Going Concern

Big 4

Big 4 Refugees: Where Are They Now? Are They Still Miserable?

Caleb Newquist
June 18, 2010

Unless you’re completely illiterate, you’re aware that we cover lots of news on layoffs and exoduses here at GC. Layoffs seem to be more of ’08-’09 trend while this year the exodus seems to be en vogue.

That being the case, some of the people that you knew while they were in public accounting have completely disappeared never to heard from again. Those of you still at the mercy of the billable hour might assume that these refugees are loving life in their new jobs – working 40 hours a week, making far more money and seeing more than an hour or two of sunlight on a regular basis.

But do these ex-Big 4 and public accountants really have it better? One reader wonders aloud:

Something came to mind recently when talking to my ex-Big 4 friends, who were laid off in the mass curling about a year ago. Being someone who was laid off by a Big 4, I somewhat have to agree and feel the same way. That is, I have heard from so many of these friends who hate their current jobs, and considering quitting. Even more are thinking about going back to school. So I wasn’t sure if this only applied to my friends, or is a general trend among those laid-off from Big 4s.

So I thought it would be interesting in the thought of other people who were laid off by the Big 4s. Where are they now? Do they like their jobs? Or do they feel the same way? If they don’t like their current jobs, what are their intentions? And maybe even the question of whether they would consider going back to a Big 4?

Lots of questions in there, so it’s really a grab bag. Jump in on whatever applies to you – headed back a life or Ramen and frozen pizza to get at Masters or PhD? Still glad you escaped public accounting with your sanity intact? Thinking of – gasp – going back?

Firms are definitely looking for help as evidenced by the pleas by PwC and Ernst & Young to their current employees to refer everyone and their dog for possible employment, so hey, it’s an option for those that feel that the non-Big 4 grass is faux-green. Discuss.

If I Pass CPA Exam Parts in 2010, Will I Have to Pass Them Again in 2011?

Adrienne Gonzalez
June 18, 2010

Have a question on the CPA Exam? What section is easiest? How should I study for Regulation? Are pants mandatory at the testing site? Shoot us an email with your query.

It’s the big question on everyone’s minds so we better address it now before you cute little CPA exam candidates start freaking out:

Do you know what will happen if as of December 31, 2010 I have completed two sections of the exam? Will I only have to take the remaining two sections or will I be subject to the new exam parts coming in 2011?

Good question. First of all, keep in mind that a lot of the hype surrounding the 2011 changes is:

A) CPA Review course marketing (“buy new materials! Be sure you’re up to date!”)

B) AICPA marketing (“Hey! Check out how advanced we are and how easily we can integrate a whole new set of standards into our psychometric exams!”)

C) Misinformation spread by candidates who “heard from someone” that BEC will now contain 10 simulations and all of them will be graded.

Just stop. The two biggest changes for 2011 are the addition of IFRS (which will mostly affect FAR) and communications in BEC, that’s it! That means get FAR out of the way this year if you can and throw in BEC before December if you are allergic to written communication. The exam changes twice a year anyway, this is nothing new.

Now that that’s out of the way, the rolling 18 month period also stays the same so whatever you have passed in the last 18 months will still be good. Again, if you’re freaking out about all of this, get FAR done ASAP and you will have minimal IFRS and GAAP codification garbage to deal with. A few sections are moved around (for example, business structures will be moving out of BEC) but it’s mostly the same content. REG is hardly changed at all and AUD will be one half hour shorter with more on professional ethics while BEC will be one half hour longer with written communications.

Simulations are trimmed down to “simlets” and instead of getting one topic, you have a better chance of doing well as they will be smaller and consist of several different topics. In my opinion, the exam is just getting easier.

I’m willing to bet that testing will be a bit of a bumpy ride for the first two windows of the year as the AICPA BoE gets its bearings with the new information and somewhat adjusted formats. But debits are still on the left and credits on the right so it’s not worth getting bent out of shape over; the exam will still suck and you’ll still have to study but thankfully, just like thousands of CPAs before you, you’ll rarely use anything you learned for the exam in the real world.

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor. You can see more of her posts here and all posts on the CPA Exam here.

Accounting News Roundup: UBS Clients Have ‘Mere Hours’ to Come Clean; Dixon Hughes Sued for ‘Comfort Report’; “Big 4 Only” Bank Covenants – Revealed! | 06.18.10

Caleb Newquist
June 18, 2010

UBS Customers May Have `Mere Hours’ to Report to IRS [Bloomberg]
Since the Swiss Parliament were finally able to give the OK on the agreement to disclose UBS client names to the U.S., it’s only a matter of time until the IRS starts kicking down doors in the middle of the night.

“For UBS account holders, they have mere hours to run to the IRS and hope they can disclose the account before the Swiss hand the data over,” said Asher Rubinstein, a partner at Rubinstein & Rubinstein LLP in New York who said he’s been “getting panicked calls all week.”

The lesson to be learned here, it appears, is that he IRS on a bluff, you are likely to be wrong, wrong, wrong. Doug Shulman doesn’t like to be take for a fool, “We will immediately follow up on the information we receive from the Swiss and we will vigorously enforce the laws against those who have attempted to evade their tax responsibilities by hiding their assets offshore.”

KPMG chief calls for audit reform [Accountancy Age]
John Griffith-Jones, who wishes everyone would get comfortable with the idea of the Big 4, does admit that the question about the purpose of audit is a legit one that should not be ignored, “What is the point, they and others ask, of doing extensive and increasingly elaborate audits of the financial accounts of our banks, when audits failed to identify the huge and systemic risks which led to the near collapse of the Global banking system in the Autumn of 2008?”

Campbell Recalls SpaghettiOs [WSJ]
UH OH…

600 Parish investors sue accounting firm [Charleston Post Courier]
Dixon Hughes is being sued by 600 investors of convicted mini-Madoff Al Parish for their “Comfort Report.” “The lawsuit alleges that the firm claimed to compile the report from brokerage statements, when it received statements generated only by Parish that ‘summarized imaginary account balances.’ ” Oops.

Oh, You Mean Like the Same Fed Audits We Already Have? Way to Go, Congress! [JDA]
“As any accountant will tell you, we perform audits each year to ensure the comparability of financial statements for the sake of investors. Since there is no comparing Fed statements and there are no investors (excluding the banks with mandated stock holdings in the Fed banks they are regulated by), basically all we’re doing is jerking off with our left hands pretending it is someone else doing the jerking.”

Firing squad execution sobering, but dramatic [AP]
And who doesn’t like drama?

Restrictive bank covenants keep the Big Four on top [Accountancy Age]
“Big 4 only covenants” in lending agreements are blackballing smaller firms according to BDO International CEO Jeremy Newman and others. Nonsense, you say? AA presented an example:

Buried in the 81-page credit agreement for US-based healthcare provider Amedisys is a 22-word stipulation that highlights a problem some fear is threatening the stability of the global economic system.

“Audited consolidated balance sheets of the group members… [must be] reported on by and accompanied by an unqualified report from a Big Four accounting firm,” the phrase reads.

There’s no telling how many loan agreements have this exact language but “Big Four” is often replaced by “reputable” so it’s not if the “Big 4 covenant” is cooked right into the template. That being said, AA reports that the Big 4 + GT and BDO admitted last month that the covenants do exist in the UK.

Strangely enough, Amedisys is currently in the cross-hairs of Crooked CFO-turned-Forensic sleuth Sam Antar.

CFOs on vacation: Fewer call office [San Francisco Business Times]
God forbid.

Big 4
DWB

Three Things Public Accounting Can Learn From the World Cup

Daniel Braddock
June 18, 2010

World Cup fever is sweeping the world, if not your office. Sure it’s not March Madness and a much needed relief from busy season but it is the world’s biggest athletic event. And regardless of whether you are wearing your country’s colors to the office or still confused as to what FIFA even stands for, your friendly employer should be paying attention; there’s plenty to learn from these games.

Loud noise is a powerful distraction – It’s rumored that Human Resources departments around the country are placing obscene orders for vuvuzelas, the long plastic horns that are causing a stir at the opening round games (and being banned at practically all future sporting events). Their hopes are for all Big 4 partners to use them when year 2010 bonuses and raises are announced. The news is expected to be rather bleak and disappointing, but the hope is that the horns make everything seem so much more FUN!

Seriously though – those horns sound like a swarm of drunk, football loving bees.

Timing is everything – The worst part about the World Cup games for football fans in America has been the timing of games. The first round games have been beginning at 7:30 am on the east coast and a bright 4:30 am in sunny California. Satyam hopes no one is watching their recent restatement troubles, much like West Coasters likely snoozed through Argentina/South Korea this morning.

Moral victories are still acceptable – In fact – if you spin things well enough – a moral victory is a real victory. (See Example A here) So what moral victories have we had recently?

E&Y is hiring…sorta. We still don’t know what that’s all about.

KPMG is making the suburbia-to-city commute just a thing of the past. How nice of them!

PwC raises might be decent after all. Or at least less awful than EY’s.

Deloitte made impacting the community a requirement.

McGladrey is on fire. Everybody out!

Hmm. Suddenly that 1-1 tie with the Brits doesn’t seem so mediocre, does it?

BP CFO Explains the Ixnay on the Ividenday

Caleb Newquist
June 18, 2010

“It’s an extraordinary thing for a company to do, but it’s an extraordinary thing we’re in.”

~ BP CFO Byron Grote, on the company’s decision to suspend its dividend, on a conference call with investors.

Fraud

Our Hopes for Sue Sachdeva’s Trial to Be a Circus Are Slowly Fading

Caleb Newquist
June 18, 2010

The latest out of Brew Town is that a plea deal is in the works for alleged headphone bandit Sue Sachdeva. Rich Kirchen of the Milwaukee Business Journal reports that the U.S. Attorney confirmed that prosecutors were working with S-squared’s defense attorneys on a deal.

As far as all that loot is concerned, Kircher writes that the proceeds from the auction of said loot will go back to Koss.

We would humbly suggest that they get moving on this auction thing ASAP since Koss seems to be running short on time to get their restatements out. They’ve got 13 days and counting before the Nasdaq delists them like Lehman. Get an army of temps to whip that shit out so you can get back to running a ginormous, nepotistic headphone manufacturer.

(UPDATE) Apparently You Can Also Be Too Hot to Work at PwC

Caleb Newquist
June 17, 2010

~ Update includes statement from PricewaterhouseCoopers spokesman

By now you’ve probably heard about Debrahlee Lorenzana, who was claiming that being an über-hottie caused her to get fired from her job at Citi.

The Big 4, having its share of hotties, now is facing allegations of its own discriminatory behavior. We were sent the following email that has been making the rounds at PwC about a young associate who was shown the door last Friday. Bravely, the author of the email included her name and phone number, which we’ve redacted:

I have been following the story about the banker in NYC who was fired for her “appearance”. I was just fired today [June 11th] froerhouseCoopers. I am a graduate of Lehigh University, I have been with the firm since September 2009. I would like to think I am competent enough to hold a job – I recently studied 8 hours for a CPA exam and passed. A test that I have watched my peers struggle with – studying for months and failing multiple times. I have 3 of 4 CPA exams completed, and I am 3-3 in my testing.

Anyway, I was placed on an engagement with an all-male team and one female partner. I was given a poor review on this engagement, however, my work received glowing reviews. On all my other teams I have gotten feedback that I am a pleasure to work with, intelligent, hard-working etc.etc. Per my performance review, they noted that the reason I performed below expectation was because I had a negative attitude with my team and the other piece of feedback I received, from this female partner, is that I was dressed inappropriately because I didn’t wear tights with my skirts in the winter. This is during a time we lived out of a hotel, working from 9am-4am, 7 days a week, and the last thing on anyone’s mind is clothes. I am a 22 year old girl, and I definitely do not “look the part” of an accountant. While on my team with all males, I received constant harassment about how I should “sleep with the senior manager (who was very disliked) to make him cooler” or “you have to go talk to the client cause you are hot”. My mentor from the firm was on my team as well, and every day would comment on my appearance, such as, “Did you lose weight? You look good” or “Your legs look fabulous today”. I was also told that my senior on the team was “in-love with me” and that I should “hook-up with him”. During this period I had a boyfriend whom I expressed my deep deep frustration on this with. Since my employment at the firm, I have been constantly harassed by the partner who hired me. I received such e-mails as, “I am home alone in my hot tub, you should come” or text messages like “So what color underwear are you wearing?” which, I kept my mouth shut about. Keep in mind this individual is married, with kids. Eventually I went to HR when I received my performance review because obviously there was a major disconnect. Of course, they “fully investigated” with the team of all males, and today I was told that I was fired, for under-performance. I was denied a copy of my performance reviews (which as our review policy goes – are given back to each individual at the firm). I inquired as to whether HR had spoken to other individuals I had worked with, and they told me “it was irrelevant” and that my review was contingent only upon “this one engagement (as referred to above)”. Bear in mind that I have worked on 5 other clients since September 2009, and these reviews were thrown to the wayside.

I have been following the story in the news about the woman banker fired in NYC, and have received multiple comments from my co-workers such as, “I can see them doing this to you” or “this is probably why the female partner doesn’t like you – cause you are hot”. Obviously, there seems to be an underlying theme here.

I graduated with a 3.4 from Lehigh, majoring in Accounting and minoring in writing. I got a 1410 on my SAT’s, a near perfect split of 710 Verbal and 700 Math. Throughout my life, the one thing I was sure of was my ability to compete intelligence-wise with my peers, and often exceed far above. So you can understand my extreme confusion and frustration that I could be capable of under-performing, at a firm, where there is documented proof on paper I perform well above my peer group.

So I come to you, whomever may be concerned, as this is an issue I am bringing to light and will hire an attorney for. I was wrongfully terminated – without a fair reason. I have saved all of my work performed while at PwC to provide as evidence of comparison with my peers. If this type of story strikes interest with anyone over at the NYT, I am more than happy to share more information. Like they say, Big Fours are “slave-drivers”, and yet again, they perpetuate this image.

I can be reached by telephone at [redacted]. I live in Stamford, CT and worked on clients from NYC to NJ to CT. Thank you for taking the time to read this – I am a bit flustered still from today’s events, but find no better way to vent than by writing.

SO! That’s a lot to digest. Being a fan of fantastic gams (who isn’t, amiright?) is one thing but verbalizing it in the middle of internal controls testwork is entirely another. That being said, a text requesting the hue of undies is whole other level of awkward.

~~Our calls, emails, telegrams, and messages by carrier pigeon to PwC have not been returned.~~

UDPATE: PwC spokesman Jon Stoner provided us with the following statement:

As a matter of policy and practice, PricewaterhouseCoopers is fully committed to maintaining a workplace free of sexual harassment. We take any complaints about sexual harassment seriously, and investigate any such claim thoroughly and confidentially. That is exactly what we did in this case, and we did not find any basis to the allegations.

Technology

Cautionary Tales: Enterprise Software Edition

GoingConcern
June 17, 2010

A few weeks ago, I was talking about CRM (Customer Relationship Management) software. Essentially, CRM should help a company (as Dennis Howlett – business software blogger put it), “sell more stuff.”

I don’t have a problem with that result. We can argue all day long abo really “needed” as opposed to “pushed”. That’s a philosophical debate, indeed, it’s a MORALISTIC debate. In Obama’s address to the USA (re: BP oil sands) he prayed for a “hand to guide us.” Was he talking about the hand of god, or the invisible hand? … But I digress.

My point about CRM was much less lofty. CRM systems are simply about attempting to know your customer. How much data can we collate and analyze in order to maximize our value proposition? Or, if you’re a cynic – how can we, as Homer Simpson would say, “cram one more salty treat into America’s already bloated snack hole?”

Sidenote: Back in the heyday of the SUV craze, there was a great interview on 60 Minutes with some analyst/pundit who described the motivation that seemed to underlie the populating of these beasts. He described it as “reptilian.” The term stuck with me and I find it helpful to think about in around any purchasing decision of consequence. A well executed CRM can create a veritable “Jurassic Park” of suckers if that is what one is so inclined to create. Although, it doesn’t have to be that way. It doesn’t have to be evil.

My point this week though is less about CRM per se and more about what happens when an enterprise software implementation goes awry. A different kind of evil. There have been two big stories recently detailing lawsuits being leveled against firms who had been contracted to install an enterprise system and had allegedly failed to deliver on the contract.

In one case, EDS (now owned by Hewlett Packard) just agreed to pay British Sky Broadcasting $460 million for a failed CRM implementation. This was from a project undertaken in the year 2000 and abandoned two years later. The settlement is four times the value of the budgeted project cost.

In a second case, Marin County, CA is suing Deloitte Consulting for an alleged failure in rolling out an ERP (Enterprise Resource Planning) system. Marin County is seeking $30 million. Their contention is that Deloitte didn’t have the technical skills on the software in question. That’s an important point. This type of technical skill is of the “use it or lose it” variety.

So, is that the answer? When a software implementation goes awry, you sue everyone? Well, sometimes.

You see, buying an enterprise software system isn’t like buying a vehicle. You can’t just hand the wheel over to your reptilian brain and pray for the invisible hand to hook up financing and you’re on your way.

There’s work involved, normally a third party, that is paid to configure the software and integrate it into your organization’s existing infrastructure. In a complex business model, the process of defining and integrating all the business rules, data flows, and connections can be daunting… sometimes, impossible. Failure, unfortunately, is always an option.

These recent examples deal with alleged failures on the part of the third party implementers, but failures can occur anywhere within “hell’s half-acre.”

I’ve seen examples where it was clearly a management failure to provide project leadership that created an implementation failure. The example I am thinking about resulted in the company taking a $2 million dollar charge then having to start over. When I went to see them, it looked like they were heading right back down the same road. Making the same mistakes. Me? I can’t help someone who doesn’t want to be helped.

Some folks point to Saas products as a way to alleviate these nightmare scenarios. If only it was that easy. Wherever a business has an existing IT architecture, there is the possibility of an integration problem (assuming you want integrated systems which I have to believe that you’ll want). There is another company I can think of who, when I met them, had been working for at least 6 months on an integration with a Saas ERP system and their back office. For a number of reasons, it really just didn’t seem like it was going to work. And the red flag for me was that the CFO and the Director of Finance had vastly different views as to how the project was going.

These are just a couple examples I can name from my own experiences and I’m not even in the software implementation game!

The moral of the story is know the statement of work inside out. Understand the terms of the contract. Technical skills are finite. Be very clear on the desired outcomes.

And beware of the reptilian brain.

Geoff Devereux as been active in Vancouver’s technology start-up community for the past 5 years. Prior to getting lured into tech start-ups, Geoff worked in various fields including a 5 year stint in a tax accounting firm. You can see more of his posts for GC here.

Announcements

Thanks to This Week’s Advertisers

GoingConcern
June 17, 2010

A quick word of thanks to this week’s advertisers on Going Concern:

• Sunshine Suites

• VideoEgg

• Wiley

If you’re interested in advertising on Going Concern, email us at advertising@breakingmedia.com.

Thanks!

KPMG

Bonus Watch ’10: More Evidence That Promotions at KPMG Don’t Pay Like They Used To

Caleb Newquist
June 17, 2010

From somewhere deep in the heart of Texas:

KPMG Dallas senior associate promotion bonus: $650 before tax. That’s down from $800 last year. Bullshit.

For those of you that don’t have a 10-ky handy, that’s a 19% drop. This correlates with the news from last month that the 1.25% for the summer bump and then a little follow up at fiscal year end.

Another source is seriously unmoved and makes an interesting point, “The bonus hardly pays for the charcoal so we can cook our Omaha Steaks.”

And just for the record, the freshly minted SAs get their new titles officially on July 1 but they should be comfortable correcting colleagues, family and clients for the next two weeks. Keep us updated.

UPDATE: Advisory out of NY chimes in:

KPMG NY Advisory Senior Associate announcements are being made by performance managers. Bonuses are a staggering $150 more then Dallas, thats $800 or 5.3% of the average salary here when annualized. I don’t dare think of what that comes to hourly with our SAS70 and Audit support busy season coming into swing.

Wanted: Actor Who Can Channel the Quality of Ernst & Young

Caleb Newquist
June 17, 2010

We know Ernst & Young is looking for some extra help but this particular role will require someone (an extra from Inglorious Basterds, perhaps?) that is theatrical first and a numbers person second:

For starters, why do you need an actor to “demonstrate what not to do in the workplace”? Couldn’t they just secretly film employees on any old regular Thursday and get the footage they need? Then you could do a candid camera type ending where Jim Turley jumps out and cans their asses.

As far as casting is concerned, David Hasselhoff immediately comes to mind but in the off-chance that the Hoff isn’t available, who picks up this gig? We imagine an in-house choice would be preferable in order to save on costs.

JT has a nice strong face/chin but can he do the accent? We know the Vegas office is a cesspool of talent. Perhaps this is the hazing for one of the new partners? Ideas welcome.

Tax Court: Don’t Bet Your Bass on Those Hobby Losses

Joe Kristan
June 17, 2010

One of the promised benefits of feminism was that both men and women would reap benefits from allowing women to achieve their potential in the workforce. And for Mr. Steve Lowe, it absolutely worked that way.

The Tax Court gives a hint at Mrs. Lowe’s achieved potential:

During the years at issue petitioner wife (Mrs. Lowe) worked full time as a “controller” for Fry Steel Co., where she has worked for over 38 years. She earned $177,219 and $184,181 in 2005 and 2006, respectively, with an additional $12,000 per year for taking notes at the board of directors meetings.

And how did that work out for Mr. Lowe?

In 2005 Mr. Lowe fits run by either American Bass, FLW Strem Series, or Western Outdoor News (WON) and reported gross income on petitioners’ Schedule C of $4,241. In 2006 Mr. Lowe fished in 15 tournaments run by those same organizations and reported $10,932 of gross income. The entry fees ranged from $280 to $825 with an additional $325 for a “coangler” amateur in FLW events.

Yes, Mrs. Lowe’s empowerment enabled her to hold down a fulfilling and well-paid job, freeing her husband to follow his dreams – to go fishing every day.

The only thing that could possibly be better than fishing every day while your wife brings home a nice paycheck is to get a tax deduction for fishing every day while your wife brings home a nice paycheck. And Mr. Lowe gave it a try, deducting $49,067 of fishing expenses in 2005. Unfortunately, he hooked a snag.

The tax law disallows losses from activities “not engaged in for profit” – the so-called “hobby loss” rules. The Tax Court summed it up (my emphasis):

Mrs. Lowe earned substantial income from her job at Fry Steel Co., and the losses from Mr. Lowe’s fishing activity resulted in substantial tax benefits. During the years at issue Mrs. Lowe earned an average of about $180,000 a year from her job, and petitioners were able to deduct an average of about $41,000 per year on their joint Federal income tax returns due to Mr. Lowe’s fishing activity losses. Mr. Lowe was not employed before the fishing activity and was able to pursue this activity because of Mrs. Lowe’s substantial income. We also note that Mr. Lowe fished for recreation and pleasure long before commencing his competitive bass fishing activity. He clearly enjoyed that activity and likely would have incurred significant fishing costs yearly for personal pleasure had he not conducted his claimed business activity.

The case illustrates some hobby loss red flags:

• The activity loses money and shows no sign of doing otherwise – It’s fishing, for heavens’s sake.

• The losses offset significant other income – If you would be getting the earned income credit otherwise, the IRS doesn’t invoke the hobby loss rules.

• The activity is fun – If your money-losing business can be perceived as fun – like fishing, say, or playing slots – it’s that much harder to convince the IRS that you’re really in it for profit. Remember, though, that even miserable activities (like selling Amway or writing blog posts) can run afoul of the hobby loss rules.

So Mr. Lowe lost his deductions. The Tax Court waived penalties, though, and Mr. Lowe, as far as we know, still can fish every day while his wife works. Millions of red-blooded men would take that deal, even without tax deductions.

Joe Kristan is a shareholder of Roth & Company, P.C. in Des Moines, Iowa, author of the Tax Update Blog and Going Concern contributor. You can see all of his posts for GC here.

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