Good morning, capital markets servants! Hope everyone’s settled in now that we’ve had a full week of work post-holidays. If you have a tip or story for us, email or text anytime. Let’s get right into the news.
Federal Reserve chair and professional brrrrrrrer Jerome Powell got served by the DoJ. In a rare move, he quickly issued a hostage video video statement:
Text of statement here.
Journal of Accountancy gets deep about auditing in “5 imperatives for auditors from the PCAOB chair,” posted this morning:
“There is many a slip twixt the cup and the lip.”
At last month’s AICPA Conference on Current SEC and PCAOB Developments, George Botic continued his tradition of educating while entertaining fellow CPAs regarding the audit — this time in his role as acting chair of the PCAOB.
Botic quoted a proverb about the potential peril in the simple act of taking a sip of hot tea and applied it to the complicated act of getting an audit to the finish line.
“That narrow space between the cup and the lip,” Botic posited, “is where risks live and where vigilance matters.”
Botic then segued into spilling the tea on five imperatives for auditors in the new year.
The rest of the article is the five imperatives. Obviously.
The EPA threw the Biden administration under the bus, reports Bloomberg Law:
The EPA says its recent failure to get a clean bill of financial health from its watchdog offers further proof that the Biden administration was reckless and spent money wastefully.
The failed audit—the Environmental Protection Agency’s first in at least 25 years—could provide a predicate for Congress to shrink the EPA’s budget, which lawmakers are currently weighing and the Trump administration has requested. Agencies don’t typically suffer legal penalties for failing to make their books add up.
Things aren’t so great in the UK, BDO and KPMG make an appearance in Daily Mail:
Business confidence collapsed after the Budget and companies put the brakes on hiring – setting the scene for another bleak year for the economy, experts warned yesterday.
In a report that piles more pressure on beleaguered Chancellor Rachel Reeves, the accountancy group BDO said morale among firms fell to its lowest level in nearly five years last month.
A separate survey by accountants KPMG and the Recruitment & Employment Confederation (REC) showed hiring slowed to a crawl at the end of 2025 as demand for staff ‘continued to weaken’.
REC chief executive Neil Carberry said: ‘Making this a better year for hiring will require a focus on building business confidence to invest.’
NJBIZ talked to local CPAs about clients taking risky tax positions. Their warnings apply to everyone, not just cannabis dispensaries with the testicular fortitude to take aggressive positions:
Walking the line between smart tax planning and waving a red flag in front of the Internal Revenue Service involves careful consideration, proper documentation and, sometimes, a professional legal opinion, say New Jersey CPAs. The wrong moves can trigger an audit or worse.
That’s what happened when a New Jersey cannabis dispensary wanted to take an unusually aggressive tax position, according to Seth Kamens, managing member of the CPA and advisory firm Kamens & Associates.
“At the time, federal law allowed cannabis businesses to deduct their cost of goods sold, but –unlike New Jersey – prohibited deductions for SG&A [sales, general, administrative], ordinary business expenses like salaries,” he explained. “The dispensary had $5 million in sales and $3 million in cost of goods sold and wanted to deduct an additional $1 million in other expenses.”
The stance taken by the company, which is no longer a client of his firm, was that federal law denying the additional deductions was not valid, Kamens added [a recent executive order signed by President Donald Trump that directs federal agencies to move to favorably reschedule cannabis under the Controlled Substances Act may change that]. “We couldn’t write a legal opinion ourselves, since we are not attorneys, so the client hired an attorney who researched the matter and wrote an opinion, which was submitted with the return, backing up the company’s position.”
Love how they specifically mention the dispo is no longer a client of the firm.
First PwC becomes the official firm of Formula 1 and changes their entire global brand around the partnership, now Deloitte and McLaren Racing are “deepening” their partnership:
McLaren Racing has announced a significant expansion of its long-standing high-performance partnership with Deloitte, broadening the collaboration across multiple racing programmes and reinforcing Deloitte’s role as a strategic transformation partner to the organisation.
As part of the expanded agreement, Deloitte becomes the official transformation partner across McLaren Racing’s global portfolio. The partnership will support McLaren’s Formula 1 team, Arrow McLaren in the NTT INDYCAR SERIES, and McLaren’s forthcoming entry into the FIA World Endurance Championship from 2027.
In Nigeria, some drama is brewing between an audit firm and the government of Osun in the southwest part of the country. The government says the firm “deliberately misled it on number of ghost workers just to maximise profit.”
The Osun State Government has denied allegations of alleged cover up of ghost workers’ indictment within the state public service by Sally Tibbot Limited, an audit firm, describing the press briefing by the company as a subtle blackmail to force a fraudulent staff audit report on the state.
The forensic audit firm, SALLY TIBBOT had accused the Osun State Government of inserting a total of 8,452 alleged ghost workers into the state’s payroll and paying them a sum of N13,716,914,129.28 annually.
The allegation was made by the Executive Vice Chairman and Chief Executive Officer of the firm, Sa’adat Bakrin-Ottun, who spoke through the company’s legal counsel, Jiti Ogunye, at a press conference held at the Nigeria Union of Journalists Secretariat in Lagos on Friday.
Makes you appreciate all your boring audits where clients begrudgingly accept any findings and just pay their invoices, eh?
The PwC tax scandal continues to threaten billable hours. In “‘Unethical’ companies to be banned from govt contracts,” ACS discusses efforts to keep naughty firms away from contracts and a government agency totally against the idea:
A proposed plan to ban “unethical” private companies from winning government contracts for up to five years would have a major impact on tech work and “may jeopardise continuity of essential services”, the Digital Transformation Agency has warned.
Greens Senator Barbara Pocock last year introduced a private members’ bill to the Senate that would introduce a federal debarment regime for government contracts, meaning that companies may be banned for five years if they engage in “unethical conduct”.
Hey, five years will fly by before you know it.
In a submission to the Senate committee now investigating the bill, the government’s Digital Transformation Agency (DTA) raised concerns that such a scheme would come with “significant operational risks and unintended consequences”, particularly when it comes to IT work.
“In the digital market, where unique or highly specialised services are often supplied by a limited number of providers, a permanent exclusion of a supplier may jeopardise continuity of essential services and escalate costs and risks,” the DTA submission said.
“The dynamic nature of the technology sector – with frequent mergers, acquisitions and changes in subsidiary and reseller relationships – means that a blanket ban may inadvertently restrict access to critical or innovative capabilities that subsequently become available through previously debarred organisations.”
We’re pleased to see this one didn’t just get swept under the rug and forgotten about.
35-year-old Kenneth McLawhorn, a longtime KPMGer from South Jersey, has passed away. The local news has the details:
McLawhorn is survived by his wife, Andriana, whom he met while attending the University of North Carolina at Chapel Hill, his obituary reads. He spent 11 years working at KPMG, according to his obituary. His LinkedIn shows he was a consulting director operating out of Philadelphia.
Our condolences to his family, friends, and colleagues.
Here’s a long nerdy read for you from KPMG: Value Creation in Private Equity
Private equity (PE) has traditionally relied on picking the right investment to release value through business transformation post-deal.
PE returns have traditionally had a component of financial leverage, multiple arbitrage and value creation — usually considering a combination of all these factors whilst surfing a wave of low interest rates and natural market expansion.
As those factors seem to evolve and fade — base rates have normalized, dry powder tops US $1.0tn, and there is more than US $3.0tn backlog of unsold assets in the exit pipeline — it becomes clear that the industry will need to evolve into looking for more sophisticated ways of creating tangible value in ever increasingly disputed markets.
In this sector, data is power. Hedge funds turned quant a decade ago. Public-market active managers quickly followed with factor signals and alternative data. Yet most buy-out houses still prefer to trust a more traditional approach towards value creation, based on expert judgment and financial analysis.
We believe that as market tailwinds fade, operational alpha — built on stochastic modeling, outside-in signals and predictive intervention — will likely become a real source of competitive advantage and a systemic and repeatable investment edge. We believe that the next decade belongs to houses that can manufacture operational alpha – systematic EBITDA uplift, delivered quickly and at scale.
In this paper we set out a five-capability blueprint for value creation next-gen alpha and illustrate — with data and case studies — how leading General Partners (GPs) are now tilting their models to becoming the next-gen ‘quant PE house’.
That’s it for this particular news brief. Now go out there and have a wonderful week, you.
