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January 27, 2023

Monday Morning Accounting News Brief: Gen Z Ruins Accounting; EY Hammers Out Some Deets; Internal Control Controversy | 12.05.22

a cat cuddled up in a scarf

How is it December already? Not a lot going on this time of year, let’s find some things anyway.

Deloitte believes 2023 will be the year of virtual reality. E. Cohen and Company, CPAs of Rockville, Maryland, merged into Marcum effective December 1, adding to Marcum’s presence in the Mid-Atlantic. The PCAOB has been busy publishing Canadian inspection reports. Baker Tilly is running a pilot program that explores the idea of scrapping the traditional billable hour and basing its fees on the actual projects it completes instead: “It’s not about the hour, it’s about the production, it’s about the work to get the project done,” CEO Alan Whitman told Bloomberg Tax. Controversial internal control audit improve operational efficiency for small firms, study finds: “Regulators keep exempting more firms from complying with internal control audits because of the costs,” said Chan Lin, the C.A. Scupin Professor at the University of Kansas School of Business. “Not only is the cost high, but firms don’t feel it has value. They assume since management is doing the internal control evaluation themselves, the auditor opinion does not matter. That’s why it’s controversial.”

Crypto shit:

In the aftermath of FTX’s bankruptcy, crypto watchers on Twitter set their sights on to KuCoin, the world’s fourth-largest exchange by trading volume. Critics spotted a potential time bomb in the form of KuCoin’s complex options product called “dual investment,” which let customers earn interest rates as high as 300% for depositing cryptocurrencies.

The flare-up over KuCoin’s dual investment product also came with concerns over solvency, with Lyu releasing an open letter dispelling the rumors and promising to release a Merkle tree proof of reserves. On Monday, the exchange also announced that it was engaging with the accounting firm Mazars to provide a third-party “factual findings” report.

Many in the crypto industry have said that a proof of reserves release is not sufficient without an accounting of liabilities and a third-party audit. KuCoin’s announcement about Mazars only said that it would provide additional transparency and reporting on whether customers’ “in-scope assets are collateralized.” It is unclear if this process will constitute a full third-party audit.

Speaking of Mazars: Mazars, a leading audit, tax, and advisory firm in the U.S. with a heavy presence in New Jersey, announced it acquired Boston-based accounting firm Samet & Co. P.C. Following the acquisition, Mazars gained five partners, three managing directors and 65 new professionals (that’s press release copy, obviously).

Gen Z is ruining the public accounting meat grinder.

An update on the EY split talks from Bloomberg Tax:

Ernst & Young’s leaders have yet to settle key issues essential to their planned break up of the $45 billion professional services firm. According to people familiar with the firm’s deliberations, details still in flux include how to divvy up tax partners between the advisory business and audit practice, how to structure any stock-based compensation for advisory staff, and perhaps the most basic question: Who will run the newly decoupled businesses?

EY leaders expect that about 75 of its 140 affiliates will consider sometime in early 2023 whether to support splitting apart the global firm, the people said—a shorter window than the firm had predicted back in September when EY leaders announced they would seek partners’ approval beginning this year.

No votes have been scheduled yet, a person familiar with the firm’s deliberations said.

And in pizza news:

I shall point you to Pizza Parties In Lieu of Compensation: A Comprehensive History if you are interested in learning more about gluten and cheese as a morale booster.

A few things we’re working on this week:

  • Yearly top ten lists. So. Many. Yearly. Top Ten. Lists.
  • We’re doing a video holiday card this year. Yay!
  • A defected senior partner at a large firm has reached out to us with claims that their former firm is racist, we’ll investigate.
  • A PCAOB whistleblower has a long list of grievances, we’ll share them all.
  • There is literally nothing else going on in this godforsaken industry. Gonna be a rough couple weeks.

That’s about it. If you see anything interesting, give me a shout.

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