Going Concern

News

The “Red Flags” Rule is Still Useless for CPAs

Adrienne Gonzalez
May 3, 2010

In more government bureaucracy news, the FTC is granting a reprieve to CPAs when it comes to a new law that deals with identity theft, one which some CPAs say is useless given professional responsibility.

The new FTC rules requires businesses to “develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities -– known as ‘red flags’ — that could indicate identity theft.” The problem with that, of course, is that the AICPA Code of Professional Conduct already deals with the issue of identity theft in that there is an iron-clad confidentiality rule by which all CPAs must abide. Seems simple, right?

The US District Court has ordered an FTC delay of the rule for AICPA members in public practice, says the Maryland Association of CPAs. Barry Melancon, AICPA President said in 2009 when the AICPA filed a lawsuit against the FTC, “We do not believe that there is any reasonably foreseeable risk of identity theft when CPA clients are billed for services rendered. As trusted advisors, CPAs are personally acquainted with their clients and already adhere to strict privacy requirements governing identifying information.”

Don’t take it personal, Barry, the FTC is just trying to do its job, even if that means overreaching its authority and attempting to place restrictions on professionals who already go above and beyond the intent of the FTC on a daily basis.

In the meantime – and just in case the rule cannot be delayed indefinitely (as is, implementation has been put off until June 1, 2010) – the AICPA has some guidance for CPAs on creating an identity theft prevention program. Keep in mind the new requirements, if implemented, only affect CPAs who bill their clients on a monthly or revolving basis as it is meant to place additional controls in client billing.

The American Bar Association is also fighting the rule.

Another ‘Red Flags’ delay: CPAs get 90 more days [CPA Success]

News

Former PwC Senior Manager Charged with Supporting Terrorism

Caleb Newquist
May 3, 2010

Late on Friday, two men were charged with conspiring to support al-Qaida, including a former senior manager at PricewaterhouseCoopers, according to the AP.

Wesam El-Hanafi a computer engineer, and Sabirhan Hasanoff, the former P. Dub SM, were both in court on Friday after being arrested overseas and returned to the United States from Dubai.

The AP reports that the “vaguely-worded” indictment states that El-Hanafi was instructed by al-Qaida “on operational security measures and directed him to perform tasks for al-Qaida” and that Hasanoff was paid $50,000 by an unnamed co-conspirator and was ordered to perform unspecified tasks for AQ in New York.

The U.S. Attorney was quoted that the two men are accused of helping “to modernize al-Qaida by providing computer systems expertise and other goods and services,” which involved purchasing seven Casio watches (?).

Prosecutors described Hasanoff only as a dual citizen of the United States and Australia who has lived in Brooklyn. Public records show he has a Queens address and is a certified public accountant.

A professional networking site says a Sabir Hasanoff was a senior manager at Pricewaterhouse Coopers who graduated from Baruch College in Manhattan. Pricewaterhouse spokesman Kelly Howard said the accounting firm employed Hasanoff from 2003 to 2006.

This LinkedIn profile shows the details reported by the AP. A call to PwC was not immediately returned.

The Sydney Morning Herald reported that Hasanoff’s brother and sister-in-law had not spoken to him in 12 years, “No, he was never in trouble. I don’t know what’s happened now. He studied at a private school. Maybe he has changed. I don’t know if he’s a good person or a bad person because we haven’t been connected now for a long time.”

We’re not insinuating that his time at PwC was the reason for his lifestyle change but three years at any Big 4 firm would change anybody. That being said, turning to terrorism is deplorable. Couldn’t he have developed a dependancy problem of some kind instead?

2 men charged in NYC with supporting terror [AP]
2 U.S. men charged with aiding al-Qaida [UPI]
Australian ‘linked’ to al-Qaeda [Sydney Morning Herald]

IFRS

For Some Large Companies, IFRS Is the Financial Reporting Equivalent of Y2K but What About the Little Guy?

Caleb Newquist
May 3, 2010

It turns out that for many of the largest global companies, all this IFRS anxiety might be completely overblown. Companies with massive accounting departments and gurus leading the IFRS charge don’t seem to be all that concerned about accounting adjustments or costs, two areas that could cause headaches for smaller companies that are forced to adopt IFRS.

At the accounting conference at Pace University last week, some of the accounting gurus from the largest global companies reacted to the switch with “meh”:

They will be “underwhelmed,” says Aaron Anderson, director, IFRS policy and implementation at IBM…”When I look at the impact on IBM and compare it to whether investors will care, frankly, I don’t think they will.”
…
He pointed out that if the company moves all of its financial reporting to IFRS — and some of its foreign subsidiaries are already reporting under the international standards — the change wouldn’t be material in areas that investors “care about,” such as service contracts and product backlog, which are “numbers that are not reported in GAAP, anyway.”

Unfortunately, not every company has the good fortune to have a “Director of IFRS Policy and Implementation.” For some small businesses, the IFRS adoption could very well be headed up by the CFO of the company, assisted by the controller, with a couple of senior accountants pitching in. If things really get complicated (we’re talking about accounting rules, after all), then consultants could be called in to straighten help out but at what cost?

But even companies that do have someone spearheading this effort have a few concerns. Alcoa’s IFRS implementation director said the company won’t be on board until the inventory and derivatives issues have been worked out but everything after that will be NBD:

Klingler said that Alcoa won’t bless a conversion to IFRS until issues around inventory accounting are settled. Currently, Alcoa and other U.S. companies receive a tax benefit from using the last-in, first-out (LIFO) accounting method, which is banned by IFRS. Being forced to dump LIFO could cost those companies significant cash tax payments.

Alcoa executives are also concerned with understanding how hedging rules will change, said Klingler, since the company is a commodities supplier. However, “everything else will be small numbers” with respect to accounting adjustments, he said.

So a couple big ticket issues that will certainly be resolved and then Alcoa will be marching to IFRS no problem. For small companies, dumping LIFO or figuring out hedge accounting (again) could have a huge effect.

Back to the money issue. Many are worried that since the last big change in the industry — Sarbanes-Oxley — resulted in huge compliance costs, companies will spend another king’s ransom to adopt IFRS. But again, for the largest companies, they’ve more or less got the cost of conversion nailed down and aren’t that concerned:

Anderson conceded that switching to international standards will require “a lot of work,” but added that IBM, which has already started the process of preparing for a switch, knows “within a tight range” what it will cost — and in relative terms, “it won’t be very much.”

The concession of “a lot of work” is the cause for concern for small companies. Naturally, the more complex a business, the more work will be required to adopt IFRS but at least those companies have the manpower and the resources to weather the initial learning curve. Smaller companies may find themselves short staffed which could result in need of outside expertise (and thus spending a small fortune) to make adoption happen.

Unfazed by IFRS [CFO]

Accounting News Roundup: Rajaratnam Claims KPMG “Tricked” Him into Illegal Tax Shelter; United, Continental Agree to ‘Merger of Equals’; Some Thoughts on iPad for Accountants | 05.03.10

Caleb Newquist
May 3, 2010

Galleon’s Rajaratnam Said He Was Duped in Illegal Tax Shelter [Bloomberg Businessweek]
Raj Rajaratnam, who is awaiting trial in an insider trading case set to take place this fall, claimed that he was “tricked into investing in an illegal tax shelter,” that was developed by KPMG and “tax shelter promoter” Diversified Group, according to a lawsuit from 2005.

Rajaratnam and Galleon co-founder Gary Rosenbach won a $5.8 million in an arbitrator’s judgment against Diversified Group and its president in 2009. KPMG was not mentioned in the judgment and neither Rajaratnam’s attorney nor KPMG would comment on the current r if the firm had made a payment to Raj.

Rajaratnam and Rosenbach said they were induced to invest in a shelter called “OPS,” or Option Partnership Strategy, which was developed by KPMG and Diversified as a way to generate fees for the firms.

“The OPS shelter was essentially an illegal basis-shifting scheme which — unbeknownst to plaintiffs — relied upon a disingenuous reading of the federal tax code,” his lawyers wrote in the complaint.

Prosecutors will be interested to know what Rajaratnam said under oath in his suit against KPMG to determine if any of his statements will be useful in their insider trading case.

United, Continental Agree to Combine [WSJ]
United Airlines and Continental Airlines have agreed to combine, in a stock swap valued at $3 billion.

The “merger of equals” would create the world’s largest airline that would control 21% of the total domestic capacity and be 8% larger than Delta Air Lines in terms of miles flown, serving 370 destinations. Assuming the deal does not raise any antitrust concerns and contracts for employees are approved in a timely fashion, the companies plan to complete the transaction in the 4th quarter of this year.

iPad for business – the taste test [ZDNet]
Dennis Howlett tested out an iPad and since some of you have, at the very least, wondered about it for your own professional use, here’s his take on Numbers, a spreadsheet application that he says is “gorgeous to look at” but has several drawbacks:

I found it was possible to create a confusing error formula. Ahem. That will require fixing. While Numbers has masses of functions (see illustration), there is no ability to create Pivot Tables. Those are the accountant’s stand by for reporting and the like. It’s boring but essential stuff. Without Pivot Tables, the iPad won’t get a sniff in the hands of this powerful and influential group. There is an alternative for the future. Some smart developers out there will build reporting applications that can run over the Internet. It is one of the gaping holes in the SaaS/cloud story requiring urgent attention.

Any other thoughts on iPad for accountants? Weigh in.

IIA Proposes New Standards for Internal Auditors [Compliance Week]
The Institute of Internal Auditors is requested comment on proposals for new standards that would include a requirement for internal auditors to provide audit opinions and to additional explanation of the responsibility of internal auditors for the work of contractors.

Grant Thornton closing Triad office, moving operations to Charlotte [Triad Business Journal (subscription required for full article)]
Grant Thornton finally got around to announcing the closure of its Greensboro/Triad office. We reported on the closure back in February. The firm announced that the “vast majority” of its approximately 30 employees would be moving to the firm’s offices in either Charlotte or Raleigh. The TBJ reports National Director of Communications, John Vita’s comments: “We remain committed to the Triad marketplace, however, we believe it can be best served over the long term by attracting the highest quality professionals who wish to work out of our larger offices in Charlotte and Raleigh.”

Quote of the Day

Putting the Success of the Homebuyer Tax Credit in Perspective

Adrienne Gonzalez
May 1, 2010

“Yes, it is a success, if the objective was to demonstrate that people will take free money if you give it to them.”

– Joe Kristan, explaining the success of the homebuyer tax credit program, which ends today.

Don’t Bank on a Tax Refund Loan Next Year

Adrienne Gonzalez
May 1, 2010

JP Morgan has sent out notice to 13000 tax preparers that it plans to discontinue its refund loan operations, leaving tens of thousands of taxpayers with a snowball’s chance in hell of getting a front on money due back from the government come tax time.

This is nothing new for tax preparers. Last year, Jackson Hewitt announced that its RAL (Refund Anticipation Loan) funding was down to about 50%, meaning it could only cover half of the RALs it anticipated it would be asked to process come tax time. The problem came from Santa Barbara Bank & Trust, who funded about 75% of Jackson Hewitt’s RALs, after it was told by the Comptroller of the Currency that it had to increase its capital ratios and quick. SBBT may not have been able to buff up its capital levels but you can buff up your own by following these tips to decrease your “rebate” from Uncle Sam so you aren’t standing around waiting for Treasury to cut you a check:

Keep your exemptions in check This is the easiest, simplest, most obvious solution. If you’re waiting for a huge refund check every year, maybe it’s time to reevaluate the tax position you’ve held since you were in college.

If you’re still in a rush, e-file Sure, it’s not instant, but you’ll get your refund a lot quicker by e-filing than you will the good old fashioned snail mail way. National figures show 60% of Americans used e-file last year, leaving the USPS SOL once again.

File early Again, this seems obvious but if you want your money quicker, file at the front of the line. Americans are procrastinators so if you’re one of the first anxious little taxpayers out of the 1040 gate, chances are your refund will get processed faster.

Hey Ladies, Have You Thought About Working for BDO?

Adrienne Gonzalez
April 30, 2010

As most of us know, women are overrepresented in public accounting yet not necessarily rewarded for their hard work, dedication, and deftness in handling both career and family (for first and second years, substitute “family” for “sleeping with hot coworkers”). Knowing that, we’re thrilled to tell you that BDO has been chosen as one of the 2010 Best CPA Firms for Women by the American Society of Women Accountants and the American Woman’s Society of Certified Public Accountants. The award is an initiative of the ASWA and AWSCPA joint Accounting/MOVE project, a national research effort to measure progress and advance women at public accounting firms and corporate accounting employers.

The Accounting/MOVE project was especially impressed by BDO’s promotion of women within the firm tied directly to BDO’s training and retention initiative.

If you recall, BDO was conveniently left out of the Working Mother 100 best companies in 2009 list last year.

As a working mother AND woman myself, I find it appropriate to point out that not all women are mothers so it doesn’t necessarily mean any progress has been made on BDO’s work/life policies. It would be awfully presumptuous of everyone – and, frankly, a tad sexist – to assume as much. For some women, work/life balance simply means spending less time at work and more time hooking up with coworkers or pursuing other hobbies and activities that don’t involve dirty diapers and scrubbing crayon drawings off of the wall.

BDO Named a Best CPA Firm for Women by American Society of Women Accountants and American Woman’s Society of CPAs [Business Wire]

The IRS Would Like to Remind You That They are Not Spammers

Adrienne Gonzalez
April 30, 2010

With tax season over, scam season has begun and the IRS wants to be sure that you know they will never send you unsolicited e-mails or request identifying information about you a la PayPal scams. Because, you know, they’re helpful like that. Since many of you are waiting patiently by your mailbox (or bank statement if you E-filed for direct deposit) for your refund checks, it’s all that much more important to be on the lookout for these kinds of tricks hitting your inbox.

Protect yourself, little taxpayer, and know that the IRS is here to help make sure you don’t get scammed by unscrupulous impersonators:

The IRS does not send taxpayers unsolicited e-mails about their tax accounts, tax situations or personal tax issues. If you receive such an e-mail, most likely it’s a scam.

IRS impersonation schemes flourish during filing season. These schemes may take place via phone, fax, Internet sites, social networking sites and particularly e-mail.

Many impersonations are identity theft scams that try to trick victims into revealing personal and financial information that can be used to access their financial accounts. Some e-mail scams contain attachments or links that, when clicked, download malicous code (virus) that infects your computer or direct you to a bogus form or site posing as a genuine IRS form or Web site.

Some impersonations may be commercial Internet sites that consumers unknowingly visit, thinking they’re accessing the genuine IRS Web site, IRS.gov. However, such sites have no connection to the IRS.

IRS Spokesperson Jennifer Henrie-Brown gave us a few tips for avoiding scams and reporting sketchy e-mails to the Service to combat the spamming problem: “The IRS does not initiate taxpayer communications through e-mail and does not request detailed personal or financial information through email. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site, you should not reply. Do not open any attachments or click on any links. Doing so may download malware that can damage your computer or allow remote access to your hard drive,” she told us.

What do you do if you get one of these weird, misspelled, bad-grammar-infested fake e-mails claiming to be from the IRS? “If you receive a suspicious email claiming to be from the IRS, or Web addresses that do not begin with http://www.irs.gov, you can relay that email to IRS mailbox phishing@irs.gov. IRS can use the information URLs and links in the suspcious emails you sent to trace the hosting Web site and alert authorities to help shut down the fraudulent sites.”

Suggested reading: Online Scams that Impersonate the IRS [IRS]

KPMG
News

(UPDATE) Friendly Reminder to TierOne Bank: Today Is the Last Day to Get Your Act Together

Adrienne Gonzalez
April 30, 2010

Catch up, we covered this on Sunday night: In a bizarre piece of auditing news released late on a Sunday night, KPMG has verbally resigned as Nebraska-based TierOne Bank’s independent auditor, withdrawn its audit opinion for 2008 and taken back its review of TierOne’s financials for the quarter ended March 31, 2009. Citing risk of material misstatement, KPMG has also warned the audit committee that TierOne’s financials are not to be relied upon by investors.

Well today is April 30th and that means TierOne has run out of time to get its shit together to please the OTS. Meanwhile, KPMG is still paddling away in the lifeboat before the ship sinks but with a week’s head start, we’re sure they’ve gotten far enough away from the scene of the crime to be entirely unaffected by the outcome, whatever it may be.

In a textbook case of he said/she said, TierOne is a little butthurt that KPMG would suddenly change its tune and bail on the bank so close to such an important deadline. Adding insult to injury, KPMG claims that TierOne destroyed a document on specific reserves required by the OTS, even though the auditors had requested the document more than once. TierOne claims that it gave the document to both the OTS and KPMG as requested. TierOne also enthusiastically states that not once did KPMG express any concerns about the bank’s condition until just before bailing on the bank and resigning from the audit.

We’ll update if the FDIC moves in later this afternoon and takes down TierOne.

UPDATE: TierOne tried to sell itself to Great Western Bank but the deal was shot down by the OTS. The $2+ billion bank is sort of just sitting there exposed in the open without an auditor and no real plan, you can pretty much guess what happens from here. Meanwhile, it was a busy Bank Fail Friday but TierOne was not among them. See you next week?

TierOne sale plan due today [Lincoln Journal Star]

Career Center

Job of the Day: UBS Needs an Accounting Director

GoingConcern
April 30, 2010

UBS is looking for someone to join their Fixed Income, Currencies and Commodities (FICC) Structuring Group at the Director level who has expertise in both U.S. GAAP and IFRS.

The position requires four years of relevant experience, and a CPA. Experience in a Big 4 transaction services group is ideal. This position is located in Stamford, CT.

Company: UBS AG

Title: Executive Director/Director – FICC Structuring – Accounting Expert

Location: Stamford, CT

Responsibilities: The candidate will be expected to (1) Structure and execute transactions, and (2) Support the Structuring Group in analyzing and structuring the accounting aspects of transactions. The candidate will report to Head of US RATL.

Qualifications/Skills: The ideal candidate will have practiced accounting in a transaction services group at a Big 4 accounting firm with experience in US GAAP and IFRS. The candidate should have a track record of innovation/creativity. Minimum of 4 years proven relevant experience; 4 year Bachelor’s degree or international equivalent; CPA.

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

When a Tax Time Bomb Goes Off: Repurcussions Await Some Small Nonprofits

Joe Kristan
April 30, 2010

At the end of the day on Monday, May 17, hundreds of thousands of little tax-exempt organizations will to turn into taxable little pumpkins. Under a provision of the Pension Protection Act of 2006, tax-exempt organizations that had been small enough to fall below IRS filing thresholds were required to start filing information reports. The law automatically revokes the exempt status of organizations that fail to file for three straight years. The deadline for that third year is May 17 for calendar-year filers.

Of course many of these organizations are inactive or defunct, but many aren’t. That means thousands of volunteer garden club, school parent organization and social club volunteer treasurers will unwittingly find themselves in charge of filing tax returns for their newly-taxable little corporations.

If you are an exempt organization treasurer or board member, you should find out right now whether your organization has filed. If your organization normally takes in less than $25,000 per year, the filing is a very simple on-line process, mostly just asking for identifying information. Bigger outfits will have to file a version of Form 990. If you need extra time, you can get a three-month extension on Form 8868. Some organizations, mostly governments and religious entities, are exempt from the filing and revocation rules.

But what will happen when these outfits lose their exempt status? They can ask for it back retroactively by filing Form 1023 or Form 1024 and paying a fee from $250 to $800. But many of these outfits will have no idea that they have lost their exempt status. What happens to them?

Most will become taxable C corporations or, in some cases, a taxable trust – depending on how they are set up. They will have income – for example, from contributions or dues – and they will be subject to normal Form 1120 filing requirements. If they fail to file, the normal kind and gentle penalties will accrue. Nobody really knows what the IRS will do about all of these little unwitting scofflaws.

And for what? Senator Charles Grassley explained back when the bill was passed in 2006:

The pension bill includes a good package of charitable giving incentives and loophole closers. It makes sense to tighten areas of abuse while increasing incentives for charitable giving. Americans are very generous with their donations. They deserve to know that their money helps the needy, not the greedy. Some individuals are creative about exploiting non-profits’ tax-exempt status for personal gain, and Congress has to be just as smart about shutting down abuse.

So take that, you greedy, abusive volunteer booster club treasurers! @ChuckGrassley has your number.

CPA Exam

All About the 4.5th Section of the CPA Exam: Ethics!

Adrienne Gonzalez
April 30, 2010

We covered Ethics before but since this is the last in our daily columns this week on the CPA exam, it’s a good way to wrap things up. Once again, if you are looking for CPA exam tips, tricks, hints or just have an idea for a topic you’d like to see addressed here, get in touch with us.

Last time we talked about the ethics exam, we suggested the following:

Speak to your state society of CPAs to find out if they offer some kind of ethics exam support. Helplines exist but you’ll never find them if you don’t look.

Because the ethics exam is open book, not timed, and allows potty breaks (unlike, say, FAR), take your time and don’t rush through it. You have more than 1.5 minutes to read through and answer the questions, take advantage of this fact.

If all else fails, try to find a lifeline. The CalCPA Education Foundation gives you a “lifeline” if you have unsuccessfully attempted their ethics exam three times.

A few more things to keep in mind:

If possible, choose the Online version of exam materials in searchable PDF form so you can search for keywords that will answer the questions. It beats flipping through a book and is often cheaper than the book version of the exam anyway.

Don’t take the ethics exam too early or you may have to take it again. If you decide to take the ethics exam before you have completed all four parts of the CPA exam, be sure you know how long your score is good for (probably a year max). You don’t want to have to take it twice so wait until you are at least 3/4 of the way through the exam or completely finished to tackle ethics.

Though review courses don’t have coursework on ethics, there are tons of resources available that consist of tips from others who have taken and passed the ethics exam. Start with the CPAnet forums, plenty of candidates and would-be CPAs have shared their experiences and many are happy to help if you have specific questions about how they did it.

Hope that helps and thanks for joining us for this week of CPA exam goodness!

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