It’s Monday. Yay. Here’s what’s going on.
Smaller accounting firms have asked Big 4 to share their expertise [FT]:
Smaller rivals have called on the UK’s Big Four accounting firms to share their audit expertise and technology, but partners at the big firms say they fear being accused of breaking competition law if they do so.
“Part of the problem is there isn’t [enough] knowledge sitting outside of the Big Four,” said Martin Muirhead, chair of the Association of Practising Accountants, which represents 20 midsized accounting firms.
Deloitte, EY, KPMG and PwC dwarf their smaller competitors and have invested heavily in improving their audits and modernising their technology, in response to tougher regulation after auditing failures and corporate scandals at companies including BHS, Carillion and Patisserie Valerie.
The top firms “have learnt a lot over the last five years since Carillion about quality and audit methodology, and educating us would assist us in improving audit quality”, Muirhead told the Financial Times.
Whitley Penn struck a deal with the New York attorney general to hand over documents subpoenaed in the state’s $250 million civil suit over the former president’s asset valuations. The New York attorney general sued Whitley Penn last month after the firm said Texas accountant-client privilege protected them from handing over said documents.
Whitley Penn LLP, the Texas-based firm Trump hired after he parted ways with longtime accountant Mazars USA LLP, reached the agreement with Trump and New York Attorney General Letitia James last week, according to an April 7 order signed by New York state court Justice Arthur Engoron.
Under the deal, Whitley Penn will hand over all documents and communications related to the start of its business relationship with the Trump Organization, as well as all records related to Trump’s statements of financial condition, which are central to New York’s lawsuit.
Will technology solve the accountant shortage? [Westfair Online]
According to the recently published Intuit QuickBooks Accountant Technology Survey, 85% of accountants predicting that technology create new interest in this career by making the work more engaging. U.S. accountants predicted they will spend an average of $15,800 on technology improvements and upgrades over the next 12 months. Nearly half of the 2,000 accountants polled for the survey said they expected to invest in and adopt automation tools (48%), artificial intelligence (AI) (48%), and blockchain technology (47%) during the next 12 months.
Current accountants have already seen a change in their duties based on technology – 81% stated technology helped free their time to enable a more advisory role with their clients and a nearly identical share (80%) reported increased face-to-face time with clients thanks to technology.
As a result of this shift, 86% of accountants predicted technology will be the driving force behind expanded business. The primary benefit of accounting technology was identified as boosting revenue due to efficiency gains (41%), followed by increasing income streams (36%). Looking into the near future, the accountant respondents forecasted improved operations by using technology to better predict future business performance (38%) and understand real-time business performance (38%).
But despite the benefits cited in technology, nearly one-third of accountants (31%) said that ensuring accuracy was their biggest concern with technology. This comes as more than three in five accountants stated their clients sought increased assistance with financial management (67%), filing taxes (62%), managing staffing costs (62%), and financial forecasting (65%) during the past two years.
Fresh from WSJ this morning: Auditors Didn’t Flag Risks Building Up in Banks
“[KPMG] auditors failed to mention the fire in the basement or the box of dynamite on the first floor, but they did point out the peeling paint on the flower box,” said Erik Gordon, a University of Michigan business professor. “How could they miss the interest-rate risk?”
Audit regulator Public Company Accounting Oversight Board introduced critical audit matters in 2017 to “breathe life into the audit report.” Described as the biggest shake-up in audits in 70 years, the new standard was meant to make audit opinions more useful to investors.
So far, though, critical audit matters have failed to shed light on issues that have caused a collapse of confidence among depositors and investors in many small and midsize banks.
Auditors are required to record any critical audit matters when they sign off on a public company’s books. Regulators define these as matters that have a significant impact on the financial statements and involve “especially challenging, subjective or complex” judgments by the auditors.
Silicon Valley Bank’s unrealized losses in its bond portfolio appear to “meet every definition of a possible critical audit matter,” said Martin Baumann, a former chief auditor at the PCAOB who had a leading role in designing the new measure.
A Connecticut woman’s quest for a motivating way to reward herself following the rigors of becoming a certified public accountant led to the formation of a cottage business that specializes in personalized, sweet treats.
FreshBooks kept an Amazon Web Services (AWS) Storage bucket holding sensitive employee information unprotected on the internet, available to anyone who knew where to look, experts have claimed. As a result, more than 30 million of its users, in more than 160 countries around the world were put at risk of identity theft and other cybercrime. [TechRadar]
That’s about it. We are digging into multiple reports of secret layoffs at EY in recent months — were you put on a PIP after otherwise stellar performance and suddenly let go? Reach out and tell us all about it. Tipsters are always anonymous.