. That is how our work, vision and ambition support the proper functioning and sustainability of organizations, financial markets and economies worldwide in the public interest.”

The Philadelphia Inquirer — which is a real newspaper, I’ve written an op-ed for them myself — addresses “how young accountants are reshaping their firms.” Molly Kowal, who graduated in 2021 and works for EisnerAmper, is just one person they spoke to for the piece, along with her sister Grace who works remotely for Aprio:

Accounting firms are prioritizing work-life balance as they face a ‘human capital issue’ — even during tax season

Molly Kowal said some firms are also advertising [billable hours limits] externally, often using a “55-hour rule” during busy season as a way to draw in candidates. Grace Kowal said this seems to be a decrease from years ago, when people might bill 60 to 70 hours a week, or more.

“I have managers that are making sure we’re not working crazy hours,” Molly Kowal said. “As a way to maintain people staying, they’re aware of trying to keep a more realistic goal.”

“We’re getting the work done, but not burning people out,” Grace Kowal said. “Nobody wants to go to a firm that’s going to run you into the ground.”

And Jen Cryder, CEO of the Pennsylvania Institute of Certified Public Accountants (PICPA):

For years, Cryder said, big accounting firms have been investing in tools that eliminate some of the workload during busy season, and that’s starting to trickle down to midsize accounting firms in Philadelphia. She recalls her early years as an intern and junior accountant two decades ago, noting that “all of that has been replaced by technology for most firms these days.”

They are also increasingly bringing on non-accountants to handle administrative work and other non-accounting tasks, Endres said. She’s noticed more hiring for those support roles in recent years.

They also quoted an ex-Deloitter who was billing 100 hours a week at her peak who said, “I left because at some point I didn’t feel like myself.”

FASB might be regretting asking for input on a new chapter of its Conceptual Framework last December. If finalized by the Board, the proposed chapter would become Chapter 6 of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, and would represent the completion of the FASB’s Conceptual Framework.

The proposed chapter provides concepts for the Board to consider when choosing a measurement system for an asset or a liability recognized in general purpose financial statements. It describes:

  • Two relevant and representationally faithful measurement systems: the entry price system and the exit price system and
  • Considerations when selecting a measurement system.

Bloomberg Tax says the proposal has drawn “blunt feedback” which is a polite way of saying people think it’s stupid.

How businesses should measure assets and liabilities is one of the trickiest issues in accounting. Feedback on a plan to streamline US rulemakers’ approach to setting measurement requirements reflects just how thorny that debate can get.

Academics, audit firms, and professional groups gave blunt feedback on a Financial Accounting Standards Board proposal laying out high-level concepts for how assets and liabilities should be measured, comment letters show. The proposal is confusing, some responses said, and others said it didn’t go far enough to help the board craft consistent accounting rules.

The proposal, issued in December as a draft chapter in FASB’s Conceptual Framework, calls for updating an internal guide the board uses when making tough decisions about writing accounting rules for US companies and not-for-profit organizations. FASB has been working on and off on its Conceptual Framework since the board was founded in 1973 but has never developed robust concepts on measurement.

The current proposal doesn’t offer ground-breaking guidance and maintains the status quo, wrote Paul Miller, emeritus accounting professor at the University of Colorado at Colorado Springs and author of a book about FASB’s history.

“Beyond any doubt, I believe the board could have done better,” Miller wrote. “If this draft represents the best it can do, I’m full of doubts about its present credibility and its future existence.”

You can access the deets from FASB here after you read and accept their terms.

Dean of the University of Texas at Austin’s McCombs School of Business Lillian Mills talks about another FASB rule that sheds light on corporate assistance from the gubmint for Bloomberg Law:

The federal government announced last month that it will grant up to $8.5 billion to Intel Corp., one of the first of the $39 billion in grants it will make under the CHIPS and Science Act.

But the CHIPS and Science Act is just the tip of the fiscal iceberg. In 2023, state and federal governments made direct grants to more than 2,200 businesses, according to a database compiled from government records by the watchdog group Good Jobs First.

Although taxpayers are the ones ultimately paying for these grants, they often have a hard time finding out what they’re paying for. But transparency for taxpayers and other stakeholders is coming, thanks to the Financial Accounting Standards Board, which is developing a new rule on disclosing government assistance in financial reports.

The new rule would be welcome news. In published research, I and co-author Ryan Hess of Oklahoma State University looked at the 50 largest assistance packages between 2003 and 2019, as tallied by Good Jobs First. We found 28 of the companies didn’t mention government assistance at all in their financial statements, and only five disclosed any details about assistance received and commitments made in exchange.

Here’s that paper, “Government Assistance: A Growing, Underdisclosed Financing Source” in Accounting Horizons 1–25, for your reading pleasure.

Canadian Accountant said the historically massive fine against KPMG Netherlands for answer sharing puts PwC Canada’s cheating into perspective. What they mean is, in true Canadian fashion PwC copped to the offense and cooperated with investigators whereas KPMG cheaters did not. Quite the opposite actually.

As Big Four foreign firms punished for exam cheating, PwC Canada fines put into perspective:

The difference in the magnitude between the recent fines and those of PwC Canada was largely due to the “extraordinary cooperation” of the Canadian firm in reporting the failings to audit regulators. A tersely worded statement, titled “The PCAOB will not tolerate cheating,” from PCAOB Chair Erica Y. Williams cited that the Dutch firm had misinformed investigators.

This article from The Times (UK) is a month old but I’m only just now seeing it because the AI content farms have been spitting out articles on it in the last few days and it’s showing up in my news feeds. So now you’re seeing it too:

Deloitte apprentice who joined at 18 becomes £1 million a year partner, and he never went to university

Ben Newton was bursting with pride when he took his seat at the table for a meeting of the top brass at Deloitte last week. The 30-year-old, who joined the professional services firm 12 years ago, has just been made a partner — whose pay, on average, is £1 million. For anyone to join those ranks so young is a big achievement, but for Newton it is even bigger — he was the first to have made partner on its Brightstart apprentice scheme for school leavers.

Deloitte started its Brightstart scheme to widen its hiring pool and offer people a route into work rather than through university.

Newton said: “I grew up in Dorset. My dad left school at 16 and was a soldier in the army. My mum worked in a pub and then a travel agent. It was an upbringing far removed from London and the world of finance.”

He had been the first in his family to be offered a place at university — to study maths at Warwick — but decided to join Brightstart so he could earn a salary and get an early start in the workplace. Newton is now a qualified accountant, and working as an auditor.

Not a bad gig for a non-college grad if you can get it.

Partially Chinese state-owned IOL (Independent Online) of South Africa published a big old thing about the Big 4 oligopoly:

Run on numbers: The role of the big four auditing companies in a financialised world

Accounting firms have always been central to the accumulation strategies of the powerful. In the modern financialised economy, they have become even more important. (Financialisation refers to the increasing role of financial motives, financial markets, financial actors, and financial institutions in the operation of the domestic and international economies).

As accounting firms increasingly took on additional functions, particularly as consultancies, they have moved further and further away from the mandate of deterring malfeasance. After a period of state-led economic policy following World War II, characterised by high tax rates, government spending, and regulation, the 1980s saw a resurgence of free-market ideologues led by former prime minister of the United Kingdom Margaret Thatcher and former United States of America president Ronald Reagan.

Their policies at home rapidly slashed corporate taxes and regulations. These ideas were also proliferated throughout the global south by the policies of the International Monetary Fund (IMF) and the World Bank, opening markets for Western corporations to profiteer, often at the expense of public services.

These radical free-market ideas, coupled with modern technology and the ease of moving money, prompted the rapid financialisation of the global economy. In a financialised world, accountants are indispensable. They provide consulting services, including tax advice, financial risk management, and financial management advice, amongst other things. They function as both monitors and spurs of the financialised global economy.

Modern War Institute at West Point published “A Tax Day Resolution For the Department of Defense: Pass an Audit

There are several reasons why the American taxpayer should be concerned about DoD having never passed an audit. Most obviously, defense spending is by far the largest consumer of US federal discretionary tax revenue, with total budget authorizations approaching $1 trillion annually. There is a multitude of contexts available to establish just how big this number is—almost 40 percent of all reported global military expenditures, more than the GDP of all but nineteen countries, or a stack of $100 bills that would be six hundred miles high, to list a few. Regardless of one’s choice of context, the pathways to potential fraud, waste, abuse, and corruption within the US defense budget are commensurably numerous. Additionally, the Department of Defense is the largest employer in the world (and thus the largest portion of the federal bureaucracy), which makes the pathways available to a large number of stakeholders. These two factors of scale—a lot of money and a lot of people—suggest a level of complexity in DoD operations where even expected waste—the literal costs of doing business—could total billions of dollars.


CNBC coming in with another timely Tax Day piece:

State tax officials are using AI to go after wealthy payers

“States are getting very sophisticated using AI to determine the best audit candidates,” said Mark Klein, partner and chairman emeritus at Hodgson Russ LLP. “And guess what? When you’re looking for revenue, it’s not going to be the person making $10,000 a year. It’s going to be the person making $10 million.”

Klein said the state is sending out hundreds of thousands of AI-generated letters looking for revenue.

“It’s like a fishing expedition,” he said.

Lastly, here was the scene at an IRS office in Atlanta over the weekend:

‘I want my money’: People spend hours in line outside Atlanta tax center for IRS help

Long lines wrapped around Atlanta’s Tax Assistance Center Saturday morning.

The IRS held extended hours ahead of Monday’s tax deadline. People were able to speak one-on-one with an IRS representative at the event.

People were camped out in lawn chairs as early as 6 a.m. ahead of the 9 a.m. event — and many told Atlanta News First that they didn’t come by choice.

“All I need to do is verify my identity, and that’s it. It’s a tiny process,” one attendee said.

A majority of the people in line had received an email or letter from the IRS stating they had to verify their identity in person. The notification went on to say their refund was being held until they did so.

That was more news than I ever could have hoped to find on a Monday morning in April. I hope those of you on the grind will get some rest soon. To you and everyone else, let’s make it a good one OK? Shout if you see or hear anything good via text 202-505-8885, email, or Twitter. Love ya, mean it.