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Monday Morning Accounting News Brief: Deloitte Refutes a Demand Shift; Firm Data Breach; KPMG’s New AI Partner | 4.24.23

Posted on by Adrienne Gonzalez
dog in bed with a book and glasses

Good morning and welcome to another Monday. Here are a few stories to whet your appetite for what promises to be a thrilling week in accounting ahead (obligatory /s).

Study Finds Negative Impact on Audit Partners who Give Adverse Internal Control Opinions:

As regulators review audit independence requirements to figure out whether the rules should be changed in order to promote auditor objectivity and skepticism, a recent academic study points to a negative incentive system that may impair independence and bring down audit quality.

The study found that audit firms “are significantly more likely to remove” a partner from a continuing engagement when the partner issued an adverse internal control opinion in the previous year. Such problem is tied to the client-pay audit model, which critics say produces inherent conflicts of interest.

In particular, researchers found that partners that issued adverse internal control opinions experienced unfavorable changes in their client portfolios with lower fees and less prestigious assignments.

KPMG and MindBridge announce alliance to power KPMG audits with AI technology:

KPMG and MindBridge have today announced a strategic alliance to help bring advanced artificial intelligence (AI) into KPMG member firms’ digital audits around the world. KPMG’s smart audit platform, KPMG Clara, will now use MindBridge’s technology to help unleash the power of AI into audits, further enabling the identification of unexpected or high-risk transactions and helping to provide enhanced audit quality.

Discussion item:

Related article from July 2022:

Blind Item: California Firms Are Paying California Salaries to Poach Midwestern Public Accountants (UPDATE)

‘Carbon Accountant’ will be the future’s most important and in-demand job, writes Paul Ford for Bloomberg:

I think the one, true job—the job that will matter more than any—will be, essentially, carbon accountant. The greatest job security will be for people who know the tax rebates and every aspect of green law, then study PDFs—God, there will still be PDFs in 2050, won’t there?—then study every aspect of the large, open climate standards from places like Gold Standard, Verra, IFRS and others, and get really, really good at using mitigation disclosure software to fill out report after report so their employers don’t get fined or shut down by the government.

We’re going to need hundreds of thousands of people like that. They’re going to take pictures, install sensors, write things down, look inside of vats of chemicals, create PowerPoints. And they’ll be able to bill a ton, because once we realize that no magical unicorn is going to show up in the garden dragging a cart full of large denominations—that’s the moment of profound and painful realization when people will understand they need to give up and call a consultant. And that’s when the real money starts to flow. Trust me on that. I was a consultant.

WaPo discusses recent layoffs:

Consulting firm Deloitte said in a statement that its “U.S. businesses continue to experience strong client demand. As growth in select practices moderates, we are taking modest personnel actions where necessary.”

The Financial Times and other outlets reported that 1,200 workers would be laid off at Deloitte, but the company declined to confirm the number.

Economists say the latest wave doesn’t signal a labor market in free fall, or even one that’s grinding to a halt. Rather, the layoffs are a marker of an economy trying to find its way to a new normal.

The changing nature of workforce mobility:

According to the recent EY 2023 Mobility Reimagined Survey, which shares insights from more than 1,000 global mobility professionals and employees recently posted on international assignments, workforce mobility has failed to reach its full potential. While lucrative workforce mobility programs are imperative for the global talent race, with respondents voicing that these programs facilitate growth for individuals and their organizations, the survey showed a discrepancy between mobility programs offered by organizations and talent demand.

Among those surveyed, 92% believe that workforce mobility opportunities help organizations drive growth by supporting organizational goals while investing in top talent. However, most respondents were unsure as to whether organizations can handle the potential tax, immigration, and regulatory risks.

Some other stuff:

The accountant shortage is so real that dozens of cities have no credit score because they didn’t file financial paperwork in time [Fortune]
Oklahoma loosens CPA requirements [AT]
Ava Labs CEO Calls for Crypto Regulators Who Can Read and Audit Code [CoinDesk]
Accounting Firm Rubino & Company Files Official Notice of Data Breach [JD Supra]

That’s all I have for now. Log off and go get some sun, you need it.

Related Posts

Accounting News Roundup: Audit Committee Chair Resigns from WellCare Health; PwC, E&Y Officially Cut Iran Ties; Repo 105 = Pointless, Repugnant Practice | 04.26.10

Director Resigns at Wellcare Health [WSJ]
Regina Herzlinger was the chair of the audit committee of WellCare Health Plans, Inc., a Tampa-based provider of Medicaid and Medicare plans, but resigned last week amid controversy around the company’s accounting practices. The Wall St. Journal reports that Ms Herzlinger said that internal audits discovered the company overbilled the Illinois Medicaid program by $1 million “and potentially overcharged states for almost $500,000 worth of maternity care.” She also stated that the company “ran afoul of Georgia’s requirements that it account for eachhich it paid providers, resulting in a $610,000 fine.”

WellCare also paid an $80 million fine to the State of Florida last May for a criminal investigation “into allegations that it had defrauded Florida benefits programs for low-income adults and children” as well as $10 million to the SEC for an investigation into its accounting. At least they’re keeping some attorneys busy.


Ms Herzlinger alleges that she was not renominated to her position on the board of directors for raising questions about the accounting practices at the WellCare as well as corporate-governance issues.

The Company claims that “good corporate-governance practices require it to bring in new board members periodically to provide a fresh perspective,” so at least they’ve got that point covered. The Journal also reports that the company is pulling the materiality card, saying that the “accounting errors Ms. Herzlinger identified were relatively small and the company’s own internal controls indentified them, indicating that its processes are working well.”

Lehman Investors Add Auditor Ernst & Young to Suit Over Deals [Bloomberg]
Charlie Perkins, the Lucas van Pragg of Big 4 accounting firms, has to be getting sick of repeating himself:

“Throughout our period as the auditor of Lehman, we firmly believe our work met all applicable professional standards, applying the rules that existed at the time.”

Countrywide Investors Said to Settle Lawsuit for $600 Million [Bloomberg BusinessWeek]
KPMG is listed as one of fifty defendants in the lawsuit in California.

Companies Feeling More Pressure to Cut Iran Ties [NYT]
PricewaterhouseCoopers and Ernst & Young have both cut their ties with Iran, following KPMG, the Times reports. This results in grand total of zero Big 4 firms with affiliates in Iran.

United Against Nuclear Iran (“UANI”) President Mark Wallace received letters from both PwC and E&Y:

This week, Mr. Wallace’s group received letters from both PricewaterhouseCoopers and Ernst & Young assuring the group that they had cut ties with Iranian firms. PricewaterhouseCoopers wrote that the Middle East member of the company’s global network had had a “cooperating firm relationship” with Agahan & Company, an Iranian firm, but that it expired last year. Ernst & Young said it cut its ties in 2001 to the Tadvin Company, one of Iran’s largest accounting firms, even though Tadvin was still listed on its Web site this year.

Mr. Wallace called that a breakthrough because by publicly avoiding Iran, the American accounting firms that audit so many other companies send an important signal. “What it says is if it’s too risky for the Big Four accounting firms,” he said, “it should be too risky for other companies.”

It’s pretty obvious Mr Wallace doesn’t know anything about Big 4 accounting firms re: risk.

A manifesto for accountants [Tax Research UK]
Richard Murphy has some suggestions for the Accountancy Age manifesto.

Repo 105 Explained With Numbers and Detail [The Summa]
“Right now, I just don’t see what the big fuss is all about. The number differentials are just too small. Although a repugnant practice, Lehman didn’t accomplish much of anything with Repo 105 use.”

Accounting News Roundup: The Corporate Offshore Cash Stash; SEC Is On Groupon; Looking for the “Just Right” Amount of Going Concern Warnings | 07.28.11

With G.O.P. Unity at Risk, Boehner Tries Tougher Style [NYT]
“I didn’t put my neck on the line and go toe to toe with Obama to not have an army behind me,” Mr. Boehner declared at a private party meeting, according to some House members. He demanded the fealty of conservatives who were threatening to sink his budget proposal and deny him the chance to confront the Senate with a take-it-or-leave offer on a debt ceiling increase. Mr. Boehner really had no choice but to go all out. A defeat of that plan — which seemed likely Tuesday night before its prospects improved Wednesday — would have been a disastrous repudiation, in effect a stinging vote of no US groups hit as tax keeps cash overseas [FT]
As much as half US companies’ record $1,240bn in cash balances is being held overseas, according to Moody’s research, with groups wary of incurring a 35 per cent repatriation tax. The foreign holdings are limiting corporate flexibility in managing balance sheets and adding to pressure from the business community for wide-ranging tax reforms.

Treasury to Weigh Which Bills to Pay [NYT]
The outlines of the answer, however, already are clear. Officials have said repeatedly that Treasury does not have the legal authority to pay bills based on political, moral or economic considerations. It cannot, for instance, set aside invoices from weapons companies to preserve money for children’s programs. The implication is that the government will need to pay bills in the order that they come due. President Obama has warned as a result that the government “cannot guarantee” payments of Social Security benefits or other popular programs. Officials also have disputed the assertion of some Republicans that the government could prioritize interest payments.

Groupon’s Accounting Lingo Gets Scrutiny [WSJ]
Groupon Inc. has attracted scrutiny from regulators over a newfangled accounting metric it is using to market itself to investors ahead of its initial public offering, said a person familiar with the situation. The Securities and Exchange Commission has asked Groupon to answer questions about the unusual measure it invented, which paints a more robust picture of performance by excluding marketing and other expenses, this person said.

The Influence Industry: Challenging the IRS on rules that keep donors secret [WaPo]
Two advocacy groups have filed a petition with the Internal Revenue Service challenging regulations that allow political organizations such as the conservative Crossroads GPS and the liberal Priorities USA to form as nonprofits under the tax code. The issue comes down to disclosure of donors: Groups that form as nonprofits are not required to reveal them. By contrast, political groups registered with the Federal Election Commission must list all of their contributors.

Ford CFO: No More Mr. No [CFOJ]
“We’re in an expensive period,” Booth acknowledged during a conference call with analysts Tuesday, but added, “You’ll not see us backing away from world class products and world class revenues; we’ve tried doing it the other way and it doesn’t work.”

Going, Gone: Too Many “Going Concern” Warnings May Be As Bad As Too Few [Forbes]
It’s a “Goldilocks Effect.”

IRS Realigns International Tax Operations [AT]
The realignment will result in a new “Advance Pricing and Mutual Agreement program” under the direction of a single executive. The IRS also plans to increase the staff available to the two program areas. The IRS said the combined office would allow the agency to reduce the time it needs to complete advance pricing agreements and to resolve transfer pricing disputes with treaty partners in other countries. The Office of Chief Counsel will continue to help analyze and resolve the legal issues.

What’s Your Fraud IQ? [JofA]
Or maybe a “Criminal Quotient.”

kpmg auditors pcaob partners conspiracy

Accounting News Roundup: Big 4 ‘Global’ Structures and ‘Disappointing’ Liabilities | 03.07.18

KPMG Acts Globally But Keeps Scandals Local [WSJ] Michael Rapoport revisits the “global structure” of […]