Going Concern

KPMG

KPMG’s New Paperless Audit Is Going to Be the Best Thing Since Paper

Caleb Newquist
May 22, 2010

[caption id="attachment_10529" align="alignright" width="150" caption="Paperless!"]

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How about one more convo with the KPMG leadership this week? As one commenter mused earlier, the lack of past CEO spreadsheet-side chats were too few and far between so we figure we’re doing a you a favor by this passing ��round, John Veihmeyer and Henry Keizer kick around lowballing fees, outsourcing and the firm’s new paperless audit technology:

Inquisitor 1: Can you talk a little bit more specifically about what we’re doing right now to compete with firms that are reducing their fees so drastically that you have to wonder how they are even covering costs?

Keizer: To me, the first and foremost guiding principle is – make sure you’re giving the most absolute best client service. I think to the extent that you do have great service, we’ve got to be able to have very transparent and open discussions with our clients as to what are our economics? Where are we? What is the competitive information? What is market pricing, as opposed to the offer that came in unsolicited? And find a way to meet the objectives of what we need, and what our client needs.

Maybe we will, in fact, have to drop a price in, let’s say, our audit offering. But then are able to say, but why can’t we maintain the same or higher KPMG spend? Let’s look at who’s doing your tax compliance work. Let’s look at who’s doing your SAS70? Those types of discussions do allow us to compete successfully without having a case where it’s just about price.

Not sure who transcribed this thing but it’ll work for a Friday. First off, Inquisitor numero uno is obviously under the impression that KPMG would never lowball its fees. Even though other people have suggested exactly that.

Keizer Soze then reminds his little friend that it’s really not about the money, it’s about providing the best client service imaginable (sacrificing life, limb and/or dignity) which will result in more work for the firm. It’s a self-perpetuating cycle, really.

Inquisitor 2: Is there more plans to outsource positions in the U.S. to India?

Veihmeyer: I think as you look across the entire scope of our activities, and I think the most important one is – how do we serve our global clients – making sure that we are competitive in the marketplace and can think about how we execute a lot of our engagements differently to be successful. I think we will continue to look for opportunities to source talent, source resources, source skills, anywhere in the world it makes sense. I don’t see it as exchanging a position here for something offshore.

I think we see this as a very key strategy to make sure we are as competitive as we can possibly be in the marketplace—which I think will have one primary impact to the U.S. firm and that is create more opportunities for our people here. And why is that the case? Because we will win more work, we will be competitive in situations that we otherwise wouldn’t be competitive in, if we didn’t have that capability. And that’s what creates opportunities for our people.

In a word: Yes. As for why – Dammit, we’re a $20 billion firm (but not really, we’re actually a network of independent firms operating under a global cooperative. Ask Tim Flynn; he’ll tell you) and our competitors play hard ball. We’ve got to create other jobs overseas to keep up with those guys. Will that affect you? No chance, Blanche! If it does, it just means your life will be infinitely better because KPMG has business it didn’t have before.

Inquisitor 3: eAudIT – how is it going? What challenges have we faced? And how are clients, employees, and recruits receiving the deployment?

Keizer: e-AudIT is on track for deployment. We released the software in April, the 2010 version. Training schedules will be rolling out over the next several months.

It is the tool that accomplishes three major things. One, it allows us to do things more efficiently. It moves us from a work paper format to a work flow.

And lastly, there’s always been a great appetite of our professionals, how do I tap into the knowledge that KPMG has? e-AudIT is the platform now, to actually make that knowledge available to our professionals.

I think e-AudIT puts us in front of our competitors in terms of a platform that’s truly the best that’s out there. I believe when we look back, it will be the single most important ingredient to us providing the type of service, meeting our regulatory and professional requirements, and having our people feel good at how we have enabled them to really be high performance professionals.

[Jesus, easy with the rapid fire, Inquisitor tres; Hank isn’t a speed listener]. Paperless auditing has moved into KPMG lock, stock and barrel. We’re only 10 years into the 21st Century and we’re ready to start fixing bugs in this thing for the next ten years.

It’s far superior to anything the other firms have because you’ve been training on it over in Monty and we haven’t heard a single complaint. Someday you’ll be able to tell your grandstaff that this was the absolutely most exciting time to be at KPMG because that was when things got serious.

You Can Forget About Landing That CFO Position at the SEC

Caleb Newquist
May 21, 2010

Mary Schapiro took some time out of her fraud fighting Friday to ask Kenneth Johnson to quit acting as the Commission’s CFO and to take on the official responsibility of running the Office of Financial Management.

Mr Johnson (KenJo?) vehemently accepted the offer and threw in a shout out to the boss, “I’m honored to accept this new role at such an important time for the agency. Chairman Schapiro is deeply committed to strong financial management, and I’m proud to lead the agency’s initiatives in this area.”

Presumably, the CFO position isn’t a kicking-down-doors type job so Johnson’s first order of business should be to determine the savings on a group rate at one porn site that can appropriate service all tastes.

Washington, D.C., May 21, 2010 — Securities and Exchange Commission Chairman Mary L. Schapiro today announced that Kenneth A. Johnson has been named Chief Financial Officer for the agency.

Mr. Johnson has been serving as acting CFO for much of the past year. The agency’s CFO is responsible for leading its Office of Financial Management, which handles the budget, finance, and accounting operations for the SEC.

“I’m delighted that Ken has agreed to take on this role at the SEC,” said Chairman Schapiro. “His deep experience in the financial arena will be incredibly valuable as we grow as an agency.”

Mr. Johnson added, “I’m honored to accept this new role at such an important time for the agency. Chairman Schapiro is deeply committed to strong financial management, and I’m proud to lead the agency’s initiatives in this area.”

Mr. Johnson, 37, joined the SEC in 2003 as a Management Analyst in the Office of the Executive Director. In that role, he advised on all aspects of the budget process, developed strategy initiatives, and responded to inquiries from the Office of Management and Budget (OMB) and Congress regarding the SEC’s budget and financial operations. He became Chief Management Analyst in 2006.

Mr. Johnson has served as a valuable staff expert on legislative proposals, and he managed the development of the SEC’s long-range Strategic Plan that would guide agency policy through 2015.

Prior to joining the SEC staff, Mr. Johnson worked as a Commerce Analyst at the Congressional Budget Office. His primary responsibility in that role was to analyze and report on the budgetary effects of committee-approved legislation.

Mr. Johnson earned his Masters in Public Policy from the Kennedy School of Government at Harvard University, and earned his BA at Stanford University.

IRS
Video

Just So You’re Aware: An Ex-IRS Agent Has a Reality TV Show

Caleb Newquist
May 21, 2010

A taste of the June 6th premiere of The IRS (+) Hitman:

And if you think that’s interesting, there’s more:

Is there a complete sentence in there somewhere? Try the next one.

You hear that? How can you live with yourselves IRS? Stealing money from this Jonas Brothers wannabe family that won’t be able to stand around the kitchen eating cheese whiz out of the jar with their hands! No mercy indeed. If you have an IRS injustice story, you better get in touch with this Hitman character.

Wanted by America, the IRS (+) Hitman Reality TV Show is Here [PR]

Career Center

Job of the Day: Arizona American Water Needs a Financial Analyst

GoingConcern
May 21, 2010

Arizona American Water is looking for an experienced professional with an accounting or finance background to fill a Intermediate Financial Analyst position in Phoenix, Arizona.

The position requires 5 – 7 years experience including SOx and U.S. GAAP knowledge with a CPA or CMA credential desirable.

Company: Arizona American Water Company

Title: Financial Analyst II (Intermediate)

Location: Phoenix, AZ

Description: Intermediate Financial Analyst responsible for developing revenue and expense analyses, projections, reports and presentations.

Responsibilities: Compile and analyze financial information for developing revenue/expense analyses, projections, reports and presentations. Ensure accuracy of financial information; identify trends and present findings to senior management. Analyze and assess business performance against goals. Support management in shaping, driving and influencing business performance and continuous improvement.

Qualifications/Skills: Requires BA/BS in accounting/finance related field and 5-7 years related experience including, knowledge of US GAAP, SOX, regulatory accounting and practices and computer expertise. CPA/CMA is desirable. Experience in water/wastewater utility industry is highly desirable.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

IRS Asked to Crack Down on Church’s ‘Troubling Tweets’

Caleb Newquist
May 21, 2010

You house of worship types are probably used to hearing politically toned sermons coming from your clergy(wo)man but a nonprofit holy house flat out telling its congregation, “Get out there and vote for [candidate soon-to-be caught up in a lurid sex scandal]!” would be venturing into some tricky waters.

Well, the Americans United for Separation of Church and State seems to have caught wind of a church who ventured. The AU claims that the Oasis Church in Los Angeles was openly supporting its Director of Social Justice’s, Alex Jones-Moreno run for reelection to the Greater Wilshire Neighborhood City Council on its website and on Twitter:

Americans United was not amused by this, sending a complaint to the IRS and putting out a press release:

“Oasis Church’s appeals might have been innovative, but they still violate the law,” said the Rev. Barry W. Lynn, executive director of Americans United. “Federal law bars churches and other tax-exempt non-profits from electioneering. The IRS should crack down on these troubling tweets.”

We called the IRS in Los Angeles, who was not aware of the story and we were told the usual yarn of “we can’t comment on individual tax cases,” which we were expecting but the IRS PR folks are always nice people and we like a pleasant voice every now and again.

Anyhoo, we did stumble across the IRS Tax Guide for Churches and Religious Organizations, that says the following on page 5 (our bolding):

Churches and religious organizations, like many other charitable organizations, qualify for exemption from federal income tax under IRC section 501(c)(3) and are generally eligible to receive tax-deductible contributions. To qualify for tax-exempt status, such an organization must meet the following requirements (covered in greater detail throughout this publication):

• the organization must be organized and operated exclusively for religious, educational, scientific, or other
charitable purposes,
• net earnings may not inure to the benefit of any private individual or shareholder,
• no substantial part of its activity may be attempting to influence legislation,
• the organization may not intervene in political campaigns, and
• the organization’s purposes and activities may not
be illegal or violate fundamental public policy.

Now whether Tweeting = “intervene” we’re not sure but Americans United certainly seems to think so. We’d invite any tax-exempt experts to weigh in.

A message left at Mr Jones-Moreno’s Oasis office was not immediately returned.

Americans United Asks IRS to Investigate Los Angeles Church That ‘Tweeted’ Candidate to Victory [AU]

Bonus Watch ’10: “Performers” Getting More Love at Deloitte

Caleb Newquist
May 21, 2010

Last month we told you about some Deloitte partners in the Northeast that were dropping some “Applause Awards” on “strong performers,” possibly to help calm some nerves.

At that time, our sources indicated that “partners have also hinted at more money coming their way.” It now sounds like those hints are resulting in some greased palms:

[S]ome $1,000 [Outstanding Performance Awards] have been circulating in NE AERS for “performers”. Similar to the $100 applause awards for the larger segment of consultants, I think partners are trying to head off a mass exodus; not sure if the 1k will make a difference; but it does seem to be keeping people from quitting prior to hearing about their year-end comp adjustments

So regardless of what some Deloitte HR types might think, there are partners out there that are worried about people leaving and they seem to understand that throwing a little cash around does wonders for cooling some anxious heads.

Three Study Motivators for the CPA Exam During a Blackout Window

Adrienne Gonzalez
May 21, 2010

Blackout months are notorious for inviting procrastination, especially June. The weather is nice, the work is light, and if you’ve been studying for most of the year, the mid-point can be exactly where you lose what little motivation you had to study. Because you have an entire month “off”, it can be easy to fall into a rut of not studying.

So as we go into this month, let’s remember some ways to stay motivated, even when it’s tempting to run off and play in the sun:

Get a study buddy – Sometimes all you need is someone ~~chewing you out~~ encouraging you to keep going. If you’re doing this alone and know you’re slacking, maybe you need to recruit a friend to keep you in check.

Bribe yourself – Yes, bribing yourself is a pretty low tactic but whatever works, right? Promise yourself a splurge when you pass whatever section you are studying for or, if you’ve got a little extra cash to throw around, bribe yourself often with treats like $4 lattes and DVDs or whatever it is you’re into that won’t break the bank. This goes in reverse – if you aren’t studying and know it, punish yourself by taking away the movie tickets or nice dinners out.

Schedule your exam date close to the opening of the next window – This way you know you can’t blow off the entire month. Obviously this isn’t a good idea if you’re taking FAR and don’t plan on studying until June 1st but if you’re planning on taking a smaller section like BEC and have the time to put it, schedule your exam in the first or second week of the window so you know you can’t procrastinate. I guarantee you’ll only lose one exam fee because of not studying before you learn that particular lesson.

Good luck and if you’ve had luck breaking the procrastination habit, do share what worked for you!

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: Finance Bill Passes Senate, Reconciliation with House Next; Dubai World Reaches Deal with Majority of Creditors; ParenteBeard Announces Emerging Growth Business Practice | 05.21.10

Caleb Newquist
May 21, 2010

Senate Passes Finance Bill [WSJ]
All this fun Wall St. has been having – drawing populist rage, testifying before Congress – will be ending soon, sayeth Majority Leader Harry Reid (D-NV), “When this bill becomes law, the joyride on Wall Street will come to a screeching halt.” The Senate bill still has to be reconciled in with the House version before being sent to the President; the goal is to have the combined bill completed by the end of June.

Dubai creditors agree $14.4bn deal [Accountancy Age]
Deloitte’s restructuring magician, Aidan Burkett, has pulled a rabbit out of his hat for Dubai World. DW has come to an agreement with 60% of its creditors, that will see the conglomerate repay $14.4 billion, in two tranches, over thirteen years.

Opportunities Abound in Tax and Accounting [FINS]
As the economy recovers, the accounting firms have more opportunities in the tax and advisory areas while in the governmental world, the Federal Reserve, FBI and FDIC are looking for accounting professionals. Options are good.

John Burton, a Columbia Dean, Dies at 77 [NYT]
Mr Burton was the first chief accountant of the SEC where he “stiffened the requirements for financial reporting by companies and lobbied accounting firms to take greater responsibility for the accuracy and clarity of the financial records under their review.”

And regarding the accountant’s “undervalued” role in society (largely unchanged today), Mr Burton wrote that accountants had only themselves to blame:

Mr. Burton wrote an essay for The New York Times in which he argued that, yes, accountants were undervalued in society, but that in many ways they were themselves to blame for a lack of creativity and for not seizing opportunities to influence business trends and political decisions.

“Accountants are not primarily record keepers and checkers,” he wrote in the essay, titled “Where Are the Angry Young C.P.A.’s?,” “but measurers of economic and social phenomena whose measurements can significantly influence the allocation decisions of our society.”

ParenteBeard Launches Emerging Growth Business Services Practice [ParenteBeard PR]
Mid Atlantic firm ParenteBeard’s new Emerging Growth Business Services Practice will serve clients in various growth stages utilizing the firm’s resources in “audit and accounting, small business, tax, international tax, SEC and business advisory [services].”

At Which Point the SEC Will Announce That “Things Are Progressing” on IFRS

Caleb Newquist
May 21, 2010

“As we move forward, we are committed to providing public progress reports beginning no later than October 2010 and frequently thereafter until the work is complete.”

~ SEC Chief Accountant James Kroeker’s testimony for tomorrow’s hearing before the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.

Three Things You Need to Remember Now That You’re Promoted

Daniel Braddock
May 21, 2010

Weekends worked: check. CPA passed: (hopefully) check. Blood, sweat, and tears: check, check, annnnd check.

Congratulations! Your hard work has paid off – you’re a newly crowned senior associate or manager. The question is, though: are you ready?

Both promotions<into unpopular clubs. After all, it’s no secret that senior staff members are in a very difficult position. There are budgets to learn, manage, and finagle. Speaking of managing, there’s the staff below and the managers and partners above. Senior staff members may be at the crossroads of the team, but new managers are now forced to the bottom rung of the upper ladder. The track to partner is narrowing down to the final few years; if you thought things were political before being manager, you need to wake up and smell the shifty maneuvering. Here are some tips to help with your newly acquired responsibility: 1. Remember where you came from – This is very much one of those “easier said than done” situations:

Seniors: Chances are you were once a clueless intern, hungry to learn about the fascinating world of public accounting. Sure, interns are overpaid and carry a sense of entitlement – but do you remember what it was like to earn that first intern paycheck?! You bought drinks for all of your Marketing major friends the following semester. And come on – you were definitely a first year, balancing life in a new town, your first “real” job, and moody bosses as old as your parents.

Managers: Simply put, you worked for some awful managers in your day. Remember the nightmares and learn from them. Don’t. Be. One. Of. Those. Managers. Respect your staff; value your senior-in-charge. They keep the wheels turning, after all.

The point I’m trying to hit home is that it is important to remember what your subordinates are going through. This will help you better manage their expectations and mold them into a reliable and loyal workforce. Organize a happy hour or weekday evening event and learn about their interests outside of work. The more you know, the better you can manage expectations, the more your staff will respect you, and the easier your job of handholding will be.

2. Build off your mentor’s lessons – We all have mentors that we look up to. Make an effort to realize what it is about their mentorship that you admire. Embrace those traits, make them your own, and build off of them. Constant improvement should be a daily challenge; a challenge that you accept head on. Seek out feedback from your mentees and staff members. Constant improvement – make it your purpose.

3. This is what you signed up for – There’s not getting around the fact that you’re stepping into a more demanding role in the firm:

Seniors: Managers will expect you to stretch a dime of budget time into a twenty dollar bill. Clients will be up your back and first years will want to know where the bathroom is located. Fact of the matter is this role will really test your personal ambitions of a career in public accounting. But that’s the point, right?

Managers: You’ve reached a very critical plateau in the firm’s hierarchy. Question leadership and thought processes. Get involved with your firm’s committees and organizations. But above all else, set an example for your staff members to respect. People work harder for those that they respect. Earn your staff’s respect.

Daniel Braddock is a former Big 4 human resources professional and auditor. You can read more of his posts for Going Concern here.

Who Wants to Buy John Daly’s House (Sans Kegerator)?

Caleb Newquist
May 21, 2010

If you feel like nothing in life is ever certain, know this – John Daly will always be a weight fluctuating, chain-smoking, boozehound. And every once in awhile, he’ll have some serious money trouble or just go completely broke.

This is usually followed up with a major win which is then followed up by a total blow-up at the next tournament that may or may not involve Big John ending up passed out pantless on the 18th green in the middle of the night.

The guy has managed to make $9 million throughout his career yet still owes the IRS over a $1 million in back taxes for ’07 and ’08, according to a lien filed with filed by the Service with Shelby County.

His house in Memphis is apparently for sale, for just a smidge under $700k. So if you’re in the market, help the guy out.

Judging by the pics, you’ll have to schlep in your own kegerator and you’ll likely have to replace the carpet due to the ubiquitous cigarette burns but it still looks like a pretty nice pad.

IRS grips, rips golfer John Daly [Tax Watchdog]

Don’t Get Too Anxious to Stuff Just Anything into Your IRA

Joe Kristan
May 20, 2010

Individual Retirement Accounts are a taxpayer’s dream, with constraints. The income they earn isn’t taxed until you distribute it; with a Roth IRA, it may never be taxed. It’s only natural for taxpayers to stuff anything they can that might generate income into an IRA.

That can be a terrible mistake.

Not everything is tax free in an IRA. Interest, dividends, capital gains – that stuff is fine. But beyond that things can get ugly.

Most problems arise when taxpayers try to use their IRAs to finance business ventures. Because IRAs are shirttail relatives of qualified pension and profit sharing plans, many pension plan rules, like those for prohibited transactions, bedevil IRAs, with taxes that can exceed 100%.

When an IRA owns an interest in a “passthrough” entity – usually a partnership, because most S corporations can’t have IRA shareholders – another complication arises. The tax law frowns on tax-exempt competition for taxable business. The frown takes the form of the “unrelated business income tax,” or UBIT. The UBIT hits otherwise tax-exempt entities with an income tax on their “unrelated business income.”

If an IRA owns an interest in a partnership (most LLCs are taxed as partnerships) that operates a trade or business, the IRA’s LLC income may be subject to UBIT, which applies at corporate tax rates. UBIT can also apply to an IRA if it owns an interest in mortgaged rental real estate. Some IRAs even run into UBIT by investing in publicly-traded energy partnerships, like Buckeye Partners, LP. Many states also have unrelated business income taxes.

The partnership is required to break out unrelated business taxable income and report it to the IRA. The IRA in turn must provide a tax identification number to the partnership to make it easier for the IRS to follow the UBIT to the IRA.

When an IRA is subject to UBIT, it can cause some awkward moments between the IRA investor and the trustee. Most IRA trustees want nothing to do with filing Form 990-T, the UBIT return. Of course the IRA owner doesn’t like the idea either, but it needs to be done. Having income tax in an IRA is especially ugly when it’s a Roth IRA, which normally would otherwise be tax-exempt forever, inside and out.

The threshold for filing a 990-T is “gross income” of $1,000 or more. Gross income is normally higher than taxable income – it is the IRA’s share of gross receipts less cost of goods sold, not reduced for any other expenses.

So be careful what you stuff into your IRA. Just because you can put something in there doesn’t mean you should.

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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