Going Concern

Accounting News Roundup: Your BFF Is Now Your Boss; TurboTax vs. H&R Block vs. CPA; Coe Tells IRS to Shove It | 03.08.11

Caleb Newquist
March 8, 2011

When Your Friends Become Your Subordinates [FINS]
[W]hat happens when you’re promoted and your closest work friends are left behind? You could suddenly be overseeing someone who trained you. Or perhaps you bested a buddy in a competition for the promotion. Some of your most important relationships on the job may be threatened by the transition.

Scorsese slapped with $2.85M back-tax bill [NYP]
More fallout from the “accountant marries stripper, starts Ponzi scheme” tale.

Google, Infosys Fight `Daughterly Guilt’ to Lure Indian Women [Bloomberg]
When Preethi Mohan Rao quit her job following the birth of her first child in 2006, the 28-year-old tax professional was prepared to put her career on hold indefinitely. Her bosses at Ernst & Young’s Global Shared Services in India would have none of it. As E&Y’s Indian operations grew to almost 4,000 employees by 2010 from about 200 in 2002, the company accomplished something rare in India: having an equal number of male and female workers[.]

Tax prep winners? CPAs in a landslide [CPA Success]
A three-way face-off between TurboTax vs. H&R Block vs. CPA for the best refund.

Insider Trading Hurts: McKinsey Survives But Target Companies Suffer [Forbes]
Francine McKenna explains the difference between a McKinsey and a Big 4 insider trading scandal.

Why I’ll Never Comment on TechCrunch Again [JDA]
Something to do with Facebook.

SEC `Capacity Gap’ Risks Oversight Lapses as Regulator’s Targets Multiply [Bloomberg]
The U.S. Securities and Exchange Commission is about 400 employees short of what it needs to manage its current workload, according to a consultant’s four- month internal review mandated by the Dodd-Frank Act. The preliminary findings by Boston Consulting Group Inc. reinforce arguments by SEC officials that the agency is underfunded and understaffed as it takes on oversight of derivatives, credit-rating firms and municipal bonds, according to a draft copy of the report obtained by Bloomberg News.

Country star to IRS: ‘Shove It’ [Tax Watchdog]
That’s a $1.6 million shove.

Audit

Is Taking Cash Out of the Hands of Young Auditors a Good Idea?

Caleb Newquist
March 8, 2011

As global cash transactions have become increasingly complex, both the familiarity and training of accountants in the cash area may have actually declined. Most young adults no longer keep check books, and consequently, no longer perform the reconciliation process on their personal accounts. Instead, they simply check available balances either online or at an automatic teller machine, and adjust their spending habits accordingly. [SmartPros]

(UPDATE, VIDEO) GW Accounting Professor Gives Qualified Opinion of Referee’s Services, Gets Ejected

Caleb Newquist
March 8, 2011

Up until now, we’ve heard more about accounting professors losing their clothes (shirt, pants) than anything their tempers. But today, we learned about a prof who was expressing an expert opinion (perhaps a little too strongly) on the value of a service:

An accounting professor and high-profile supporter of the GW Athletics program was escorted from the Smith Center Saturday for verbally confronting a referee over a foul call. From his sideline seat on the court, Robert Kasmir yelled at the referee over a foul call on sophomore forward David Pellom, prompting his removal from the court by a member of the athletics department. “Basically, I told the ref he was the worst ref I’d ever seen and he wasn’t worth the $1,600 dollars they were paying him and that was it,” Kasmir said. “And then he ejected me from the game.”

We’d be remiss if we didn’t mention the fact that Mr Kasmir isn’t that bad of a guy:

Kasmir’s ejection came after he and his family were honored during the second half for their contributions to GW Athletics. Kasmir, who received his MBA from GW in 1974, has made at least one donation to the University ranging from $10,000 to $24,999, according to financial documents. Kasmir said the ejection would not keep him from making further donations to the University in the future.

But as for that referee, Kasmir has a very unqualified view, “I think the official should never be allowed to officiate another game in the Atlantic 10, in college basketball, in the United States.”

UPDATE: From the Post for those of you that like visuals:

Professor, donor tossed from basketball game [GW Hatchet via Deadspin]

News

Social Media Poses Enough of a Risk to Overstock.com That They Disclosed It in Their 10-K

Caleb Newquist
March 7, 2011

It’s been quite some time since we picked up the Overstock beat but Gary Weiss picked up something in the company’s recently filed 10-K yesterday that makes us wonder if the company was shooting for irony or if they’ve given up on blaming the “shorts” turning instead to “social media,” which, similar to the anti-short campaign would allow them to encompass a number of villains without naming anyone directly.

From “Note 1A: Risk Factors” section of the company’s notes to the financial statements:

There has been a marked increase in use of social media platforms and similar devices, including weblogs (blogs), social media websites, and other forms of Internet-based communications which allow individuals access to a broad audience of consumers and other interested persons. Consumers value readily available information concerning retailers, manufacturers, and their goods and services and often act on such information without further investigation, authentication and without regard to its accuracy. The availability of information on social media platforms and devices is virtually immediate as is its impact. Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning the Company may be posted on such platforms and devices at any time. Information posted may be adverse to our interests, it may be inaccurate, and may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also could be used for dissemination of trade secret information, compromise of valuable company assets all of which could harm our business, prospects, financial condition and results of operations.

As Gary points out, this disclosure is especially rich since Patrick Byrne had a goon using Facebook to stalk critics like Gary, Sam Antar, Barry Ritholtz among others which of course was disseminated in various social media outlets. Newsflash to Overstock’s risk managers: when people are being pursued by creeps on the Internet, they complain about to EVERYONE THEY KNOW.

One could easily argue that Segway accidents at the office pose just as great of a risk to key employees – and thus a disclosable item – but perhaps that’s covered under their D&O policy? It still seems plausible that disclosure would still be warranted. Additionally, the risk of a good snowfall might cause some of Salt Lake City-based company’s employees to call in sick to enjoy the fresh pow could have resulted in a late filing which is certainly something the SEC would want to know. We know KPMG has a crack squad of auditors all over this engagement but it’s conceivable that they overlooked some other risks. If you’ve got ideas on what those might be, let us know below.

News

Which Accounting Firm Has a High-Ranking Partner Whose Hooker Habit Got Him in a Bit of Trouble?

Caleb Newquist
March 7, 2011

Actually, there might be a few of them but we’re talking about a very specific instance. A partner with a hectic international travel schedule got taken to the cleaners by his wife after she discovered that he was keeping company on the side while on his business trips, including the aforementioned hookers. And as luck would have it, some of the court documents found their way into our inbox. We’ve clipped some of the juicy parts for you:

It should be noted that this particular situation took place a number of years ago and proceedings were still being wrapped up fairly recently. Now, the hookers angle is especially salacious (which we like) but what does a situation like this say about the pressure that many globetrotting partners are under? The firms demand a lot from their top leaders and a lifestyle of high pressure and international travel can wear on a person. If whores on the cheap happen to be in close proximity to your hotel…well, it’s not inconceivable that some partners may want to blow off some steam. Landing an exotic piece of tail to help you cope with the stress while traveling on business may be a lot of fun but if you have a wife and kids and home, that’s where things get can complicated, and in this case expensive, as the following indicates:

And we didn’t even mention the possibility of the spreading around the clap. No one wins there.

CFOs

New Robert Half Survey Reveals CFOs Will Need You to Go Ahead and Come in on Saturday

Adrienne Gonzalez
March 7, 2011

We’re not very good at math or statistics so perhaps our numbers are off a bit, but how do 89% of CFOs expect their firms to grow in the second quarter of 2011 while 85% also do not expect to add any new full-time accounting and finance professionals? It doesn’t take a mathlete to figure out what that means for those of you lucky enough to work for these CFOs, so you better get to slacking off now before they come down to your cube and kindly inform you you’ll need to go ahead and come in on Saturday.

Robert Half interviewed 1400 CFOs across the country for their Robert Half Financial Hiring Index and here’s what they came up with:

Most (85 percent) chief financial officers (CFOs) interviewed for the Robert Half Financial Hiring Index said they expect to make no changes to their current staffing levels during the second quarter of 2011. Seven percent anticipate adding full-time accounting and finance professionals, while another 7 percent plan personnel reductions. The net 0 percent projection is down two points from the first-quarter 2011 forecast.

As businesses navigate the current economy, they remain optimistic about the outlook for their own companies. Eighty-nine percent of CFOs expressed confidence in their firms’ growth potential in the second quarter, up one point from the first-quarter survey.

Looking to relocate? Try the Pacific or Mid-Atlantic regions. Twelve percent of CFOs plan to add full-time accounting and finance professionals and 5 percent foresee cutbacks, a net 7 percent increase.

“Many Pacific-region companies, particularly those in the manufacturing and technology sectors, are rebuilding their teams to meet renewed demand for their products and services,” said Max Messmer, chairman and CEO of Robert Half International. “In particular, firms are looking for skilled financial analysts to help them control costs and prepare for potential growth.”

In the end, a net 0 hiring projection is a lot better than previous recent surveys which were in the negative however we’d be remiss if we did not point out that the last time the survey showed a net 0 projection was for 3rd quarter 2008. And we all know how that particular period of time went.

What does this mean? New grads who are still waiting around for jobs can keep waiting, and more seasoned professionals who have been out of work for quite some time should probably just give up. Thanks for the great news, RH!

Accounting News Roundup: EC Impatient with U.S. IFRS Foot Dragging; British Expats Have a Week to Get Back to Libya; MBAs Can’t Right | 03.07.11

Caleb Newquist
March 7, 2011

Brussels pushes US on accounting [FT]
The European Commission has tried to bolster the US’s uncertain commitment to global accounting standards by suggesting that it could lose international influence if it does not sign up. Brussels’s impatience with the long-standing attempt to create a single language for financial reporting comes amid criticism of the rules being written for the project.

MF Global appoints new CFO [Reuters]
Brokerage MF Global Holdings , led by former Goldman Sachs Chief Executive Jon Corzine, has appointed Henri Steenkamp to the post of Chief Financial Officer. Steenkamp, who is currently the firm’s chief accounting officer and global controller, will replace Randy MacDonald, who was recently appointed global head of the firm’s retail operations, the company said in a statement.

CFOs Reveal Second-Quarter Hiring Plans [PR Newswire]
Most (85 percent) chief financial officers (CFOs) interviewed for the Robert Half Financial Hiring Index said they expect to make no changes to their current staffing levels during the second quarter of 2011. Seven percent anticipate adding full-time accounting and finance professionals, while another 7 percent plan personnel reductions. The net 0 percent projection is down two points from the first-quarter 2011 forecast.

Taxman gives ex-pats a week’s notice to return to Libya [Accountancy Age]
HMRC has announced that the ex-pats will have one week after the country is deemed safe by the Foreign Office to return there without it affecting their status. Jonathan Kropman, a tax partner at law firm Berwin Leighton Paisner, said: “Given reports of widespread damage to property and infrastructure in Libya this seems unduly harsh.

Students Struggle for Words [WSJ]
While M.B.A. students’ quantitative skills are prized by employers, their writing and presentation skills have been a perennial complaint. Employers and writing coaches say business-school graduates tend to ramble, use pretentious vocabulary or pen too-casual emails.

Al Pacino — Targeted By IRS Over $188k Debt [TMZ]
A little fallout from the Ken Starr (the guy who just got sentenced) situation.

On Campus

Grad Assistants May Starve After University of Illinois ‘Payroll Glitch’ Results in Back Taxes Owed

Caleb Newquist
March 5, 2011

The irony being that UI is consistently one of the top accounting programs in the country. The Champaign News-Gazette has the scoop:

The University of Illinois failed to withhold taxes for hundreds of graduate assistants over seven years, resulting in thousands of dollars in back taxes owed to the Internal Revenue Service. The payroll “glitch” also means some graduate assistants will go without pay for the next few months to cover taxes owed on their tuition and service fee waivers. About 280 graduate assistants will be taxed for part of their 2011 tuition waivers starting this month, and 17 who owe more than their next few paychecks will get no pay for three months, officials said.

Seven years. Hopefully some of the grad assistants have some money saved but it sounds like more than a few of them will be having a helluva time with this. The Graduate Employees’ Organization director of communication, Natalie Uhl gets serious:

“For some of them, they have absolutely no way to pay rent next month, no way to buy food,” she said. Some students are planning to drop out of school, Uhl said. “They’ll essentially be paying to work for the school,” she said. “They’ll be receiving no money for the work that they do.”

Jesus. That’s worse than working for minimum wage at an accounting firm! The University, for their whole role in this, is saying “my bad” but rationalizes the lack of paying the GAs by keeping things no nonsense. This is the IRS we’re talking about, after all. They’ve got guns!

“We feel bad about the inconvenience. We understand that the additional withholding may create a hardship, and it’s unfortunate. We’re required by the law to take the withholding,” [UI spokesman Thomas Hardy] said.

UI didn’t withhold taxes for hundreds of grad assistants [CNG]

News

O Bank Restatements, Where Art Thou?

Caleb Newquist
March 5, 2011

Because Jonathan Weil is wondering.

He noticed that Audit Analytics found that 699 SEC-registered companies filed restatements last year which was slightly higher than ’09. This was considerably less than the 1,566 restatements in ’06 but when it came to the number of banks that had restatements, he noticed something strange:

The figures for banks, in particular, look unnaturally low. Forty-four banks restated last year, one fewer than in 2009. Even more curious, there were 133 banks that issued corrections from 2008 through 2010. That was down from 169 banks during the previous three-year period, before the financial crisis took off in earnest, which makes no sense.

Here we had the greatest banking industry meltdown since the Great Depression. Hundreds of lenders failed. And yet the number of banks correcting accounting errors declined while the collapse was unfolding. There were no restatements by the likes of IndyMac, Washington Mutual or Lehman Brothers, for example. The obvious conclusion is the government has been giving lots of banks a free pass, as have their auditors.

Honesty for Banks Is Still Such a Lonely Word [Bloomberg]

News

Whoever Founded ‘National Employee Appreciation Day’ Probably Never Worked as an Accountant During Busy Season

Caleb Newquist
March 5, 2011

That’s right team, March 4th marks National Employee Appreciation Day and if you happen to have a deadline today or just got Lumberged into working the weekend, you’re definitely not feeling appreciated.

Doubly ironic is the news from the latest list from Forbes that says that “Accounting” is the 6th Happiest Job in America. That is followed up by “Finance at #7 and “Legal” at #10. On the one hand, Forbes has these professions in the correct order – accountants are generally less miserable than those in finance or law but the fact that they appear in the top ten is laughable. Of course now that we have In a JIT, perhaps the happy ranking is slightly more believable.

Employee Appreciation Day 2011 [CBS]
In Pictures: The 10 Happiest Jobs In America [Forbes]

Latest Epic Video Out of Ernst & Young Includes Lots of Bleeps, Faux-Coffee Diss, Best Lyric Ever

Caleb Newquist
March 4, 2011

It’s been increasingly obvious that Ernst & Young has the most talented video producers amongst the rank ‘n’ file Big 4 professionals. Last year we saw a video from the Las Vegas office (it was pulled) that was not the most impressive in terms of the talent presented but a Elvis impersonator made up for the rest of the group.

More recently from the Black and Yellow we’ve seen a farewell rock video and a mockumentary from across the pond (also pulled) that both demonstrate the sort of right-brained capabilities that exist within E&Y. Today, we bring you the latest in epic E&Y videos that brings voice to the frustration of being stuck in a JIT (“just-in-time”) cubicle.

So there’s a lot to digest here but I’ve got my favorite moments picked out:

1. I’m not sure who wears vests to the office these days but it’s fashion-forward and I like it.

2. Cursing right off the bat (and not letting up) score bigs points with Adrienne.

3. A Flavia diss is always apropriate.

4. Best lyric ever: I’M THE KING OF EY; ON A JET LIKE TURLEY; YOU’RE IN PUBLIC ACCOUNTING, NO YOU AIN’T LEAVIN’ EARLY

5. Kicking the roller was mean (but hilarious).

6. They should have known they were doomed when they wrote the lyric about a partner “seeing me now.”

7. Chuck Norris? Obama? Paddycake? Things really took a strange turn at the end.

The word from the tubes is that it’s been making the rounds inside and outside E&Y so we’re not exactly sure when this was made but our tipster was a little miffed about the possibility of these guys not having anything to do:

Here’s another video produced by auditors in the midst of busy season who somehow find time for this shit. This one comes courtesy of EY San Jose. Apparently it’s been making it’s rounds inside (and outside) of EY all day. HR must be thrilled at this use of company time (and property, from what it appears).

Apparently it never occurred to our tipster that this was a firm-sanctioned production since the Vegas vid went over so well. There’s only one way to find out so I left voicemails for both of these guys to try and get the behind-the-JIT story. So far I haven’t heard back from either of them but it’s still a little early out in San Jose. But whenever you can guys, email us.

Your thoughts on this latest bit of video ingenuity are welcome at this time.

CPA Exam

Why Did Prometric Get Fined $300,000 by NASBA in 2010?

Adrienne Gonzalez
March 4, 2011

David A. Costello, CPA, President & CEO and Michael R. Bryant, CPA, CFO of NASBA jointly and severally stated that NASBA’s 2010 financial statements did not contain any untrue material statements and their auditors, Lattimore Black Morgan & Cain, PC seconded that so obviously the following is all accurate. We looked ourselves. Not being professional financial statement ninjas, however, we invite you to take a peek for yourself here.

The good news for NASBA is that total consolidated revenue in Fiscal 2010 was $33.7 million compared to $31.4 million in Fiscal 2009, an increase of 7.3%. There were more CPA exam candidates as well as a new state added to NASBA’s CPAES program, which does the work of state boards of accountancy by processing CPA exam applications.

Interestingly, though my grandparents have been eating Alpo for the last two years thanks to Ben Bernanke and I’m earning a little under half a percent on my savings, NASBA must have a good investment banker because they did pretty well for themselves in FY 10. The annual report states that revenue from escrow management fees related to the CPA exam increased over the prior year and that higher interest rates, on average, during FY 10 were earned on these funds which are held in fully-insured securities or interest-bearing accounts. Can someone please let me know where these accounts are?! I want in.

But the most interesting part of NASBA’s mostly dull financial statements is the $300,000 “fine” Prometric paid them for violating its CPA exam agreement. Yes, the same agreement that was just renewed through 2024 with much fanfare last year.

The item is reported as “Income from Contract Issue” on NASBA’s consolidated financial statements and buried in note 12 thusly:

Note 12. Income from Contract Issue
As a part of the initial CBT Services Agreement effective May 31, 2002, Prometric was required to obtain and maintain insurance policies for certain specific perils, coverage amounts, terms and conditions naming the Association and its member boards as additional insureds. During fiscal 2010, the Association asserted that Prometric failed to comply with certain applicable insurance requirements. Prometric denied the assertions but, in resolution of the matter, provided evidence that it had come into compliance, agreed to indemnify, hold harmless and defend for any coverage lapses, and paid $300,000 to the Association. In addition, Prometric reimbursed the Association for certain legal and administrative expenses related to the resolution.

It doesn’t appear that NASBA declared the legal and admin expenses it also received so we’re assuming they were either immaterial or just embarrassing. Any financial statement detectives are welcome to come to their own conclusions.

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