Going Concern

News

What Are the IASB and FASB Smoking?

Caleb Newquist
April 21, 2011

[T]he tediously-reported proclamation of real convergence commitment has never been more than a smokescreen behind which the divergent interests of the Americans and the Europeans have knocked heads to the point of insensibility. (For which, recall the continued fudging of the SEC as to whether, if ever, that agency is even going to confirm a date certain on which to decide if to weigh in or not […].) Why no-one has called the question on this endless charade reflects the two-level fantasy in the dialog: the IASB and the FASB both pretend to believe in the desirability of fully-converged accounting standards, and the community of financial statement issuers and users pretend to believe them. [Re:Balance]

News

Public Accounting Exodus Watch 2011 (Poll)

Caleb Newquist
April 20, 2011

Earlier I attempted to give a BDO senior manager some perspective on the how to deliver the news that he was jumping ship. Oddly enough, a friend of GC also sent us this message yesterday:

Since this ‘Tis the Season’ for attrition, it would be interesting to see a survey on who is looking for employment beyond their current employ.

So since we like to get a feel for such things, we’re putting on a little poll to see how many people are grabbing life preservers. Vote in the poll after the jump and discuss the particulars in the comments.

Online Surveys & Market Research

What Is the Most Difficult Sentence to Understand in the Tax Code?

Caleb Newquist
April 20, 2011

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The IRC is probably the last thing many of you want to think about right now but, yes, I’m going there.

David Foster Wallace’s posthumous novel, “The Pale King“, is set in an IRS office in Peoria, Illinois and you’ll be shocked – SHOCKED! – to learn that the protagonist is fighting extreme boredom at his job. Wallace did extensive research prior to writing his final book including taking accounting classes at Illinois State University and carrying on “lively correspondence with tax lawyers and C.P.A.’s, peppering them with questions about the Tax Reform Act of 1986, compliance studies, I.R.S. office furniture, and an exotic tax shelter called ‘the Silver Butterfly,'” the Times reports.

One of the accountants Wallace corresponded with was Stephen Lacy who wrote this about Section 509(a):

“[L]egendary as the most difficult sentence to understand in the tax code,” adding: “I find that although I can never quite understand what it says, after I read it several times and concentrate, I can actually get into a kind of weird Zen-type meditation high! (Then again sometimes it provokes a profound anxiety attack.)”

“Legendary,” not only because its Mr Lacy’s drug of choice, but because Ronald Reagan quoted this passage back in June of 1986 when he set forth on his divine mission of reforming the tax code. A mission he ultimately achieved and thereby canonizing himself in the hearts and minds of many (can’t you picture the shrine in Grover Norquist’s house?). Anyhoo, here it is, in all its glory:

For purposes of Paragraph (3), an organization described in Paragraph (2) shall be deemed to include an organization described in Section 501(c) (4), (5), or (6) which would be described in Paragraph (2) if it were an organization described in Section 509(a)(3)

Not exactly Stieg Larsson is it? Anyway, if any portion of the code is still haunting your dreams and you feel as though it tops 509(a), you’re invited to exorcise it out now and your conscience will finally be clear.

David Foster Wallace and the Literary Tax Accountant [NYT]

BDO Senior Manager Wants to Know How Best to Say ‘I Quit’

Caleb Newquist
April 20, 2011

Welcome to the High Holiday edition of Accounting Career Emergencies. In today’s edition, a senior manager at BDO is ready to give notice but can’t decide if it’s best to keep things professional or to go out with a verbal assault the likes of which George Costanza has never seen.

Are you working in the Twilight Zone? Need some good ideas for celebrating the end of busy season? Feeling jealous about the sexy success<l us at advice@goingconcern.com and we’ll get you over your accountants-in-love envy.

Back to kicking off The Public Accounting Attrition Tour of 2011:

Going Concern,

I am still knee deep in busy season, with many engagements still open and pushing their April 30th deadlines. There is no real end in sight, since May and June look equally as busy with Q’s, EBP’s, 9/30 year ends and other projects the Partners engage us for that further contribute to my maxed out PTO accrual. So naturally, as most people do this time of year, I have been looking for open positions searching for that golden opportunity to finally break free of the social, physical and health suppression known as public accounting. That being said, is it wrong to lay down at night and dream of what you would say when giving your notice?

I have played out hundreds of scenarios in my head saying everything from the absolute extreme to the overly conservative. That makes me think – what is the best way to “leave” a public accounting firm? During my 11 year career, I have seen all kinds of people leave in a ball of fire, rather than just fade away. Those people think that the firm will collapse without them, or their leaving will cause a mass exodus or significant change to the firm. No way. It never happens. So really, what is the point of telling the Partners (and HR in the exit conference), what you really feel in your heart?

Dear Dreaming of Quitting,

There’s nothing at all wrong with dreaming of the most epic march in ever. I assume you’re referring to something similar to this:

As you mention, people who go out with a furious speech that features wild hand gestures and name-calling are typically those who think they are indispensable or are somehow the catalyst to the collapse of their firm. You’re right to say that this is NEVER the case. A team or an office may go through a rough patch (mileage of rough patch may vary) but eventually things calm down and return to relative normalcy.

So to answer your second question – the best way to leave your firm is: quietly. That doesn’t mean you don’t tell your colleagues, friends or others that you’re leaving (most probably know that you’re looking to leave anyway) but it should be a drama-free encounter. You meet with the appropriate people, tell them that your last day will be X and that should be it. If they pry about why you’re leaving or attempt to convince you otherwise, you can respectfully decline or entertain their queries and/or begging. That’s up to you. Even if you’ve been used and abused throughout the time at your firm, would it really make you feel better to tell that a partner that the experience of working with them was akin to a circle of Dante’s Inferno that he dared not scribe?

As for the motive behind these overtly dramatic “I quit!” speeches, I get the feeling that those who feel compelled to give them think they will get some satisfaction out of telling someone exactly how they feel; that giving everyone who deserves a piece of their mind will somehow make everything negative that happened in the past worth it. If you feel like expressing some honesty about your experience, that’s perfectly okay but for crissakes, have some tact. If you simply feel justified to spew verbal excrement, that only makes you look like a lunatic. A very unprofessional lunatic.

Technology

Robert Half Offers New Rules for the Digital Age

Adrienne Gonzalez
April 20, 2011

Some business etiquette rules in this day and age are common sense (which we hope most of you have at least a little of): tweet as if your boss is watching, don’t threaten to stab your senior on Facebook (especially if said senior is in your friends list), and don’t leave a miserable trail of bad behavior behind on your company laptop when you leave the company.

For everything else that isn’t so clear, Robert Half offers Business Etiquette: The New Rules in a Digital Age, tips and tricks for polishing up your online persona. Here are a few sticky etiquette questions and answers to whet your palate:

Can Facebook postings hurt my job search?

A good rule of thumb is to always post prudently: If you don’t want your employer to see it, get rid of it. A recent survey by our firm revealed that 44 percent of executives review the Facebook presence of potential hires. Even if your account is just for fun, keep it in check. To put your Facebook on a privacy lockdown, click on the drop-down “Account” menu in the top right corner and select “Privacy Settings.” Keep in mind that Facebook may change its privacy features at any time, and you might not be aware of the changes when they occur. Always assume that anything you post online may become public.

Should I friend my boss or coworkers?

This is the $64,000 question, and the feelings of those on the receiving end may provide the answer. (See “Thinking About ‘Friending’ Your Boss on Facebook?” on Page 10 of Business Etiquette: The New Rules in a Digital Age.) If you do connect, utilize privacy settings and different friend lists to control how — and with whom — you share content. Be sensitive to your professional environment: some industries or companies are much more engaged in digital networking than others. If you’re starting a new job, take your cue from others before sending out “friend” requests to your new colleagues.

How responsive should I be to e-mail when I’m on vacation?

It depends on whether you want to have a real vacation. If your “Out of Office” says you’re not checking e-mail on vacation, don’t check and respond to messages. Doing so changes expectations and implies you’re more accessible than you said you’d be. Instead, be considerate to others’ needs while you are out and list a back-up contact in your Out of Office auto response.

We especially like that last one. Remember, being professional isn’t the same as being a bitch, and you are allowed to set reasonable boundaries without giving your partners a stroke while they fume over those damn incorrigible Gen Y kids taking over the office. And if anyone tells you differently, you send them our way and we’ll set them straight.

You can download Business Etiquette: The New Rules in a Digital Age via Robert Half.

Accounting News Roundup: Ex-Taylor Bean Chairman Found Guilty; Did Auditors Miss Fraud at Lloyds, RBS?; Tax Prep in the Classroom | 04.20.11

Caleb Newquist
April 20, 2011

Ex-Taylor Bean Chairman Farkas Found Guilty on All 14 Counts in Fraud Case [Bloomberg]
Lee Farkas, the ex-chairman of Taylor, Bean & Whitaker Mortgage Corp., was found guilty of 14 counts of conspiracy and bank, wire ann what prosecutors said was a $3 billion scheme involving fake mortgage assets. A federal jury in Alexandria, Virginia, yesterday returned the verdict after one day of deliberations. Farkas, who was free during the trial, was taken into custody. He faces a maximum sentence of 30 years on the conspiracy and bank-fraud charges and 20 years or more on the wire-fraud and securities-fraud counts when he’s sentenced on July 1.

Auditors ‘could have missed fraud’ at Lloyds and RBS [Accountancy Age]
Auditors might not have picked up on financial mismanagement at Lloyds and RBS, so great was the confusion surrounding the banks’ assets in 2008. So concluded the Public Accounts Committee, which today called it “alarming” that neither lender was able prove their assets were not linked to fraud or criminality when they entered the Treasury’s Asset Protection Scheme in January 2009.

Yahoo CFO Says ‘Investments Starting To Pay Off’ [Dow Jones]
Yahoo Inc.’s (YHOO) first quarter-results show that investments the Internet giant has been making are “starting to pay off,” Chief Financial Officer Tim Morse said Tuesday. In an interview with Dow Jones Newswires, Morse noted that Yahoo beat the midpoint of its revenue guidance and topped analysts’ earnings-per-share forecasts by 1 cent. He also noted that that number of users of Yahoo’s branded properties was up 15% over last year and the minutes they spent on the sites rose 17%.

Facebook Seeking Friends in Beltway [WSJ]
Facebook is still trying to find a path to Washington, where the company has only a fledgling lobbying operation, even though it finds its privacy policies under increasing scrutiny and is trying to navigate a politically sensitive expansion into China. In seven years, Facebook has risen from a tiny start-up to an Internet power with a potential market value estimated at more than $50 billion. Now an online forum with more than 600 million users, Facebook faces growing pressure from lawmakers and regulators concerned about the way it uses personal information shared by its users.

State launches probe into campaign to provide superhero capes to jobless [Orlando Sentinel]
Dubbed the “Cape-A-Bility Challenge,” a $73,000 public-relations campaign by Workforce Central Florida features a cartoon character named “Dr. Evil Unemployment” and includes handing out about 6,000 red superhero capes to jobless Central Floridians. The campaign, revealed Saturday in a report in the Orlando Sentinel, was met with derision by many unemployed who questioned spending more than $14,200 on capes and $2,300 on foam cutouts of “Dr. Evil Unemployment.” They said the campaign’s tone risked minimizing the severity of the region’s labor problems.

Subotnik: Why All Students in the Basic Tax Course Should Prepare a Return [TaxProf Blog]
Novel idea.

What Not to Say in a Job Interview [FINS]
Job interviews should not be therapy sessions.

News

‘Single, Fat Accountant’ Struggling with Royal Couple Envy

Caleb Newquist
April 20, 2011

Once again, we call attention to troubles from across the Pond, courtesy of AccountingWEB UK.

This time, the Single Fat Accountant is dealing with his uncontrollable jealousy over Kate and Willy’s upcoming nuptials:

I would like to publicly admit that I am jealous of the about to be married Royal couple. I do not want to know anything about them. I would prefer if there a total media blackout on the whole wedding. This to my big disappointment will not happen. As the time is getting nearer for the big day, the media has gone frenzy over the upcoming nuptials.

I know I should be a decent human being and wish them all the very best for the future like most of the very class conscious Britain. l cannot lie and pretend to join in the well wishes. I know this does makes me a mean and a horrible person.

Isn’t saying disparaging things about the Royal punishable by death in Britain? Or something? Well, single fat accountant it’s cool because most of us here in the States (accountants or not) don’t give a flying rat’s ass about Kate and Willy. Are they a good-looking couple? Sure. Do they enjoy wealth and social status that most people would kill for? Obviously. Will their marriage crash and burn in an ugly affair that results in another Royal Family scandal that will result tabloid fodder for years to come? We give it a 50/50 shot. The point is – why are you jealous? It doesn’t make any sense. Are you not capable of not clicking on their pictures or stories with their names in the headline? You’re wasting your precious utilization, friend. Get back to your spreadsheets.

Can you guys help cheer our friend up? Tell him everything is cool despite his lack of bloodline, wealth and hot fiancée.

Latest Poll Suggests That Most People Think Paul Ryan’s Deficit Reduction Plan Is a Lousy Idea

Caleb Newquist
April 19, 2011

[A McClatchy-Marist] poll reported that roughly two out of three registered voters — 64 percent — would be in favor of increasing taxes on annual income over $250,000. President Obama reiterated in his deficit-reduction speech last week that he favored allowing taxes to rise on families in that income level. Independents favored that plan of action at roughly the same percentage as the country at large, with more than eight in 10 Democrats also behind the idea. A majority of Republicans, 54 percent, opposed it. The poll was conducted both before and after Obama’s Wednesday speech, with support for higher taxes on wealthier Americans picking up afterward. Meanwhile, fully four in five registered voters oppose cutting Medicare and Medicaid. The House GOP’s fiscal 2012 budget, largely crafted by Rep. Paul Ryan (R-Wis.), makes fundamental long-term changes to both health entitlement programs, converting Medicaid into a block grant and turning Medicare into a type of voucher system. [The Hill, Earlier]

News

How Are You Celebrating the End of Busy Season?

Caleb Newquist
April 19, 2011

I’ll tell you how I’m celebrating – continuing my successful string of years not celebrating. Adrienne? She’s experimenting with home remedies for a stomach flu. But never mind our problems, you guys have somehow survived the January to April stretch without going nuts, assaulting someone and successfully avoiding awkward sexual advances (the latter two sometimes happening at the same time). That means you deserve to celebrate; whether or not that’s on company dime is another question.

Back in the KPMG days, I attended a pretty good throw-down at the Central Park Boathouse for the Financial Services group but that was in the spring of 2008 when the Bear Stearns embers were still hot and everyone who worked on the Citi still thought they worked for a great client (that’s what I was told, anyway). In 2009, end of busy season soirees were a much more muted with individual team celebrations because the world had basically just ended.

Last spring it sounded like it was more of the same. Nothing too out of control and individual teams were left to celebrate how they saw fit. Of course with a successful fiscal 2010 and fiscal 2011 looking good, firms may be ready to jump into the ostentatious end of busy season blowout parties once again. Maybe your partner(s) is/are taking you to Peter Luger’s; maybe it’s an intimate evening at the his/her home where some entertainment will be provided (hopefully from inside the firm). Or maybe it will just a drinks and awkwardly dancing the night away. We can’t possibly know since we don’t get invited to such things (at least officially), so discuss your plans, send us your invites or come up with your own ideas about how to best celebrate getting your life back.

Why Is Utilization Such a Big Deal at Public Accounting Firms?

Caleb Newquist
April 19, 2011

As it’s only been a few days since we learned about the death of Pan Jie, the PwC auditor who died in Shanghai, many people are questioning everything, from high pressure culture within the Big 4 to this most recent contribution from the mail bag wanting to know why utilization is such a BFD:

Hey Caleb,

Been reading all the comments on the Shanghai PDub girl perhaps overworking to death, and everyone seem to have the same opinion on the same thing: overworking, but undercharging. And, this topic of utilization has really been troubling me since the first day I joined public accounting. So can someone care to explain why utilization is such big deal at the Big 4s??

I really don’t get it. Because ultimately, in my opinion it is purely a [key performance indicator] that is on paper, and is not a real depicting of a company’s financial performance. From when I last checked, the concept of OT pay is no longer applicable. So it’s not like by charging more hours, the firms are not paying me more and thus impacting their bottom line. Of course, if I need to bring on more people to the team to complete the audit, it may impact the bottom line for that engagement. And, also maybe there are the out-of-pocket expenses that you need to consider for employees beyond 8 hours. But I am sure [out-of-pocket expenses] during busy season will not break for audit budget. But besides that, everything is pretty much fixed, from the audit fee, staff’s salaries, expenses, etc. So I really don’t get this utilization game that management is playing.

Is my mind too simple, or can someone explain it to me?

Here’s my take on utilization – it partially factors into how firms determine if they’re getting their money’s worth out of employees. Say you’ve got two employees that are effectively the same (hours, performance, etc.) except one takes all five weeks of their PTO while the other doesn’t take any PTO. The difference of two hundred hours – on paper – shows that one employee is one creating 200 additional hours of value for the firm versus their co-worker who does not. If both of these individuals met their utilization goals for the year, then there’s really no issue. But if the five weeks of PTO taken by the first employee causes them to fall short, a friendly HR professional or performance counselor will have an easy decision as who should be crowned a top performer at evaluation time. Regardless of firms saying “we want you to take vacation” they want you to meet utilization goals first.

As for budgeting, depending on the engagement you may have wiggle room and you may not. If you’re serving a small client, regular late-night dinners could easily blow the budget and zap the realization, especially if you’re billing all the hours you’re working. So if you’re trying to make utilization goals but have a tight budget, you may have to cave on either charging all the hours or starving to death. Not an easy choice and is one reason why serving small clients can be a double-edged sword.

So essentially I agree with you, utilization is primarily a performance indicator and not much else. It simplifies the ability to determine someone’s value on paper. Low utilization indicates that you suck at your job or no one likes you. High utilization means you’re a workhorse and a team player. When it comes to cutting the weakest link, the decision is pretty easy. I admit that I’m far removed from the latest trends in determine valuable employees so veterans of the utilization game and people in the know are invited to chime in with theories on utilization and its usefulness (or lack thereof).

CPA Exam

Everything You Thought You Knew About How the CPA Exam is Scored is Wrong

Adrienne Gonzalez
April 19, 2011

I’m 97% sure most CPA exam candidates are confused by the CPA exam’s psychometric scoring, either because it is supposed to be that way or they haven’t done their research. Either way, I once again got the chance to speak with John Mattar, Ed.D., Director of Psychometrics and Research and Mike Decker, Director of Operations and Development, both of the AICPA’s examinations unit. This time we focused on how the CPA exam is scored. Remember that most of this information is already available on the AICPA’s website, check out How the CPA Exam is Scored and the Psychometrics and Scoring section for more detailed, less sarcastic information than what you might find here. That being said, we appreciate John and Mike taking time to humor us anyway.

Of course, no discussion about how the exam is scored would be complete without rehashing last quarter’s somewhat tardy score release issue. John and Mike compared it to buying a new car but driving home in your old car, meaning scoring is going to be a broke down Toyota Tercel for just two more quarters but if you all can be patient, you’ll be spinning around town in that shiny new Lexus by December. “We’re doing everything we can to administer a quality exam, including communicating with candidates,” Mike told us. They also let us know that they will be using NASBA to push out timely information to candidates in the quarters ahead. See? Told you they were listening to candidates’ scoring concerns.

When talking about how the CPA exam is scored, it’s important to remember that candidates take different but equivalent exams. “It’s not possible to say what each testlet is worth because everyone is taking different exams,” said John. That being said, we did manage to get them to tell us that, contrary to popular belief, candidates are not compared to each other when they are scored. How do we know? While we still don’t know how many points each question is worth, John told us “we can say with 100% assurance if two different candidates get the same question, they will both get the same amount of points or credit for getting that question right.” This whole exam scoring thing is feeling less and less insidious by the minute, isn’t it?

For the final time: the CPA exam is not graded on a curve, nor are you compared to everyone who did better than you, nor are you compared to everyone who showed up to Prometric that day or week or month. “The way the exam is scored, candidates are compared to a fixed ability level. They are not compared to each other. If in the next window candidates maybe aren’t as well-prepared, fewer people will pass. They are being compared to a fixed level of ability,” John told us. Twice. Just to make sure we all got it. Got it? Let’s go over it one more time (from the Scoring FAQs):

The CPA Examination is NOT curved. Every candidate’s score is entirely independent of other candidates’ Examination results.

The CPA Examination is a criterion-referenced examination which means that it rests upon pre-determined standards. Every candidate’s performance is measured against established standards to determine whether the candidate has demonstrated the level of knowledge and skills that is represented by the passing score. Every candidate is judged against the same standards, and every score is an independent result.

Are we clear on that? Awesome, moving on…

Pretest questions make up fifteen MCQ in AUD/FAR and twelve in REG/BEC, one task-based simulation in FAR, AUD and REG and one written communication in BEC. The problem with gaming this system is that you can’t, since you have no way of knowing which questions are pretest and which are operational. So just guess equally on all of them as if every single one counts, mmmkay? Pretest questions will resemble operational questions since they are testing whatever is in the Content Specification Outline, meaning IFRS wasn’t tested on a pretest basis last year. What this means for candidates is that nothing outside of the CSOs will EVER be pretested. Maybe not a life-changing piece of information but really useful to know if you are prone to asking “what should I be studying?” and are familiar with the CSOs.

So what’s with the score report you get when you fail that compares you to those who scored between 75 and 80 in that window? Why not compare you to the CPA exam superstars who pulled down 99s without breaking a sweat?

“If you compared [failing candidates] to people that got all the way up to 99, it’s not as useful,” John said. “We want the basis of comparison that is going to be the most meaningful to the people who failed and that group is those that got closest to passing. If I got a 62 and the comparison group includes all the people who got above 90, that isn’t going to help me as much. Most of the people who pass are between 75 – 80.”

While we appreciate the AICPA taking the time to speak with us, we feel it’s important to point out that, at the end of the day, they are the best source of information for candidates. Answers to most of your questions can be found on their website. If you’re having trouble finding something or have a specific question related to the CPA exam, get in touch and we’ll do our best to do the Googling on your behalf.

Accounting News Roundup: Obamas Earned $1.7 Million in 2010; 9th Circuit Hears Boeing Whistleblower Case; Tax Advisor for the Desperate Endorses Trump | 04.19.11

Caleb Newquist
April 19, 2011

Alterra Investors Should Oppose KPMG Reappointment, ISS Says [Bloomberg]
Alterra Capital Holdings Ltd. (ALTE) investors should reject the insurer’s plan to reappoint KPMG- Bermuda after a government accounting board faulted the auditor’s work, said Institutional Shareholder Services Inc. The proxy-advisory service joins Glass Lewis & Co. in advising shareholders next month to vote against a proposal by Alterra’s management to keep the Bermuda affiliate of the Big Four accounting firm as the company’s auditor.

Obamas Earned $1.7 Million, Paid $453,770 in Taxes; Bidens Made $379,178 [Bloomberg]
President Barack Obama and his wife, Michelle, reported $1.7 million in adjusted gross income last year and paid $453,770 in federal income taxes, according to tax returns released yesterday by the White House. The Obamas’ adjusted gross income for 2010 dropped about 69 percent from the previous year, when it was $5.5 million, and 2010 was the couple’s lowest-earning year since 2006, before Obama’s presidential campaign generated interest in books he wrote. Their total federal income tax liability for 2010 dropped about 75 percent from 2009, when it was $1.8 million.

ASU 2011-2: The Accounting for Troubled Debt Restructurings Still Leaks Oil [Accounting Onion]
How accounting standards and Hondas are not alike.

Testy 9th Circuit Hears Whistleblower Case [CNS]
Two Boeing employees who were fired after providing a newspaper reporter information about alleged ethics violations asked the 9th Circuit to reconsider a federal judge’s ruling that the Sarbanes-Oxley Act does not prohibit termination for disclosures to the media. No court has yet addressed whether employees can be fired under federal whistleblower laws for providing non-confidential information about potential fraud to the press.

Arguments Have Loopholes, Too [CFO]
The debate over GE’s taxes has as many holes as the IRC.

Gary Busey Endorses Donald Trump for President in 2012 [YouTube]

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