Going Concern

News

The AICPA Wants Your Thoughts on What the Future Holds for CPAs

Adrienne Gonzalez
April 4, 2011

Now is your chance to tell the AICPA exactly where you think the industry is headed in the future. CPAs don’t get many chances to be this candid about their chosen profession, so please make it count.

CPA Horizons 2025, coined “the profession’s effort to anticipate and plan for the future,” is a short survey that seeks to get professionals’ opinions on where the industry is going and the challenges it faces to get there. Participants are faced with the following directive:

Growing global competition, rapid technological development and increasing regulation are impacting the CPA profession today and will continue to in the coming years. As a result of the changing environment, how can the profession remain competitive? Will services being requested of the profession change? Will the profession’s core values, core services and core competencies remain the same or need to change to allow the profession to continue to best serve its clients and employers?

CPA Horizons 2025 is about your future and the future of your profession. It’s about forging a path to ensure both remain competitive in a rapidly changing world. Your participation in this profession-wide endeavor is vital in helping shape our collective future.

We are soliciting the thoughts of thousands of CPA’s along with other voices via this interactive survey, online discussion forums, in person forums and direct outreach to AICPA committee members, leaders in the profession and beyond. We ask for 15 minutes to help map out the next 15 years. Your 15 minutes will be on a limited # of questions that is a subset of a larger group of questions which will serve to identify what is on the Horizon impacting the profession. Your participation is important. What may the future hold? Help tell us.

Beyond answering simply yes or no questions based on pre-determined criteria, you will have the opportunity to write in your answers regarding trends, opportunities and challenges facing the profession. You will also get an entire box to fill in what you think the profession should do to remain relevant, a huge opportunity for those of you who feel the current food chain just isn’t doing it for you.

And then you get to watch a video. Frankly I’ve got to say this video was pretty depressing, showing how the U.S. is falling behind in the global scheme of things, continuously getting spanked by India and China when it comes to science, math and the economy. Ouch.

Take the survey here.

Accounting News Roundup: Should Nonprofits Be Required to Disclose Their Donors?; Employees at LECG Dwindling; GE Tax Planning for Commoners | 04.04.11

Caleb Newquist
April 4, 2011

Widespread cracks found on Southwest jet-NTSB [Reuters]
Evidence of widespread fuselage cracks and fatigue were found on a Southwest Airlines Co (LUV.N) jet that made an emergency landing in Arizona with a hole in the cabin, a U.S. safety investigator said on Sunday. The incident on Friday prompted Southwest, the largest domestic airline by passengers flown, to ground planes and cancel hundreds of flights over the weekend so it could inspect its older model 737-300s. Small subsurface fuselage cracks were found on two other planes, which may require repairs, Southwest said.

Bring Donors Out of the Shadows [NYT]
The billionaire industrialist brothers Charles and David Koch have drawn sharp criticism for their extensive giving to libertarian causes. Though some of their organizational ties are public, many are unknown, thanks to a provision in the tax code that allows the Koch brothers and other donors, on both the left and the right, to conceal the recipients of their largess, even as they get to write it off on their taxes. Fortunately, there is a solution to this problem: require all nonprofit organizations that engage in political advocacy to reveal their donors.

You’re not writing me another big check? You tax hiker! [Tax Update Blog]
Refundable tax credits draw the ire of Joe Kristan.

Lil Wayne falls in deeper tax hole [Tax Watchdog]
Perhaps this is why he was working so hard while in prison.

Disintegrating accounting firm LECG down to 70 employees [PBJ]
LECG Corp., which listed 1,200 employees just three months ago, said it now has fewer than 70 employees, the majority of whom management expects to leave within the next 30 days. The Devon, Pa.-based accounting firm has been selling off practice groups and paying down its $30 million debt. These transitions will not result in any proceeds to LECG’s common stockholders and it is not anticipated that future operations will, either.

Rich Are Targeted in IRS Audit Offensive [WSJ]
According to the agency’s latest statistical report for the fiscal year ended Sept. 30, the percentage of taxpayers who were audited increased in every category of adjusted gross income above $500,000, compared with a year earlier. The biggest jumps came at the top of the income ladder. About 18% of Americans earning at least $10 million were audited in fiscal 2010, up from 11% in fiscal 2009, according to the IRS. For those earning $500,000 to $1 million, the audit rate rose to 3.4% from 2.8%.

How You Can Pull a GE on Taxes [SmartMoney]
Without paying for all the lobbyists and tax lawyers.

Office Depot Loses Tax Credits; CFO May Have Lost His Lunch

Caleb Newquist
April 2, 2011

Office Depot CFO Mike Newman can’t handle – CAN’T HANDLE – the bad news handed down by the IRS:

“I’m sick about it,” Newman said of the mistake the company and its advisors made in thinking Office Depot could use tax credits of $80 million last year and $63 million this year, calling the mistake his responsibility. Office Depot and its tax advisors believed the company was eligible to use prior losses to get tax credits under the American Recovery and Reinvestment Act of 2009, but the IRS told the company that other tax rules superseded the ones under which Office Depot was using to determine eligibility.

Of course we’d love to know who this “advisor” is that Newman is referring to. Since Deloitte earned over $589k in tax fees for fiscal year ’10 you could conclude that he’s referring to D. It’s certainly possible that it’s someone else so we invite you to come up with some theories.

Office Depot Off; Explains Impact Of IRS Tax-Credit Denial [Dow Jones]

News

The Waning Days of Tax Season Are Wearing Thin on at Least One Accountant

Caleb Newquist
April 1, 2011

Michael Grossbach is taking it out on the help.

Michael Grossbach, 32, surrendered himself to police when he learned of his impending arrest for allegedly assaulting his office assistant on March 5, police said.

“Apparently there was an argument and he lunged at her, grabbing her hand forcefully,” said Sergeant Michael Buck of Irvington Police. “There were injuries, but nothing serious.”

Sergeant Michael Foley arrested the Garrison resident for having illegal physical contact with his 31-year-old employee at his accounting firm at 106 North Broadway. The defendant was charged with assault in the third degree, a misdemeanor. According to police, if convicted he is facing anything from a fine to one year in prison.

Irvington Accountant Charged with Assaulting His Assistant [RP]

News

Marcum Has Some Doubts About American Apparel’s Ability to Continue Selling Gold Lamé Leggings

Caleb Newquist
April 1, 2011

Bad news for Dov Charney’s hipster retail paradise as Marcum – who replaced Deloitte last summer – has issued its auditor’s opinion with the language that no one likes to see.

But before we get to that, if you take a quick glance at the balance sheet you’ll see that the company barely has enough money to keep the lights on as their working capital is a measly $3 million (current assets of $216 million, current liabilities of $213 million). This shockingly bad number is mostly due to the $138 million in revolving credit facilities the company has included in its current liabilities. The company is also shows an accumulated deficit of over $73 million in its equity section. APP also bled over $32 million in cash from operations, according to its cash flow statement. All this bad news has lots of people talking about bankruptcy and that doesn’t touch the thirteen (that’s Gawker’s count, I only saw twelve) ongoing lawsuits against the company. Plus there’s the subpoena the company received from the U.S. Attorney General for SDNY last August over their auditor switcheroo.

We could go on and on but you get the pic. Here’s the final paragraph from Marcum’s opinion in APP’s 10-K:

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred a substantial loss from operations and had negative cash flow from operations for the year ended December 31, 2010. As a result of noncompliance with certain loan covenants, debt with carrying value of approximately $138.0 million at December 31, 2010, could be declared immediately due and payable. Notwithstanding the foregoing, the Company has minimal availability for additional borrowings from its existing credit facilities, which could result in the Company not having sufficient liquidity or minimum cash levels to operate its business. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Obviously the bad news is that investors are really spooked but the good news is that there could be a serious fire sale on hoodies and t-shirts in our future. Silver lining!

KPMG
PwC

What Do Libya and KPMG Have in Common?

Caleb Newquist
April 1, 2011

That was the question posed to us by our tipster. The answer: more and more defections. The latest is James Draper, per an internal email sent to us this morning.

Welcome new Risk Assurance Principal James Draper

The ranks of Risk Assurance continue to grow with the addition of accomplished professionals. These catalyst and experienced hires are helping us to evolve our services, and impress the marketplace with the expertise in which we deliver them. James Draper is our newest edition, joining us as a principle [sic, Jimbo is now a PwC “pal”] in our San Francisco office.

Jamie’s focus will be on helping to grow our IT&PA/ERP Controls services, particularly in the areas of SAP and JD Edwards. He joins us from KPMG where he has logged over 15 years experience assisting clients with technology risks. Instrumental in helping clients implement controls and security, Jamie has effectively managed the risks associated with large system implementations. In fact, he has assisted a number of global companies across a variety of industries through complex implementations, among them: Chevron, eBay, Nestle, Rolls-Royce (Aerospace) and Dolby. Jamie will help us to help our clients become more efficient in their control processes, leveraging system functionality including SAP’s Governance Risk & Compliance (GRC) module.

[The part where they talk about his personal life]

Please join me in welcoming Jamie to our firm, and to Risk Assurance.

If history is any indicator we’ll see a press release from PwC at some point but in the meantime, reactions to the latest KPMG turncoat are welcome at this time.

More competitive poaching:
PwC Lands Another KPMG Partner; Steven Tseng Joining Transfer Pricing Practice
PwC Picks Up Thomas Henry from KPMG; Will Lead Global Incentives Practice

CPA Exam

NASBA Reaches Out to Japanese CPA Exam Candidates Impacted by March Disaster

Adrienne Gonzalez
April 1, 2011

By disasters, we don’t mean that thing that happened with scoring.

When Katrina hit in 2004, NASBA granted affected CPA exam candidates an automatic extension. This time around, they are asking Japanese CPA exam candidates directly affected by the earthquake and tsunami disasters to contact them for assistance.

Here’s the official word from NASBA:

Our hearts go out to those in the Japan area who are dealing with rebuilding their lives and communities after the recent earthquake and tsunami disasters in that region. Japanese candidates who are scheduled to test in the near future, (United States or at our Guam Testing Center) and who may not be able to do so now due to the logistical issues that the disaster caused, should know that we are here to assist during this time of uncertainty.

Japanese candidates who may need to request an NTS extension and/or rescheduling, should contact NASBA’s Candidate Care department by emailing candidatecare@nasba.org and we will handle each concern on a case by case basis as we receive requests.

We recommend that all concerns of this type be directed to NASBA’s Candidate Care department. For this particular issue, only those affected by the earthquake/tsunami disaster should email us at candidatecare@nasba.org.

We assume that last line means “please don’t use the Candidate Care department to yell at us about scores” but did not ask to be sure. Let’s just pretend it did just to be safe.

Accounting News Roundup: Schapiro’s ‘Ineffectual’ SEC; Openly Gay Workers Enjoy Higher Job Satisfaction; AICPA Introduces IFRS Certificate | 04.01.11

Caleb Newquist
April 1, 2011

Schapiro SEC Seen Ineffectual Amid Dodd-Frank Funding Curbs [Bloomberg]
Today, Schapiro, 55, faces challenges a good bit nastier than a muddy lacrosse game. As she hits the halfway point of her five-year term as head of the SEC, she must deal with a sprawling legislative mandate to rewrite regulations affecting the financial industry while, at the same time, trying to erase the stain of the SEC’s failure to uncover Bernard Madoff’s Ponzi scheme.

Openly Gay Workers Have Better Careers [FINS]
Abntifying lesbian, gay, bisexual and transgender employees are open about their preferences at work, according to the survey of 2,800 LGBT finance workers conducted by Sylvia Ann Hewlett, director of the Center for Work-Life Policy. Only a third of those who are not out are satisfied with the rate of advancement in their careers, compared with the almost-two thirds of those who are out who said they are satisfied.

Buffett’s Handling of Deputy Baffles Some Experts [DealBook]
Warren E. Buffett is an old-school capitalist with a rock star’s aura, a global celebrity who is revered like a small-town hero. Yet that carefully cultivated image — the envy of nearly every top executive — risks being tarnished by a disclosure that he knew one of his right-hand executives had bought shares in a company before Mr. Buffett’s company announced a deal for it.

The House of Lords — Experienced with “Disconcerting Complacency” — Looks at the Market Concentration and Role of the Auditors [Re:Balance]
Jim Peterson isn’t as impressed with House of Lords report.

Less Would be More from Auditors [The Accounting Onion]
Tom Selling tees up next week’s subcommittee hearing and gives everyone a warning, “[SEC Chief Accountant] Kroeker and Leslie Seidman have been so IFRS-fixated for so long, and have had so little to say on the Subcommittee’s topic, it’s doubtful they are in a position to do little more than defend and deflect. If they actually testify under oath that adoption of IFRS should be part of the solution, I think I might become sick.”

Nasdaq, ICE Top Deutsche Boerse With $11.3 Billion NYSE Bid [Bloomberg]
Nasdaq OMX Group Inc. (NDAQ) and IntercontinentalExchange Inc. offered to buy NYSE Euronext (NYX) for about $11.3 billion as the companies teamed up in an attempt to snatch the New York Stock Exchange from Deutsche Boerse AG. The companies offered $42.50 in cash and stock for each NYSE Euronext share, according to a statement released today. The bid is a 19 percent premium to Deutsche Boerse’s February offer, based on the German exchange operator’s closing share price as of yesterday, Nasdaq and IntercontinentalExchange said. The bid is 27 percent higher than NYSE Euronext’s stock price on Feb. 8, the day before the company’s announcement of discussions with Deutsche Boerse.

When a Job Is So Bad It Hurts [WSJ]
Some jobs are so bad that they are actually worse for employees’ psychological well-being than not having a job at all, according to a new study in the journal Occupational and Environmental Medicine. Researchers from the Australian National University analyzed annual data over several years from 7,155 adults, evaluating links between the nature of their jobs and their mental health. They found “the mental health of those who were unemployed was comparable or superior to those in jobs of the poorest” quality.

AICPA Introduces IFRS Certificate Program Based on Comprehensive, Integrated Curriculum, Online Study [Business Wire]
The American Institute of Certified Public Accountants introduced a new course of study leading to a Certificate of Educational Achievement in International Financial Reporting Standards. The new IFRS Certificate Program is a comprehensive, integrated curriculum of online courses for CPAs and other accounting professionals that provide a measurable standard for evaluating competence in understanding and applying international accounting standards.

The IRS Claims That Wind Broke This Sign

Caleb Newquist
April 1, 2011

Dan Zak of the Washington Post posted this photo last night wondering how such a thing could happen – wind or some angry taxpayer who felt it necessary to destroy public property:

If you live in the District, you’re probably familiar with them and DZ illustrates:

They look bland and procedural and definitely of the post-Watergate era. And they look and feel sturdy. Like it would take a hurricane to snap one in half. Winds did reach 65 mph on Feb. 25 in the D.C. area, and the IRS says it has security footage of the ensuing decapitation-by-Mother Nature at the southwest corner of 12th Street and Constitution Avenue NW.

They will not show the footage to us.

Okay, so that’s an obvious non-denial denial. Some pointy-headed engineering types from the Universities of Maryland and Virginia that gusty winds can’t be ruled out but come on. They’ve been there since late 70s? What’s the useful life on one of those bad boys? It’s gotta be 40 years, no? Anyhoo, Zak got the opinion of a tourist from Lubbock, Texas who says it’s definitely vandalism, “Because it’s the IRS. [DUH, *eyeroll*]”

Did vandalism or wind claim an IRS sign downtown? [WaPo]

News

Congress Continues to Successfully Drag Out the 1099 Repeal

Caleb Newquist
April 1, 2011

If only somehow they could kill it completely, could we fully revel in the disfunction of the legislative branch:

What is clear is that nothing is certain with moving a 1099 repeal. The House passed a standalone measure on March 3 and the Senate tacked on an amendment to the Federal Aviation Administration (FAA) authorization bill, which passed the upper chamber, each with different offsets to cover the costs of the repeal.

The White House and House and Senate lawmakers across both parties back the elimination of the 1099 provision from the healthcare law but are at odds over how to make up for $22 billion in lost revenue as projected by the Joint Committee on Taxation.

Fate of 1099 repeal still up in the air [The Hill]

Earlier: How Will the Senate Screw Up the 1099 Repeal Bill This Time?
Even Earlier: Vastly Unpopular 1099 Requirement Survives Thanks to the Reliable Dysfunction of the U.S. Senate

In Case You Forgot, the Big 4 Are Hiring a Small Army of People This Year

Caleb Newquist
April 1, 2011

CNN/Fortune managed to dig up this corpse of a story: “Bean counters wanted: Why the Big 4 are in a hiring frenzy.” This refers to the hiring bonanza that Deloitte announced last September that was followed by various announcements by the rest of the Big 4:

[T]here’s one unlikely place where the help wanted sign is up, big time: Accounting firms.

Deloitte plans to hire 17,000 professionals in the U.S. and India in 2011, according to Cathleen Benko, its chief talent officer. It’s seeking accountants, auditors, consultants, and IT staff. Hiring is split evenly between experienced and entry-level applicants.

Ernst & Young has stepped up recruiting. It’s looking to hire 7,000 employees from college campuses — 4,500 full-time and 2,500 interns — and 6,000 experienced staff, totaling 13,000 people in 2011, says Dan Black, its director of Americas Campus Recruiting. Experienced staffing is up 80% from last year and campus recruits are up 20%.

Both firms compete for talent against PricewaterhouseCoopers, KPMG, and large consulting firms such as McKinsey and Bain. The hiring confirms a 2011 Bureau of Labor Statistics report that predicted employment in accounting and auditing would spike 22%.

For starters I don’t know why accounting firms are an “unlikely” place for the “help wanted sign” but don’t forget that this is the same outlet that told us that the firms were making money hand over fist back in the Fall of ’09. Also, why CNN/Fortune is now reporting Deloitte’s India’s hiring numbers as part of this story is a little confusing. Plus, if “hiring is split” between experienced and new hires that is a change in the breakdown from what was reported last September. Again, maybe the India numbers change things up a bit and I lost my 10-key long ago.

And we’ll also mention that the E&Y numbers are slightly better than what they initially reported last September so make of all these stats what you will, the rainbow and unicorn PR machine is in full force and CNN is happy to scoop them up spit them out.

Bean counters wanted: Why the Big 4 are in a hiring frenzy [CNNMoney]

IRS Commish Admits That a Government Shutdown During Tax Season Would Be Kinda Weird

Caleb Newquist
March 31, 2011

The head of the IRS said Thursday that a government shutdown during tax season would be a challenge the agency has never confronted before — and one that would become more complicated as the April filing deadline draws closer. Doug Shulman, the IRS commissioner, also signaled at a House Ways and Means subcommittee hearing that his agency was discussing how to address a potential shutdown with the Obama administration, though he did not spell out any details of those talks. “We run a $13 billion financial services operation, so the idea of stopping it for a few days or a few weeks is strange,” Shulman said, adding that he was hopeful, based on ongoing negotiations, that a shutdown could be averted. [The Hill]

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