Going Concern

News

Accounting Porn Does Not Involve a Guy Coming By to Fix the Cable

Caleb Newquist
March 10, 2010

AG profiled Professor David Albrecht last week, which was an honor and a privilege for everyone involved. The Professor’s contributions to the accounting blogosphere are invaluable. Staying consistent with his priceless musings, his latest post asks an important question: “What Is Accounting Pornography?”

Now since we’re sure the professor wants us to think hard about this question, we’ll kindly oblige him.

Done.

As you might expect, this question has nothing to do with your particular taste in ladyboyx.com or whatever else the SEC staff might have turned you on to. No, this is more of the strange reading and/or viewing material that you might just enjoy a little too much (e.g. Lat’s proclivity for the Harvard Law faculty directory).

Okay, here are a few answers that come to mind:

• Any internal report that you stumble across that details upcoming layoffs.

• For Sam Antar and the rest of you sleuthy types, the notes to Overstock.com’s financial statements.

• For the weirdos, it could be watching Big 4 CEOs’ banal talking points with a snowy backdrop. Or the thought of Jim Turley in his Timberlands.

• For the sickos, nightmare CPA exam stories that end in a grade of 74.

If there’s something else that gets you off (Ben Bernanke testimony doesn’t count, AG) feel free to share. Just try to keep it relatively clean. In the meantime, we’ll be flipping through the Enron script.

What Is Accounting Pornography? [The Summa]

Three Signs That It Might Be Time to Get Out of Public Accounting

Daniel Braddock
March 10, 2010

Busy season is rounding the corner and, if you look carefully, you might be able to see the light at the end of the tunnel. Squint. No I swear, it’s there.

My posts this week will shift from social media to the potential job market. As a public accountant, you should always be cognizant of the fact that you have the ability to continuously develop your strengths and mold your career path. Want to pursue of a career in hedge funds? Network within your firm to be staffed on the right engagements. Need to add tax experience to your resume? Seek out a rotation.

Here are three signs that you should get you thinking about exploring your options.

1. You’ve got your CPA – This might go without saying, but many people enter the public accounting industry with the “two years and done” mentality. Pass the CPA, earn some experience stripes, and get the *$@% out. There’s nothing wrong with this, but don’t expect to $100K jobs to be jumping into your lap. The average salary bump for younger staff from public to the private sector can range from 5-10%, usually topping out around 15%. If this isn’t enough of a bump to seriously consider a private job, don’t lose sight of the quality of life improvement a new job can bring. No, not the smoke and mirrors your firm is promising you. The real deal.

2. Someone you know is interviewing – Believe it or not, the job market is actually improving. The hiring freezes on many financial firms is now limited largely to supporting roles (i.e. HR folks like myself). Hedge and private equity funds are picking up their hiring as the markets begin to thaw. Recruiters are not wasting their time with interviewing individuals for the sole purpose of interviewing. So take note next time your senior staff member has three doctor appointments in a week; perhaps you should be “coming down with a nasty bug,” too.

3. Recruiters call – and you listen – Speaking about recruiters, be prepared for an onslaught of calls. Their timing is no coincidence. The private sector has been shuffling around over the last few months (remember when your client contact suddenly went MIA?), and as the cycle goes, the newly opened private jobs will inevitably be filled by auditors and tax accountants from public. Listen to the cold, scripted calls; be open to a pay increase and better work hours; reclaim your weekends. It can’t hurt to listen to the (substantiated) claims that you’re undervalued in today’s market.

Newsflash: you are grossly undervalued.

Grant Thornton Was Not Impressed with the SEC’s Waffling on IFRS

Caleb Newquist
March 10, 2010

We really weren’t expecting much of a reaction from accounting firms on the SEC’s conclusion that there’s no rush on the IFRS issue. The Commission statement that it supports “a single set of high quality accounting standards” was good enough for PricewaterhouseCoopers, who issued a press release the day of the announcement.

The press release sounds eerily similar to the SEC’s statement with a quote from Bob Moritz thrown in for good measure:

“PricewaterhouseCoopers continues to support the goal of moving toward a single set of high quality global accounting standards,” said PricewaterhouseCoopers LLP U.S. Chairman and Senior Partner Bob Moritz. “We believe that IFRS is in the best interest of stakeholders, including investors both here and globally. We are, therefore, encouraged by these statements from the SEC.”

So PwC is encouraged by the recent development. This isn’t shocking. P. Dubs will be on board because they don’t strike us a bunch that will rock the boat. Presumably, any a hint of discontent from the Firm could potenitally jeopardize their ubiquitous magazine list presence.

On the other hand, we were surprised to see this Tweet from Emily Chasan of Reuters that pointed us to the Grant Thornton press release that came out today.

GT was NOT IMPRESSED with the SEC’s latest commitment to non-commitment, “like many in this country and elsewhere, we were hoping that the SEC would announce a mandatory date for switching to IFRS by U.S. public companies. Instead, the Commission reaffirmed that it expected to decide in 2011, provided resolution of certain issues.”

Now in case you’re questioning GT’s sincerity in this matter, they make their case for why this feet dragging is unacceptable:

Whether the U.S. races or crawls toward IFRS could mean the difference between staying in front or falling behind. The rest of the world is moving forward, boldly. Major economies like Japan, China and India have already chosen IFRS. It is unrealistic — and risky — to think that we can stand outside looking in forever. If we don’t want our influence and opportunities stripped away, we must make sure that we keep a seat at the table.

This is probably as insubordinate as you can expect an accounting firm to get over an issue that is “largely academic” but it is refreshing to see a little public honesty out of GT.

Grant Thornton LLP statement regarding SEC and IFRS Roadmap [Press Release]
PricewaterhouseCoopers States Support for SEC Move Toward Single Set of High Quality Accounting Standards [Press Release]

Career Center

Job of the Day: Global Wealth Manager Needs a Head of Financial Control

GoingConcern
March 9, 2010

Ashton Lane Group has a global wealth manager client in need of a Head of Financial Control who can implement and maintain existing and new control frameworks.

Candidates should have a minimum of seven years experience and a CPA license. Knowledge of SAP is a plus.

Get more details on the position, located in New York, after the jump.

Recruiter: Ashton Lane Group

Title: VP Head of Financial Control

Location: New York

Minimum Experience: 7 years

Description: Build and lead the financial control team within a global wealth manager.

Responsibilities: Lead a team of up to five entity controllers; Responsible for the monthly general ledger control and account reconciliation processes, ensuring that a robust control framework is embedded and maintained; Represent team at monthly Letter of Representation meetings and escalate any material issues; Review existing end to end revenue processes and implement new controls as the business expands; Support the launch of a new Trust entity and set up the control framework and associated regulatory and statutory reporting;

Qualifications: 7+ years financial control experience within financial services; Understanding of Capital Management principles; Experience of finance process design and implementation; Knowledge and experience of SAP an advantage; Bachelors’ degree or equivalent. CPA/CA preferred.

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

CFOs

Prudential Plc’s CFO Turned CEO Makes the Big Deal

GoingConcern
March 9, 2010

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

CFOs around the world are looking on in a mixture of admiration and jealousy at the success of a former member of the ranks. Tidjane Thiam, CEO of the U.K.’s Prudential PLC is in the process of trying to pull together what must be the biggest deal of his life. The potential $35 billion takeover of AIA will, at a stroke, convert the company from a rather staid UK life insurer into a fast growing Asian financial services behemoth.

This is not the way that text books say it should happen. Generally when a CFO is elevated to the CEO position – as happened to Thiam in the middle of last year – it is usually because there is some dreadful financial crisis looming that only an experienced CFO can really manage. Indeed the promotion of the CFO to the CEO position is likely an admission that there will not be any major strategic moves, rather a relentless of pursuit of cash, debt repayments and risk hedging.

What makes Thiam’s move even more remarkable is that it was reported that he tried to scupper the plans of his predecessor Mark Tucker when he was thinking of making a bid for AIA a year ago. Cynics might say that he wanted to do the deal himself.

Other ex-CFOs of banks, who now find themselves in the top seat, could be forgiven for feeling pangs of jealousy at what Thiam is trying to do. For instance, Stephen Hester, the CEO of RBS is the ex-CFO of Credit Suisse. His job is now all about finding ways to offload toxic assets, keep bankers from leaving and trying to explain to a furious public why bankers need to be paid even if the bank suffers a loss. How much more fun to throw the whole institution at a deal that will not only define a decade but transform the geographic and growth profile of the business.

The trend of promoting CFOs to CEOs is only around 15 years old and can be partly attributed to the private equity business. Once companies are bought out by PE firms, the first priority is to manage the financials as tightly as possible, paying down the acquisition debt and serving interest before arranging an exit. This placed great emphasis on financial skills as opposed to strategic vision. Just such a situation happened last week when Carlyle led a group of investors in a $550 million deal buying into Bank of Butterfield in Bermuda. In the process, the existing CEO Alan Thompson left the bank. His successor? Bradford Kopp, the CFO.

The promotion of the CFO to the top spot can be seen as an admission that all the focus will be on the balance sheet and not the income statement. That could explain why CFOs at Goldman Sachs and HSBC – David Viniar and Douglas Flint respectively – tend not to be mentioned as the next CEOs of the banks; these institutions have very strong internal strategic cultures matched by fortress balance sheets. An admission that either is needed in the top spot would be a sign both of a weak culture and balance sheet. But with Thiam now pioneering the way, it can be shown that CFO’s can make great strategic CEOs. Who will be next?

News

Are Accountants at a Higher Risk of Experiencing Workplace Violence During Busy Season?

Caleb Newquist
March 9, 2010

Seems like logical conclusion, right? Okay, it’s not the post office but yeesh, have you noticed the bitter Bob in the cubicle next to you? Is he approaching the breaking point? Busy season sucks after all and who knows when he’ll eventually crack:

Is our suggestion that accountants might be more likely to snap a little overblown? Maybe. But read this description from AccountingWEB before you blow us off:

You are sitting at your desk on a sunny Thursday afternoon. Your company is experiencing some hard times, and there have been layoffs company wide. A co-worker has been part of the layoffs, and is very distraught. The co-worker may have known layoffs were eminent, and thought it would never happen to them. All of a sudden, the co-worker pulls out a gun and starts shooting up the office!

Sound familiar? Of course! We imagine that someone throwing their 10-key at your head is more likely scenario but violence is violence. The article cites OSHA stating that 2 million people are victims of workplace violence every year but what’s even more exciting/troubling is the BLS survey that “70% of workplaces don’t have any type of violence prevention program in place.”

The solution? Training of course! AccountingWEB breaks it down like this:

• “Train managers and supervisors on how to detect the early warning signs of potential violence” – In other words, you know that guy who says ALOUD he’s thinking about punching the next person that asks him a stupid question? You should probably should have a word with him.

• “Tell employees that the firm wants to know about any threats or incidences, and that they are extremely serious about handling these problems.” – Naturally it helps if your company follows through on “serious about handling these problems” part. In other words, the guy swinging the sledge around should be tarred and feathered and then fired in front of the entire company. The proceedings should be broadcast internally for those that can’t attend in person. It’s simply not enough to fire the person. Public humiliation is imperative so people get the picture that this shit won’t be tolerated.

• “Implement a zero tolerance policy in the handbook relating to workplace violence” – And by zero tolerance, we’re talking no noogies, wedgies, open handed slaps, arm slugs, bloody knuckle contests or even berating someone to the point that they develop an eating disorder.

Violence in the Workplace: Are You Next? [AccountingWEB]

The Purpose of PricewaterhouseCoopers’ New HR Service in India Isn’t Entirely Clear

Adrienne Gonzalez
March 9, 2010

PwC has launched a new HR service in India and one can only speculate as to the inspiration behind staging the move there (I’ll give you a hint: it starts with Satyam and ends in fraud) but let’s take a look at the official spiel before we rush to judgment.

India’s Financial Express:

Global audit firm, PricewaterhouseCoopers, announced the launch of its human resources service ‘Saratoga’ in India along with India Human Capital Effectiveness survey (HCE), a top company official said.

“Saratoga is the most extensive database of HR metrics available globally. We are launching it in India and we have already got an immense response from Indian companies,” PricewaterhouseCoopers’ Partner and Global HRM network leader, Richard Phelps, told PTI here.

On the surface, Saratoga looks like little more than an inventory count of companies’ human capital, which means something when you have to keep a leash on a bunch of customer service guys with fake first names (how else would you keep track of them?).

See, PwC cares. They care that JP Morgan outsources call center jobs to India – I know this because I’m a Chase customer (leave me alone) and have had the misfortune of dialing in. Meanwhile, JPM’s off-shore hiring spree continues and someone’s got to handle all that “human capital”, why not PwC?

I don’t care that some guy in India has a job, I care that he calls himself Patrick and pretends to have a bizarre hybrid Texas/New Jersey accent. Is there going to be a check box on these PwC Saratoga metrics for guys who fake 50s-style American first names from Indian call centers?

I’m not bitter. It’s good that PwC cares about the global community and wants to reach out to facilitate cheap labor for its audit clients like JP Morgan (for the record I use BofA too and they have the decency to hire air-headed middle-state chicks named Kelly and Sarah).

Could you imagine what would happen if the Fed stepped in and barred PwC from auditing anything that’s moving here in the US? Hell, it happened in India.

Good luck with that human capital census or, uh, whatever it is, PwC. I mean that.

Accounting News Roundup: KPMG Survey: Half of Execs Want Option to Adopt IFRS Early; PW India Plea Rejected on Satyam; Two-thirds of States Have Raised Taxes Since Recession Began | 03.09.10

Caleb Newquist
March 9, 2010

• Half of US execs want to use IFRS early-survey [Reuters]
KPMG surveyed some shot-callers and lo and behold, half of them are ready to get down with International Financial Reporting Standards before the SEC’s target date of 2015. That’s if the SEC is even down with the whole idea.

KPMG’s surveyed also discovered that executives would like the SEC to be a little more transparent with their plans re: IFRS. You know, other than more meetings.

“Many U.S. companies with subsidiaries around the world are already using IFRS for statutory reporting,” said Janice Patrisso, partner and national IFRS leader at KPMG. “For them, having the option to synchronize it all up front at the U.S. company is a positive.”
…
Patrisso said companies with international subsidiaries that have already made conversions to IFRS were looking at the way those units had chosen to use the rules. They are also preparing for changes U.S. and international accounting rulemakers are making to converge the two sets of rules.

It’s nice to see some pushback to the SEC’s waffling. Despite where you fall on the IFRS debate, most people would agree that allowing businesses to make their own decisions about what financial reporting method to use (as long as it is consistent and high quality). Especially since the AICPA recognized the IASB as an official standard setter, thus giving private companies the go-ahead on IFRS, shouldn’t public companies be allowed the same freedom?

While the SEC spends the next five years trying to figure out what all this means, some businesses already see where this is going and don’t want to waste time. The SEC isn’t so enthused.

• PW plea on Satyam probe rejected [Business Standard]
Pricewatherhouse India really wants everyone to forget about Satyam. Their latest plea to the Securities regulator in India, the Securities and Exchanges Board of India (SEBI) has been rejected BUT apparently the firm is going to try making their case again. Sigh.

Don’t get any illusions about this case making any progress, “The next step is for ICAI’s disciplinary committee to send notices to the PW auditors charged by law enforcement agencies in the fraud case…this could happen only after the auditors, under judicial remand, are in a position to argue their case before the committee.” And we complain about the bureaucracy here.

• CBPP: 33 States Have Raised Taxes by $32 Billion/Year [TaxProf Blog]
You may have noticed a state fiscal crises here or there in the last couple of years and by God, they’re trying to do something about it. Unfortunately, the most common solution, according to the Center on Budget and Policy Priorities, is the raising of taxes. Thirty-three out of 50 states have taken a number of measures from eliminating tax exemptions and broadening tax bases to good old fashioned higher sales, income, or property tax rates.

Quote of the Day

Quote of the Day: March Madness Pools Are an Important Busy Season Distraction | 03.08.10

Caleb Newquist
March 9, 2010

“This year of all years, the importance of camaraderie and bringing employees together is greater than ever. If people are talking about March Madness, they’re not talking about the state of the business, or the pay cuts, or the layoffs, or things like that”

~ Jonathan Shapiro, partner at labor and employment firm Fisher & Phillips, on why betting pools and even game-watching are good morale boosters.

Big 4
CFOs

We’re Not Convinced That CFOs Mean What They Say When They Switch Audit Firms for No Apparent Reason

Caleb Newquist
March 9, 2010

Today in boilerplate press releases, MedAssets dropped BDO as its auditor for the bigger and bluer KPMG and the CFO punted on giving a real reason as to why.

“We are very fortunate to have had the pleasure of working with BDO Seidman for many years, including during the period of time covering our initial public offering in 2007,” said Neil Hunn, Executive Vice President and Chief Financial Officer, MedAssets. “BDO has been a tremendous business partner for us and instrumental in our success. MedAssets has experienced tremendous growth, especially over the last few years, and we expect this trend to continue. As such, we feel that KPMG is best suited to serve our Company and stockholders in the future. We look forward to our new relationship with KPMG.”

So if we were translate this statement, basically it sounds like MedAssets wants a big firm because the business is growing like gangbusters and they simply can’t be held back by a second-tier firm like BDO.

Or maybe we’ve got it dead wrong. Maybe MedAssets is spooked about BDO’s chances in the Banco Espirito appeal. Maybe KPMG’s Atlanta office is desperate for work and lowballed the audit fee. Feel free to share your own speculation but we’re sure as hell not buying the statement that a firm (in this case, BDO) ‘has been a tremendous business partner’ and ‘instrumental in our success’ and just gets up and dropped because ‘tremendous growth’ is expected to continue. Is BDO really that incapable of continuing to serve the company?

Basically, we are asking for more honest language in SEC filings and press releases.

MedAssets Engages KPMG as Auditor [Press Release]
8-K [SEC.gov]

Fraud

Reason #10,308 to Not Engage in Dubioius Accounting Practices

Caleb Newquist
March 9, 2010

So! Thinking about getting a little aggressive with the accounting? Forget aggressive, let’s just say you need to make your numbers next quarter come hell or high water? Maybe there are some pesky internal controls that you would really, really like to get around. For the good of the company of course.

Do whatcha gotta do but before you do, consider the sentence of Charles McCall, the former chairman of McKesson Corp. first. If, after reading his story, you decide it’s still worth the risk, then proceed with your plans.

A former chairman of San Francisco-based McKesson Corp. has been sentenced in federal court to 10 years in prison for securities fraud in an accounting scheme that cost shareholders $8.6 billion in 1999.

Charles McCall, 65, of Delray Beach, Fla., was given the prison term by U.S. District Judge William Alsup in San Francisco on Friday.

McCall was convicted by a jury in Alsup’s court in November of four counts of securities fraud and one count of circumventing the company’s internal accounting controls.
…
Prosecutors said that in the fraud, HBO & Co. and McKesson HBOC inflated revenues by backdating software sales and concealing side letters that would have allowed buyers to cancel proposed purchases that the company had counted as revenue.

This poor bastard got sentenced to 10 years (at 65, he’ll be lucky if manages to serve the full sentence) and he probably doesn’t know a internal control from his ass, other than at one time, he thought it was enough of a hindrance that he’d just ignore it altogether. If anyone has an extra copy of COSO laying around, kindly send it his way. He’ll have time to get caught up on the idea.

Ex-McKesson chairman gets 10 year sentence [SF Chronicle]

Tax Amnesty Programs: A Gold Mine for States or Bad Policy?

Caleb Newquist
March 9, 2010

More news out of the land of Quakers, as Pennsylvania has announced a tax amnesty program for delinquent taxpayers. The program allows tax deadbeats to pay their back taxes but all the penalties and half of the interest will be waived. Pennsylvania’s will begin on April 26th and be open for 54 days.

The AP reports that the state could generate an additional $190 million in revenues for the state which, like pretty every state, is in a dire need of revenues.

For those that participate in the amnesty program, they’ll have to be on good behavior going forward, “participants who fall into delinquency again within two years may be required to pay the full penalties and interest that had been waived. Also, once the amnesty period ends, a special, ‘nonparticipation penalty’ of 5 percent will be levied against delinquent taxes, penalties, and interest not paid in full.”

Participants will also not be eligible for future amnesty programs. Sounds like a novel idea right?

Well, maybe not.

Our resident tax guru, Joe Kristan, is not a fan of tax amnesty programs saying, “they become an expectation and they make chumps of compliant taxpayers.”

Joe’s home state of Iowa passed a tax amnesty program back in 2007 and his sentiments haven’t changed since then, “[Iowa is] adding more ~~loopholes~~ targeted tax incentives to its tax law while doing nothing to lower rates or broaden the tax base.”

But Joe, being the silver lining-type, also notes, “those of us who charge for tax work by the hour, it truly helps our economic development during an otherwise slow time of year.” So tax pros will take those new clients despite the bad policy that encouraged them.

Regardless of the bump in off-season revenues, the Tax Policy Blog (who Joe cites) noted that these programs are of little value if reform doesn’t accompany it, “if lawmakers decide to implement tax amnesty programs, they should be accompanied by fundamental tax reform that makes the tax code simpler and easier to comply with.”

So it appears that tax amnesty is nothing more than a duct tape solution from a policy stand point but it certainly makes good pandering fodder in an election year.

Pa. will offer tax amnesty [AP via Philadelphia Inquirer]

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