Going Concern

News

President’s Council on Jobs Report Suggests We Should Try Sarbanes-Oxley Light for IPOs

Adrienne Gonzalez
October 31, 2011

Barbara Roper wrote a commentary piece in WaPo Capital Business over the weekend that suggests the unthinkable: softening hard ass SOX rules for IPOs could actually kill jobs. How is that possible? Aren’t IPOs great for the economy?

Well, not always. Case in point: Groupon. Healthy, financially strong businesses are good for the economy. Scams, frauds or even overambitious accounting tricks might temporarily get the economy’s spirits up like a few rails of coke but eventually reality sets in and the economy is left broken and penniless in the alley looking for its next hit.

The report is an effort on the part of the Obama crew, who surveyed 27 business executives (including AOL’s Steve Case… and we know how his business turned out) for ideas on how to get the economy moving again. Among the suggestions, the report recommends Congress make compliance with all or part of Sarbanes-Oxley voluntary for public companies with market valuations up to $1 billion or, alternatively, exempt all companies from SOX compliance for five years after they go public.

The report blames burdensome SOX rules for the sharp drop in small IPOs in recent years, writing:

In the aftermath of the dot-com bubble and unintended consequences stemming from the Spitzer Decree and Sarbanes-Oxley regulations, the number of IPOs in the United States has fallen significantly. This is especially true for smaller companies aspiring to go public. As noted earlier, the share of IPOs that were smaller than $50 million fell from 80% in the 1990s to 20% in the 2000s. Well-intentioned regulations aimed at protecting the public from the misrepresentations of a small number of large companies have unintentionally placed significant burdens on the large number of smaller companies.

That would totally work as a justification except the SEC already debunked this silly idea. In a report earlier this year recommending no new 404(b) exemptions, SEC analysis showed that the United States has not lost U.S.-based companies filing IPOs to foreign markets for the range of issuers that would likely be in the $75-$250 million public float range after the IPO. “While U.S. markets’ share of world-wide IPOs raising $75-$250 million has declined over the past five years, there is no conclusive evidence from the study linking the requirements of Section 404(b) to IPO activity,” the report stated.

And as we all know, companies under $75 million haven’t had to worry about the SOX burden at all thanks to Congressional intervention. So how could it be that the burden they haven’t had has somehow prevented them from going public?

New boogeyman, please. I’m no huge fan of SOX but you’re going to have to come up with something better than this to convince me it’s a good idea to can it.

Accounting News Roundup: PwC and MF Global; Republicans for the Millionaire Tax; Hands Off SOx | 10.31.11

Caleb Newquist
October 31, 2011

Corzine Races to Save Firm [WSJ]
Jon S. Corzine, the former New Jersey governor, raced over the weekend to find a buyer for MF Global Holdings Ltd. in an attempt to rescue the securities firm he now runs from a crisis partially of his own making. MF Global was nearing a deal late Sunday night to file for Chapter 11 bankruptcy protection as soon as Monday and sell assets to Interactive Brokers Group, said a person familiar with the matter. The tentative agreement, reached after a marathon weekend of negotiations, could end the short tenure for Mr. Corzine at MF Global.

MF Global: 99 Problems And Auut None [Forbes]
FM: “According to the latest proxy, MF Global spent almost $12 million on total fees to PwC last year. That’s pretty paltry for a firm with the issues and complexity MF Global has.”

U.S. Economy Revives as Consumers Still Spend [Bloomberg]
While household-sentiment measures are at levels typically observed during a recession, an increase in spending during the third quarter boosted growth to the highest level of the year, Commerce Department figures showed Oct. 27. The schism partly reflects consumer ire with the government’s failure to reduce 9.1 percent unemployment or stem rising deficits, said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management. “Emotionally based indicators are suspect,” Paulsen said. “There is a lot of anger out there. In a calmer time, these indicators might provide a better guide. Consumers are scared to death, but they are still spending.”

PWC Saw No Sign of FMS Accounting Errors, Reports Now Adjusted [Bloomberg]
The auditor said it had “no indication” of any mistakes in FMS’s 2010 financial statement, based on its examinations and the documents it received. “Significant” parts of FMS’s accounting have been outsourced, PWC said in the statement.

A Tax Bracket Divided Over a Plan to Pay More [NYT]
At a wine-and-cheese reception in his office here, Terry M. Barr, president of Samson Oil and Gas, made a pitch to industry executives to donate to the Republican Party of Colorado so that they could defeat President Obama and elect more Republicans at the federal, state and local levels. After his guests left, Mr. Barr offered a surprising postscript: He agrees with a proposal by Congressional Democrats to impose a surtax on income over $1 million a year. Republicans in Congress deride the proposal for a so-called millionaires’ tax as class warfare. But in an interview, Mr. Barr said, “Wealthy people in the U.S. should be paying more tax, and I’m one of them.”

More SEC Reports on IFRS Coming: Will they be Genuine Analysis or Just More Dithering? [AO]
Tom Selling: “The public interest and investors would be better served if the Staff were to finally acknowledge that IFRS is not clearly superior to U.S. GAAP; and, eight years after its report to Congress, the necessary conditions for principles-based standard setting to occur (especially at the IASB) are still not in place.”

For PricewaterhouseCoopers, China Accounting Scandals Not A Game Changer [Forbes]
PricewaterhouseCoopers, or PwC, won’t be leaving China anytime soon following a rash of accounting scandals on small and mid-cap mainland companies listed on the New York Stock Exchange. The company told Shanghai Daily on Monday that it intends to stick around and open up five new offices despite auditors like PwC getting caught up in the middle of ugly international class action lawsuits against Chinese firms for accounting fraud allegations.

Rolling back accounting fraud protections will kill, not create, jobs [WaPo]
The recently released interim report from the President’s Council on Jobs and Competitiveness is brimming with suggestions for ways to get Americans back to work. But it also contains provisions aimed at rolling back protections against accounting fraud, which actually could result in killing jobs. One proposal calls for weakening, at all but the nation’s very largest public companies, nearly 10-year-old rules targeting accounting fraud. That would be bad news for employees and investors in Washington area companies, since it is employees and investors who suffer most when executives cook the books.

IFRS

Hans Hoogervorst Would Like You to Look at the Example Brazil Is Setting

Caleb Newquist
October 29, 2011

If anyone over the SEC needs a little help getting their heads around how to best get on board with IFRS, H-squared has found a prize pupil for you to emulate:

Addressing a conference in Sao Paolo, the former Dutch finance minister used Brazil as a “textbook example” of how best to implement global accounting standards. Hoogervorst […] praised the country’s full adoption and decision not to “tweak” the standards, saying this means global investors are “entirely comfortable” Brazilian companies’ financial statements.

Hoogervorst: Brazil embodies ideal IFRS adoption [Accountancy Age, Earlier]

KPMG
PwC

PwC Gives KPMG a Break, Appoints Insider as New Head of U.S. Tax

Caleb Newquist
October 28, 2011

I guess it was funny the first four times (and that doesn’t count the chumps that don’t get press releases) but for the extra special positions, P. Dubs must prefer to keep things in house.

Mark J. Mendola has been named as PwC’s U.S. Tax leader and a vice chairman of the firm. He will also serve as a member of the firm’s U.S. leadership team and the global Tax leadership team. Additionally, he will be responsible for the network of Tax practices across the Americas, including Canada, Mexico and South America.

For those keeping close tabs on this sort of thing, MJM joined PwC in ’86, no doubt inspired to join the tax practice thanks to the efforts of the Gipper & Co. He joined the partnership in ’98 with no indication that he strayed to the HoK. Word on the street is that KPMG is pretty bent out of shape over the competitive poaching, so PwC must be backing off. For now, anyway.

[via PwC]

Wanted: Full Set of Dentures for Auditor Watchdog

Caleb Newquist
October 28, 2011

The dynamics at both the PCAOB and the Big Four are horrible. The incentive at the Big Four is to keep prices down to the point at which it’s impossible for a new entrant to break into their charmed group; after all, if it means they end up cutting corners, the worst that happens is that they get gummed by the toothless PCAOB. [Felix Salmon/Reuters]

Threatening to Kill an IRS Employee Over the Phone Is Not Advised

Joe Kristan
October 28, 2011

Everybody admires a CPA who is willing to stand up to the IRS for a client. To a point.

A New York CPA went past that point, according to the IRS Office of Professional Responsibility. If the testimony of an IRS agent before an administrative law judge is to be believed, the CPA, George Diehl, is at least guilty of a social faux pas in a conversation with IRS Revenue Officer Miamouna Diakite when she refused to put a 45-day hold on collection of a client account.

From the ALJ opinion:

Diakite stated that Diehl refused to enter into an installment agreement. Diakite testified that he became irate and loud, saying that he had obtained holds on accounts routinely, and asked to speak to Diakite’s supervisor. Diakite told him that, pursuant to IRS procedure, her supervisor would call him within 24 hours. He insisted on talking to her supervisor immediately. Diakite then, also pursuant to protocol, told him that the account was then in “collection status” whereby the IRS “will” levy against Taxpayer 1’s bank account, garnish her salary and obtain liens on her real and personal property.

Diakite testified that Diehl became very upset and said “do you know what I do to people like you. I kill them.” Diakite replied “you don’t mean that, sir” and Diehl replied “I do. I do. I’ll kill you.” Diakite then sat at her desk repeating to herself aloud that Diehl said that he would kill her and he is in New York. She became frightened and then heard a male voice, not Diehl’s, saying “what are you doing?” and the phone was then disconnected.

The opinion never does say who the “male voice” belongs to. Somebody with better manners, perhaps.

The ALJ did believe the agent:

I find that Diehl threatened Diakite. His credibility was shaken by first stating that his words to her was that you are “killing me with your stupidity and then changing that testimony to state that you are “killing me with your bullshit.”

So for all of you aspiring CPAs out there, some lessons:

• Try not to let client tax matters get to a point where you have to argue on a hold for collection.

• Don’t threaten to kill the agents. They don’t like that, and it tends to make it more difficult to get them to help your client.

•Don’t be a pottymouth. That bad language completely blew it with that nice administrative law judge.

CPA Requirements: Meeting the 150 Credit Rule on a Budget

Adrienne Gonzalez
October 28, 2011

Happy Friday, people! Is it a blackout month yet? I guess not. But hey, we have a good question I received via Twitter yesterday to talk about. If you have a CPA exam question, life question, career question or general insult to hurl at me, tweet or email me.

Done w/ exam but do u have any recs on getting 150 cred other than grad school. I don’t want to pay the $$ for it. #cpahelp

Ahhh, the good old 150 rule. Intended to turn bright-eyed young accounting students into skilled leaders of the industry, the 150 rule has driven a lot of you right off the steaming pile of debt. But unless your state actually requires a Master’s (I can’t name a single one that does), there is absolutely no reason to take that route unless you feel that it will improve your salary prospects or if you can afford it. Otherwise? Please.

So. What’s a 4-year-college underachiever to do?

The truth is that many state boards accept credits from any educational institution recognized in that state, meaning you can easily sign up for 30 units at community college and meet the 150 unit requirement for licensure. Now, the key here is to take classes that you think will round you out as a human being, actually be interesting, or at least inspire you to show up for class. In my experience taking night classes at a community college back in the day, community college professors can actually be a lot more fun than the professors you might be used to. Many work in the industry or field that they will be teaching you about, which allows them a real world practical experience that many academic accounting professors might not have (sorry, guys, you know I’m right). If you are single, you can also definitely find some tail at community college, so there’s another bonus.

Community college will be your cheapest option (if recognized by your state board), but if that isn’t something you’re able to do, there are always online colleges. A lot of these are for-profit, overpriced and not always fun to attend, though I can’t say that from personal experience. I’ve heard stories, mmkay? If you have the money, there’s nothing wrong with enrolling to take some online classes this way but it is definitely more feasible for the left-brainers out there.

Whatever you decide to do, take the opportunity to get creative with your education. Those additional units are meant for you to advance your knowledge so you can be better at your job protecting the public trust or whatever it is you’re meant to do when you get your CPA. A fucking art class wouldn’t kill you, it rounds you out.

Accounting News Roundup: Big 8 Nostalgia; Taxes Stumping Not-So-Supercommittee; PwC’s New Global Head of Tax | 10.28.11

Caleb Newquist
October 28, 2011

Longing for the Days of the Big Eight [Reuters]
[A]s corporations become more global, the need for economies of scale may require fewer larger firms. Still, the right number is probably more than four.

A firewall to stop Europe’s crisis spreading [FT]
BO: “Given the scope of the challenge and the threat to the global economy, it is important for all of us that this strategy be implemented successfully – including building a credible firewall that prevents the crisis from spreaduropean banks, charting a sustainable path for Greece and tackling the structural issues at the heart of the current crisis. The European Union is America’s single largest economic partner and a critical anchor of the global economy. I am confident that Europe has the financial and economic capacity to meet this challenge, and the US will continue to support our European partners as they work to resolve this crisis.”

Taxes Remain Stumbling Block For Deficit Panel [WSJ]
House Speaker John Boehner (R., Ohio) acknowledged that the 12-member House-Senate Joint Select Committee on Deficit Reduction was still far from reaching an agreement, but he said he was keeping up the pressure on the panel not to give up. “I expect that it’s going to be very difficult to get to an outcome, but I am committed to getting to an outcome,” he said. “We’re into the really tough time and it is going to take a lot more work.”

Republicans put faith in radical tax plans [FT]
The US budget may be drowning in red ink, but that has only spurred Republican candidates to propose cuts in tax rates for individuals and companies as they compete for the right to challenge Barack Obama in the 2012 presidential election. Three candidates – Rick Perry, the Texas governor, Newt Gingrich, the former speaker, and Herman Cain, a businessman and radio host – have put forward radical plans for flat taxes. In the Reaganite tradition of supply-side economics, these candidates see their flatter tax proposals as both their main growth engines and a potential route to a balanced budget.

Consultant gets 10 years in massive accounting fraud at western Pa.’s defunct Le-Nature’s [AP]
Fifty-five-year-old Andrew Murin, of McMurray, was sentenced Thursday based on a June guilty plea to mail fraud in the scam that cost lenders, investors and vendors more than $650 million.

Exposing Auditors’ Work [Fraud Files]
Lately, there has been talk of more requirements for auditors: more disclosures, more discussion, more information on who is doing the audits. Would a narrative by the auditors add more meaning to audit reports?

Overstock’s “Likely” Breach of Debt Covenants [WCF]
Make no mistake, Sam Antar is enjoying this.

Zetas drug cartel ‘accountant’ detained [Telegraph]
Mexican marines detained alleged Zetas “accountant” Carmen del Consuelo Saenz two days ago in the Gulf coast state of Veracruz, along 10 other alleged Zetas members. Saenz, 29, was allegedly in charge of receiving proceeds from drug sales, pirated goods, kidnappings and extortions in five southern states of Mexico, said Navy spokesman Jose Luis Vergara. Saenz used the illicit proceeds to bribe authorities and meet the drug gang’s payroll, he said.

PwC appoints global head of tax [Accountancy Age]
Richard Stamm is your man.

Rick Perry to U.S. Taxpayer: COME ON DOWN

Caleb Newquist
October 28, 2011

One of the biggest problems with Texas Governor Rick Perry’s optional flat tax may be the choice it gives taxpayers. Perry says you can either pay his new tax or pay under today’s system, whichever results in a lower bill. That sounds great, but it is a policy disaster. This is the tax code we’re talking about, not some TV game show. [TaxVox]

The Serious Questions

Audit Team Struggles to Come Up with Ironic Halloween Costume

Caleb Newquist
October 28, 2011

From the mailbag:

Hey Caleb and Adrienne,

Question: my audit team and I are looking for a cool costume idea for Halloween. Since everyone rejected my idea of dressing as “Sox”, we’re at a loss. I’d love to go for some irony element (no one liked my idea of being Occupy protesters and not showing up for work). I think it would be fun to do a play on a scandal, fall out or another sexy accounting story, but I just can’t figure out how to make a reverse merger costume. Do your twisted, ironic minds have any ideas?

-Should probably go back to work, now

Dear SPGBTWN,

Perhaps you missed our story from last month but sorry to say, you’ve got a tall order ahead of you. That writer wanted an idea for “Accounting Police” and the best I could come up with was this:

Simply dress up as police officer and walk around the whole night counting things, not unlike The Count (in fact, I suggest you do the laugh). “What the hell are you supposed to be?” some dope will say. You’ll respond, “A counting police.”

And because you’ve got a whole team of auditors trying to get creative (not your strong suit) it’s even a bigger challenge. I suppose you could go as “whistleblowers” but that will most definitely include a blowing a whistle which will likely get you quickly ejected from any party. Another option is go as Mort Mort Feingold (maybe a sexy version?) and have the rest of your friends dress up as various, dimwitted celebrities.

Of course you could really nerd it up and play on “footnotes,” or even “audit trail.” Then again, if you want to go the “sexy” route, I suggest you go with “double-entry accounting.” How sexy you make it is up to you.

Any other ideas, gang? This is a tough one.

The Big 4 and the Revolving Door

Caleb Newquist
October 27, 2011

Last week the bane of Big 4 auditors existence, the PCAOB, broke their cherry on releasing Part II of an inspection report for a Big 4 firm. The honor went to Deloitte, who sufficiently blew off the Board’s recommendations for 12 months, which led to the release of Part II.

Bloomberg‘s Jonathan Weil, who usually sits back with popcorn while these things go down before chiming in, got to it today but with a twist that you probably weren’t expecting:

board members had recused themselves from participating in meetings or discussions this year concerning Deloitte, because of past or current ties to the firm, according to three people with knowledge of the matter.

The board members — Lewis Ferguson, Jay Hanson and the board’s chairman, James Doty — were appointed by the Securities and Exchange Commission in January. Doty had been a partner at the law firm Baker Botts LLP, where Deloitte is a client. Ferguson was a partner at the law firm Gibson Dunn & Crutcher LLP, which also represents Deloitte. Hanson, a former partner at the accounting firm McGladrey & Pullen LLP, has a daughter who works for Deloitte in its Phoenix office.

The board’s policy is to not disclose recusals, in spite of its mission to “further the public interest,” as if these are none of the public’s business. “Recusals are confidential,” Colleen Brennan, a board spokeswoman, said. Doty, Ferguson and Hanson declined to comment. A Deloitte spokesman, Jonathan Gandal, said: “The PCAOB itself does not comment on recusals, and as such it would be inappropriate for us to do so.”

It’s a pretty nice scoop by Jon and we’re all used to the silence from the PCAOB and Deloitte when someone gets the best of them but honestly, is anyone surprised? Does anyone care? The answer to the first question is “No.” The answer is the second question is “Maybe.”

With the exception of Mr. Hanson (family connection, we’ll give you that one), the recusals seem a little silly since neither Ferguson or Doty actually worked directly for Deloitte. Okay, so Baker Botts and Gibson Dunn have Deloitte has a client. Which Big Law firm doesn’t? It’d be pretty tough to find any DC lawyer who didn’t do some time at a firm that represented Deloitte. That goes for any Big 4 firm. They’ve all got deep pockets with lots of legal problems, of course they’re going to hire the best lawyers money can buy. Does that make guys like Ferguson and Doty unfit to make decisions with regard to that firm?

Well, for one year it does. Under the Board’s ethics code, Doty and Ferguson will be able to vote on matters involving Deloitte in January. Still, Weil doesn’t like the smell of it. And it doesn’t stop with the PCAOB:

[T]alk about being wired: The SEC’s chief accountant, James Kroeker, is a Deloitte alumnus. At the Financial Accounting Standards Board, which writes U.S. accounting rules, the wife of one board member, Russell Golden, is a Deloitte partner.

Look, we like Jon (even if he is a Colorado grad). But how do you find accounting policy makers who aren’t from the biggest, best connected firms that have the most resources? Should the Commission start appointing academics to develop policy? Eeek. Or maybe we’ll let the public make recommendations, “Yeah, my cousin’s a CPA out of Tulsa. Really knows his stuff. He’d be good.” Please.

Dan Goelzer’s seat is coming up and he’ll be replaced by a CPA. Weil hopes that the SEC will find “a qualified person without Big 4 allegiances” but with the revolving door spinning, he’d better hope for a wild card.

Goldman Sachs Envy Gains New Meaning at Big Four [Jonathan Weil/Bloomberg]

Grant Thornton

Does Eating Hours Win at Grant Thornton?

Caleb Newquist
October 27, 2011

As we trudge towards busy season, there are certain things that everyone gets a little anxious about. Like not seeing the sun for three months. Like putting on an extra 15-20 pounds because you’re stuffing your face with takeout three nights (minimum) a week. Oh! and then there’s the hours. Right, the hours.

For those of you t awhile, you know how the game works. Do you really spend 14 hours a day staring at a spreadsheets, slapping together financial puzzles without nary a drop in your production? Obviously not. Some of you take smoke breaks. Some of you have the audacity to take a lunch hour. Some of you drop by this fine publication to keep yourself abreast of the latest haps in accounting world (and leave the page open all day). Some of you, on average, spend 15-30 minutes watching your your cubicle crush from afar thinking that you’ll just mosey over and say “What’s up? Numbers, huh?” only to snap out of your daydream.

All this non-billable time accumulates into a decent portion of your day. Accordingly, you work a little later to make up for your lack of productivity, charge the appropriate hours (based on your increasingly tighter budget) and you call it a day.

For those newer to the game, you may look up at the clock, note that it’s 6 pm and you think to yourself, “What did I accomplish today?” The answer: not much. But since there’s not charge code for “Fucking Around – General” and slamming it all to an administration code isn’t such a good move, you slip it into a code for a client that you’re supposedly working on. No problem, right?

Well, your managers and partners might have a problem. They look at the billed hours and then try to gauge what your progress is. If there are hundreds of hours and you have jack squat to show for it, people are going to be pissed.

With all that in mind, I’ll share a query from a reader out of Grant Thornton’s New York office:

I would like to know how wide-spread “Eating Hours” is at GT (NYC).

You are put on a project, its a lot of work, and as time progress more and more work piles on you. You end up putting a lot of hours. The manager/partner says that hours will not be a problem, and that you should bill all hours worked.

When the project is just about over, after you had worked tons of hours, when you are least expect it, they pull you into a meeting and admonishing you that there was no way that you worked those hours. (Basically calling you a thief to your face).

After that meeting, you are told to adjust all hours over and above the budgeted 35-40 hours work week.

Even though I am not an hourly employee, I do feel robbed in two ways. First, I can’t really enjoy the accomplishment of the project because I feel so cheated, unappreciated and disrespected by this unethical behavior. Additionally, I feel stress because how can I be expected to meet the already unrealistic utilization goals when those scumbags make me eat hours?

Okay, let me say first that I do not doubt this person’s account of being jerked around by a manager or partner with regard to hours. However, it’s a little bit unbelievable if this meeting where the de-pantsing occured came without any warning. Most of your superiors – whether they are partners, managers, SAs, whatever – are not completely unreasonable people. They don’t all of sudden turn on a dime and say, “Everything I told you was a lie. You should have known that you shouldn’t have been billing all those hours.” If that is the case, then you work for assholes.

Hopefully, if eating hours is expected of you, they tell you up front. I had former colleagues that were on engagements like this where a Senior Manager simply let them know exactly how many hours they were expected to bill but it was pretty obvious that they were going to be working far more than that to get the job done. It’s a fucked up equation to be sure, but at least you know what you’re up against. This has nothing to do with firms or offices but rather the people running the engagement.

As for GTNYC, it’s pretty tough to know how widespread the practice of eating hours is. How widespread is the alcoholism? Or doucebaggery? It’s not quantitative. But our tipster is still concerned:

I have spoken to many of my friends at other Big 4, at regional firms, and at smaller firms and no one had experienced it as bad as some of us here in GT (NYC).

Fine. But you’re very small cross-section of a huge population. Maybe you were just on a couple of bad engagements with bad partners/managers. It happens. Believe it.

For the Purple People Eaters out there, is eating hours at GT a problem? Does Vault have it all wrong? Eating hours definitely doesn’t win, but does it pay? Discuss below.

Careers

Big 4

News

Technology

Practice Management

Site Search

Twitter Feed

Get the Accounting News Roundup

Quick Reads

Sponsored Content

Get the Accounting News Roundup

Remote Accounting & Tax Director

Remote Tax Manager

Remote Tax Advisor, CPA Firm

Remote Accounting & Tax Director

Remote Tax Manager

Remote Tax Advisor, CPA Firm