Going Concern

News

Michigan CPAs, Welcome the Newest Member of the Club

Adrienne Gonzalez
June 10, 2011

Since we are totally above making disparaging remarks about strangers on the Internet, we present the following without comment from mlive.com:

Jessica A. Rolfe, of Yeo & Yeo P.C., 3023 Davenport in Saginaw, has received a Certified Public Accountant license and was promoted to senior accountant, providing auditing services in the firm’s Saginaw office.

Rolfe holds a bachelor’s degree from Saginaw Valley State University, and is a member of the Michigan Association of Certified Public Accountants and the American Institute of Certified Public Accountants.

Now the last time we shared one of these cheesy, free publicity “news” items, it also happened to be a Michigan CPA except that guy allegedly passed all four parts in one sitting, which the newspaper told us only happens with a lucky 4% of individuals. We’re not sure where they got that number (we suspect somewhere between their legs, towards the back end of things) but are glad to see no such claims made in this particular announcement.

We’ve said it before and we’ll say it again: if you have an announcement like this to make for the star intern in your life, please feel free to send it to us. We require at least 100 words, fact-checked claims and, of course, a Photoshopped headshot. Might I suggest Glamor Shots?

Thanks to the IRS, Republican Presidential Candidate Herman Cain Only Made Enough Money to ‘Buy New Golf Clubs and Move to Atlanta’

Caleb Newquist
June 9, 2011

Soon-to-be failed Presidential candidate Herman Cain is best known for being the former CEO of Godfather’s Pizza. When he took the job in 1986, the Journal reports “Mr. Cain cut costs and closed unprofitable locations and said that he returned the business to profitability in just 14 months.” An impressive feat to be sure and he continued to sling pie as the CEO until 1996 when he presumably figured he could cash in nicely.

Unfortch for Cain things didn’t really work out. And whose fault would that be? The IRS, of course!

Mr. Cain said that in 1996 he struck a deal to sell his stake in Godfather’s to his partners. That’s when the IRS showed up and commenced an audit of his tax return for the year 1994, coincidentally the year he publicly challenged President Clinton on the impact of his health-care reform plan. Simultaneous audits of Godfather’s and Mr. Cain’s partners were quickly concluded, but Mr. Cain said that the audit of his personal finances dragged on until 1999.

When he finally concluded the sale of his Godfather’s stake, Mr. Cain said that its value had fallen by 75% and yielded only enough money for him to “buy new golf clubs and move to Atlanta.” As for the IRS, they claimed he owed $1.8 million in back taxes, but he said that as soon as he appealed this decision, they immediately dropped the claim and asked only for $40,000 to cover interest on “the money I didn’t owe.” Outraged, he nevertheless paid the bill to resolve the matter. He said that such treatment at the hands of the IRS happens all the time.

Godfather vs. Tax Man [WSJ]

Technology

Do Regional Firm Accountants Have Better Excel Skills Than Their Big 4 Counterparts?

GoingConcern
June 9, 2011

The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight — everything you need to help you prosper and enjoy the accounting profession.

I was having a discussion with a colleague concerning the Excel skills in industry versus public accounting. We agreed that, generally speaking and based on surveys of class participants in our respective Excel CPE classes, industry users are more advanced than public accounting users. Within public accounting, regional firm users are more advanced than local and Big 4 users. Why is that?

We had one computer for about 150 professional staff when I started out in Big 8 public accounting oh so long ago. Back then we were the cutting edge in spreadsheet use. We were consulting with our clients on how to use Visicalc to increase productivity and reduce errors. So how did the Big 4 apparently slide to the bottom of the scale?

Theory number one holds that the Big 4 does all their training from within. They take someone who has perceived advanced skills, and use that person to teach everyone else what they know. The problem is that the in-house trainer may not know some of the advanced features in Excel that would be useful to the group. The trainer may only know slightly more than everyone else. My own experience with selling Excel to a Big 4 firm is that they feel it would be nice to know more about Excel, but it’s not imperative to the job. Rather it is better to focus CPE resources on IFRS or the latest tax code changes.

Theory number two says that associates in the Big 4 are focused in on their in-house proprietary audit software which doesn’t allow incorporating new ideas into the audit process like pivot tables or form control objects. Stick to the audit program because there is no room in the budget to experiment with Excel.

Now that I’m done ragging on the Excel skill level in the Big 4 remember I said at the beginning of the post “generally speaking” and I know there are excellent Excel users in the Big 4. I just haven’t met them yet.

Grant Thornton

Weikang Bio-Technology Felt Compelled to Issue a Press Release Announcing that Grant Thornton Successfully Verified Their Cash Balances with Bank Statements

Caleb Newquist
June 9, 2011

Chinese companies certainly have had their share of problems with financial reporting in the U.S. but I had no idea that it would come to this.

The Audit Committee of the Board of Directors of Weikang Bio-Technology Group Co., Inc. (OTC Markets: WKBT.PK – News) (“WKBT,” “Weikang” or the “Company”), a leading developer, manufacturer and marketer of Traditional Chinese Medicine (TCM), Western prescription and OTC pharmaceuticals and other health and nutritional products in the People’s Republic of China, today announced that Grant Thornton (“GT”), one of the world’s leading organizations of independently owned and managed accounting and consulting firms, has verified that the cash amounts listed on the Company’s SEC filings for 2010 and the first quarter of 2011 are consistent with account statements obtained from WKBT’s banks directly by GT.

“Given the recent change in auditors and my new chairmanship of the WKBT Audit Committee, we authorized the Grant Thornton review to take place last week, and are now releasing the results,” said Jeffery Chuang, independent director and Chairman of the Audit Committee of WKBT. “Weikang continues to advance as a U.S. publicly-traded company and we are committed to high standards in the thoroughness of our financial information,” said Mr. Chuang, a U.S. CPA who is based in Southern California.

Obviously this is completely harmless compared to, say, threatening to take auditors hostage but as far as giant wastes of time go, it’s right near the top.

Another KPMG Client Gets ID’d in a PCAOB Inspection Report

Caleb Newquist
June 9, 2011

Back in March, Bloomberg’s Jonathan Weil called attention to a PCAOB report that was pretty harsh on KPMG-Bermuda’s audit of Alterra Capital Holdings. At the time he wrote the column, KPMG, the PCAOB and Alterra weren’t talking but then Alterra filed a 8-K admitting that they were the filer in question.

Today Weil lets the cat out of the bag again and yes it’s another KPMG client, Motorola:lockquote>Four years ago, inspectors for the auditing industry’s chief watchdog discovered that KPMG LLP had let Motorola Inc. record revenue during the third quarter of 2006 from a transaction with Qualcomm Inc. (QCOM), even though the final contract wasn’t signed until the early hours of the fourth quarter. That’s no small technicality. Without the deal, Motorola would have missed its third-quarter earnings target.

The regulator, the Public Company Accounting Oversight Board, later criticized KPMG for letting Motorola book the revenue when it did. Although KPMG had discussed the transaction’s timing with both Motorola and Qualcomm, the board said the firm “failed to obtain persuasive evidence of an arrangement for revenue-recognition purposes in the third quarter.” In other words, KPMG had no good reason to believe the deal shouldn’t have been recorded in the fourth quarter.

This may sound familiar to some of you that read PCAOB Chairman James Doty’s speech from last week when he said this:

PCAOB inspectors found at one large firm that an engagement team was aware that a significant contract was not signed until the early hours of the fourth quarter. Nevertheless, the audit partner allowed the company to book the transaction in the third quarter, which allowed the company to meet its earnings target. Although the firm discussed the timing of the transaction with the customer, it failed to obtain persuasive evidence of an arrangement for revenue recognition purposes in the third quarter. The company had been an audit client of the firm for close to 50 years.

Weil writes, “KPMG has been Motorola’s auditor since 1959; it had been Motorola’s auditor for 47 years at the time of the Qualcomm deal.” So, yeah. How did he piece this one together? Elementary, my dear auditors:

Motorola’s identity was disclosed in public records last month as part of a class-action shareholder lawsuit against the company in a federal district court in Chicago. The plaintiffs in the case, led by the Macomb County Employees’ Retirement System in Michigan, filed a transcript of a September 2010 deposition of a KPMG auditor, David Pratt, who testified that Issuer C was Motorola. KPMG isn’t a defendant in the lawsuit.

Pratt also identified the Motorola customers cited in the board’s inspection report. It’s his deposition that allows me to describe the report’s findings using real names.

The oversight board said a significant portion of the company’s earnings for the 2006 third quarter came from two licensing agreements that were recorded during the last three days of the quarter. One was the Qualcomm deal that wasn’t signed until the fourth quarter. The board also cited other deficiencies in KPMG’s review of Motorola’s accounting for the transactions.

As is their wont, KPMG isn’t talking. Motorola isn’t talking (but maybe there’s another 8-K in our future?). The PCAOB, bound by the law -which, some say, is debatable – isn’t talking. My guess is that Jon Weil will continue to talk…er…write columns shining the lights on shoddy audits until the Board breaks its silence.

Dirty Secrets Fester in 50-Year Relationships [Jonathan Weil/Bloomberg]

News

UK Whitepaper Seeks to Reconcile Mother Nature’s Books

Adrienne Gonzalez
June 9, 2011

When do you recognize maple syrup, when it is earned (sucked from the tree) or realized (when it goes down your big fat gap)? How much goodwill does a forest have?

The UK Department for Environment, Food and Rural Affairs has published its first white paper on the natural environment in 20 years hoping to answer some of these questions. The natural choice: securing the value of nature suggests the UK should set up an independent Natural Capital Committee (sort of like FASB for forests) to advise the government on when, where and how natural assets are being used unsustainably.

This would create “green accounts” which give an idea how the country’s natural assets are being used.

The authors of the paper suggest that economic growth and the natural environment are mutually compatible, implying that “nature’s bank balance” should not be ignored when looking at the country’s overall economic growth.

“Past action has often taken place on too small a scale. We want to promote an ambitious, integrated approach, creating a resilient ecological network across England. We will move from net biodiversity loss to net gain, by supporting healthy, well-functioning ecosystems and coherent ecological networks. We will publish a new Biodiversity Strategy for England, responding to our international commitments and setting a new direction for policy over the next decade,” the paper says, proving that someone obviously read their accounting textbooks before they tried to write a framework for valuing nature’s assets.

[Insert bad money doesn’t grow on trees joke here]

Accounting News Roundup: Audit Fees Whimper; Nonprofits No Longer; California Tax Plan Whiffs with Voters | 06.09.11

Caleb Newquist
June 9, 2011

Corporate Audit Fees Barely Budged Last Year [CFO Journal]
Public companies paid $3.3 million on average for their audit in 2010, up just 2% from 2009, according to an annual survey from Financial Executives Research Foundation on Thursday. Private companies paid their auditors an average of $222,300, which was in line with 2009 figures. Public company audit fees had actually fallen about 2.4% in 2009, according to FERF’s survey last year, so this puts them back near their 2008 levels.

I.R.S. Ends Exemptions For 275,000 Nonprofits [NYT]
The I.R.S. announced on Wednesday that it had revoked the tax exemptions of 275,000 nonprofit organizations after they did not meet legal requirements to file annual tax forms. The action shrinks the nation’s growing nonprofit sector by roughly 17 percent, to about 1.3 million charities, trade associations, membership groups and labor unions.

Dallas’s Secret Weapon: High Fives [WSJ]
Yeah, that’s what it is.

California Voters Balk at Tax Plan [WSJ]
A deadline next week is raising the pressure on talks between Gov. Jerry Brown and lawmakers over his plan to close the state’s $9.6 billion budget gap, but the proposal isn’t gaining traction with voters. The Democratic governor pushed lawmakers for months to approve his plan to ask voters to extend some tax increases in a June special election, in line with his campaign promise to seek voter approval of any tax measure. But they didn’t strike a deal in time, so he now wants them to approve the taxes and later ask voters to ratify them.

That Look, That Weiner-Spitzer-Clinton Look [City Room/NYT]
If caught in a sex scandal, this is the face you’ll make.

Engineering Consultant Lands a Big 4 Gig, Now What?

Daniel Braddock
June 9, 2011

Ed. note: Have a question for the career advice brain trust? Email us at advice@goingconcern.com.

Going Concern received not one but two emails from a contributor in recent weeks. Aptly named Enginerd, P.E., this fine gentleman had hopes of joying a Big 4 firm with Enginerd’s background is as follows:

I come from a technical background, 8-10yrs of consulting in engineering and regulatory roles, and am being courted by a B4 to join up with a technically minded advisory/consulting group. You may not know, but engineers are a forgotten bunch earning far less than many of our other professionally degreed brothers. I’m anticipating a very healthy offer, but I don’t have much to base it on; Bologna is better than SPAM, but that isn’t saying much.

For the doubters out there – yes, the Big 4 occasionally hires engineering experts in niche markets when expanding their advisory practices. These experts may work with Transaction Services teams in markets heavy with M&A activity (think technology, energy, environment, etc.). Even at that, they don’t hire C.A.D. experts but rather individuals with previous consulting experience, like Enginerd.

Admittedly, Enginerd’s original email sat unanswered in the advice box [Ed. note: you should see the backlog!]. He recently followed up with positive news:

No response from y’all, but I did get a response from B4. They made me an offer I couldn’t refuse.

So the last questions still hold, Any thoughts on breaking into B4 consulting (done), not getting lost when you get there, and behaviors which will help make my stay a long and profitable one? I’m listed at about 85% billable, which isn’t bad, but is still a lot of hours. Short of rereading How to Win Friends and Influence Others, what is my Modus operandi?

Thanks,

Enginerd, P.E.

Dear Enginerd,

Unfortunately, I don’t have a lot of direct advice for you as I do not work regularly with employees in your position. That said, I suggest continuing to do what made you successful up to this point:

1. Network every day of your early career. Meet with the group leaders not only in your office, but in other offices as well (as it applies). Have a regional/national meeting coming up? Make plans to connect with your peers in other offices. Connecting faces with email addresses is extremely important as your responsibilities inevitably expand.

2. Find a mentor. Chances are you are not the only person in your group/office that has a background similar to your own. Feel the group out over the first few months, evaluating who you feel stands above the rest. Find someone with a background similar to yours (and senior to you in ranking) that has a strong future with the firm, and build a professional relationship with them. You shouldn’t hesitate in asking him/her to be a mentor for you. Generally speaking, people are flattered by such a request and can become excellent resources for you down the road.

3. Read advice from the Going Concern peanut gallery. I’m sure there are people with similar backgrounds to yours that are regular readers here on the site. With that said, I open it up to the group – what advice do you have for Enginerd as he joins the Big 4 consulting circus?

News

Presidential Candidate Tim Pawlenty Doesn’t Want to Bore You with the Gory Details About How He’ll Pay for His Proposed Tax Cuts

Caleb Newquist
June 9, 2011

Former Minnesota Governor Tim Pawlenty wants to cut taxes. He’s a Republican after all and Grover Norquist probably has lewd photos and several sternly-worded letters waiting in the wings should TP give the impression that he’ll do anything but slash rates.

Pawlenty’s plan calls for two rates, 10% for on the first $50k/$100k (single, married) earned and 25% for anything above that. He’s also proposing a flat 15% corporate tax rate. He would eliminate the capital gains, dividends, interest and estate taxes.

Pretty expensive proposition so it’s got to be paid for, right? Pawlenty’s got a plan for that too:

To pay for the tax cuts, Pawlenty said he would eliminate unspecified tax loopholes and subsidies. “The Tax Code is littered with special interest handouts, carve-outs, subsidies and loopholes,” he said. “That should be eliminated.”

This is one of those instances where a reporter may ask the follow-up question, “Governor, which tax credits would you eliminate?” To which Pawlenty answers, “Yes.”

[via AT]

Deloitte

What Do We Make of the Headcount in Deloitte’s Los Angeles Office?

Caleb Newquist
June 8, 2011

Our tipster had this to say, “No wonder they are getting rid of PSW [Ed. note: he/she is referring to this], there are more partners than junior staff! Where the hell is the leverage model? This is beyond completely ridiculous.”

Posted on the Green Dot’s internal interwebs:

Did you know?

The Los Angeles office represents 55% of the PSW region in terms of headcount:

Los Angeles Headcount

Partners, Principals, and Directors 195

Sr. Managers and Managers 407

Senior/Senior Consultants 304

Staff Consultants 188

Junior Staff/Analysts 141

Client Service, Admin, and Other Support 271

TOTAL 1506

Los Angeles	Headcount
Partners, Principals, and Directors	195
Sr. Managers and Managers	407
Senior/Senior Consultants	304
Staff Consultants	188
Junior Staff/Analysts	141
Client Service, Admin, and Other Support	271
TOTAL	1506

Technically, the combination of “Staff Consultants” and “Junior Staff” exceeds the PPD number although that but that puts the ratio of 1.69 staff for every PPD. I’m no expert but that could be considered low. It’s safe to say there are a few big engagements in L.A. that demand more than 1.69 staff people which probably leaves the small jobs shorthanded. Anyone in Deloitte L.A. (or anywhere else for that matter) feeling the pain because of this? Let us know in the comments.

Doug Shulman: Cutting the IRS Budget Will Do Nothing to Help the Deficit

Caleb Newquist
June 8, 2011

“Cuts such as those in the House budget resolution would actually increase the deficit by decreasing revenue,” IRS Commissioner Douglas Shulman said to the Senate Appropriations Subcommittee on Financial Services and General Government.

He said the House proposal would cut $2 billion from the agency’s budget next fiscal year. “Cuts of this magnitude would be substantial and affect all of IRS operations,” from answering taxpayers’ questions on the phone to being able to conduct audits, he said. Shulman said that for every dollar invested in the IRS, the agency collects roughly $200 in revenue. [Dow Jones]

BDO Rewarding Employees for Tattling on Headhunters with $5 Starbucks Cards

Caleb Newquist
June 8, 2011

For whatever reason, we don’t hear a lot of gossip out of BDO. Perhaps it’s because the entire firm is too captivated by the most interesting accounting firm CEO in the world, Jack Weisbaum, and are rendered loyal to a fault, thus choosing not to share the more sordid details of what happens inside B to the D tortunate because we hear rumors that there are slew of partners who are not pleased with how things are going at firm but no one seems to want to talk. I’d encourage someone to speak up by emailing us.

But for now, we’ll take the opportunity to tell you about the efforts put forth by some inside the firm that were sensitive to the post-busy season onslaught of professional recruiters. As we all know, after people have worked their asses off for three to four months, some might feel unappreciated and opt to look for a new job. Recruiters are acutely aware of this and since it’s their job to fill positions for their clients, it only makes sense that they chase people that are looking for a change. And because professional recruiting is a competitive business, sometimes the emails can clog your inbox like offers for ED drugs. Some partners at BDO thought that in order to help people stave off this bumrush, they would invite employees to simply forward the emails and voicemails received and voilà! $5 of Starbucks burning in your pocket. Oh, and did I mention that there’s no limit for how many you submit? So if you’re a hot piece of public accounting talent, getting tons of calls, you can really clean up. Not only that, the person that submitted the most unique names of headhunters and agencies would receive a $250 AMEX gift card. Yes. Sound petty? Sound pathetic? Sound desperate? Read for yourself and decide.

I split up original screenshot sent to me so that it would be easier to read, hence the narrow break.

So you might expect such an attempt to bribe employees with corporate caffeination would fall flat. That tipping off firm leadership about PEOPLE THAT ARE SIMPLY DOING THEIR JOBS (and maybe change a few professional careers for the positive) would fall on deaf ears. Well, you would be wrong. DEAD WRONG. A follow-up on the firm’s internal website (next page) stated that over 200 submissions were made and one SA in Spokane submitted 15 alone.

That’s right, the effort was so successful that they are extending it through July 8th. Not really knowing what the protocols are, I don’t know what to tell the recruiters to expect in terms of retaliation from the TPTB at BDO but at least you’ll know that if you receive some kind of nasty correspondence, the person who gave you up was baited with the siren’s call that is the white and green coffee cup.

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