Accounting firm Deloitte & Touche sued for $7.6 billion in massive mortgage fraud case [AP]
“They certainly did not do therney Steven Thomas, who represents those suing Deloitte. “This is one of those cases where the red flags are staring you in the face, and you’ve got to do a lot, and they did not.” Deloitte spokesman Jonathan Gandal responded that the company rejects the claims, calling them “utterly without merit.” The lawsuits were filed in Miami-Dade Circuit Court on behalf of the bankruptcy trustee for the fraudulent mortgage firm, Taylor Bean & Whitaker, and by Ocala Funding LLC, a company that purchased hundreds of millions of dollars’ worth of mortgages from Taylor Bean. The bankruptcy trustee is attempting to recover money for Taylor Bean creditors.

Big Four: cut down to size? [FT]
“Accountancy was my life,” ran the old advert. “Until I discovered Smirnoff.” Plenty of auditors could turn to the bottle after they see the reforms Brussels is considering. The changes, according to a draft circulating the European Commission, have caught the industry off guard. Most stunning is the suggestion that the Big Four – PwC, Deloitte, KPMG, and Ernst & Young – should spin off all their non-audit operations. Michel Barnier, internal market commissioner, also plans to mandate joint audits of large companies and make them rotate auditors far more frequently.

Groupon IPO Watch: Groupon Versus the Accounting Blogs [312]
Maybe the deal isn’t on.

Social Security Is a Ponzi Scheme [Grumpy Old Accountants]
From the Grumpies: “The essential feature of the Ponzi scheme, indeed the defining feature, is the payoff of a promised return to an investor class using funds acquired from a later class of investors. This is exactly how social security works. Retirees are paid benefits not from the actual funds that they put into the system (which were “misappropriated” for other government purposes), but rather from funds supplied by current workers. In turn, these current workers presumably will receive social security benefits when social security taxes are contributed by later workers. This works only as long as the government can con future workers (“new investors”) into funding the social security promise. So, yes, social security is a Ponzi scheme.

Obama gets a feel-good moment on jobs package [WaPo]
“My question is would you please raise my taxes?” the man deadpanned, to immediate laughter and applause. “I would like very much to have the country to continue to invest in things like Pell Grants and infrastructure and job-training programs that made it possible for me to get to where I am. And it kills me to see Congress not supporting the expiration of the tax cuts that have been benefiting so many of us for so long. I think that needs to change, and I hope that you will stay strong in doing that.”

Christie Blocks Tax Credit for ‘Jersey Shore’ [NYT]
Mr. Christie said he was “duty-bound” to see that taxpayers were “not footing a $420,000 bill for a project which does nothing more than perpetuate misconceptions about the state and its citizens.”

A Short History of the Income Tax [WSJ]
Whether the “millionaires and billionaires” are actually paying their fair share of taxes is a matter for the electorate to decide. After all, fairness is hardly an objective standard. Before the modern era, however, the federal tax system was manifestly unfair by any reasonable standard, grossly biased in favor of the well off. Ironically, attempting to fix that unfairness is what has brought us to the present moment, with a federal tax system that is grotesquely complex, often arbitrary, and corrupted by mutual back-scratching between members of Congress and influential lobbyists.

SEC Eyes Ratings From S&P [WSJ]
U.S. securities regulators are zeroing in on the use by Standard & Poor’s of fictitious “dummy” assets when it assigned a triple-A credit rating to a $1.6 billion mortgage-bond deal that imploded during the financial crisis, according to a person familiar with the matter. S&P’s parent company, McGraw-Hill Cos., said Monday that it had received a so-called Wells notice from the Securities and Exchange Commission. A Wells notice is the agency’s warning to financial institutions that they could face civil charges. McGraw-Hill said the SEC is weighing civil enforcement action against the firm for its ratings on a collateralized debt obligation called Delphinus CDO 2007-1 issued in July 2007 as the housing market was taking a turn for the worse.

Groupon IPO: Revenue Corrected for ‘Error’ [WSJ]
Now, what Groupon counts as “revenue” is the amount of money it takes in from the daily-deal offers, MINUS the money Groupon shares with merchants. Before, the revenue number included the merchant’s share ony’s revenue figure. “We consistently have stated that the amount we retain—rather than bill or collect—from the sale of Groupons is the key measure of the value we create,” Groupon said in its amended IPO filing. “This change in presentation is consistent with that belief.”

Were Groupon’s and Overstock’s Management and Auditors Stupid or Did They Condone Improper Accounting Practices? [WCF]
Sam Antar: “I believe that the managements of both companies simply chose to avoid following applicable accounting rules and their auditors condoned those practices. Seriously, can they be so stupid? If so, their audits are nothing but window dressing.”

Groupon: Restated Numbers Reveal Failure of Business [Fraud Files Blog]
And Tracy Coenen: “By reporting revenue properly (much smaller revenue numbers!), Groupon’s precarious financial position and operating strategy are exposed. Simply put: The business of Groupon does not work. And I suspect that merchants and consumers are losing interest in the Groupon type of gimmick, which puts even more financial strain on the company.”

EU to propose audit-only firms and mandatory rotation [Accountancy Age]
New European regulation looks set to turn auditing upside down, potentially forcing the biggest firms to choose between audit and non-audit services and ushering in mandatory rotation. A draft of the European Commission’s green paper on audit seen by Accountancy Age indicates a tough line is being pursued by internal markets commissioner Michel Barnier.

Facebook ‘Likes’ Small Business [WSJ]
In a push to gain more small-business users, Facebook Inc. is expected on Monday to reveal plans to launch a new program that includes giving away $10 million of advertising credits. The initiative is being launched in partnership with the U.S. Chamber of Commerce and National Federation of Independent Business, a small-business group. It is intended to educate small businesses on how to promote themselves on the social-networking site, like buying display ads targeted to specific markets, but also through cost-free measures to engage more with customers.

Shutdown looms: Spotlight now on Senate after Boehner wrangled House GOP votes [WaPo]
With time running out, Congress returns Monday to try to pass a short-term funding measure to avert a government shutdown and avoid yet another market-rattling showdown over the federal budget. The Democratic-led Senate, which on Friday blocked a GOP House measure to fund the government through Nov. 18, will vote late Monday on its own version of the bill.

US tax authorities target bank deals [FT]
US tax authorities are targeting cross-border finance deals worth billions of dollars between leading US and UK banks as they step up efforts to clamp down on abusive tax avoidance, a joint investigation by the Financial Times and ProPublica, a non-profit news organisation, has found. Four US banks – BB&T, Bank of New York Mellon, Sovereign (now part of Santander of Spain), and Wells Fargo – are in turn suing the US government over more than $1bn in tax credits that the Internal Revenue Service has disallowed over the past decade. Washington Mutual has settled a similar dispute and Wachovia is pursuing an administrative complaint over a deal. The UK’s Barclays emerges as a pivotal promoter of the complex cross-border deals, which the IRS claims were designed to generate artificial foreign tax credits.

Crocs to Counter Slowdown With New Styles [Bloomberg]
Crocs Inc. (CROX) plans to counter any global slowdown by pushing consumers to shift to new, higher- priced shoe styles from the plastic clogs for which it’s better known, Chief Executive Officer John McCarvel said. “Our whole desire is to go upscale,” McCarvel said in an interview at the World Retail Congress in Berlin today. “This is many years in the making. It has evolved constantly, upgrading the line, trying to stretch the consumer up to 40, 45 euros, pounds or dollars.”

KPMG LLP Names Lynne M. Doughtie Vice Chair – Advisory [KPMG]
Replacing Mark Goodburn who’s now the global head of advisory.