Going Concern

Deloitte

An Opportunity Lost

Caleb Newquist
December 18, 2009

Gang, we’re a little upset about something today. Last week we told you about something that had the potential to turn awards for accountants on its green eyeshade wearing head.
Yes, we’re talking about the doomed Deloitte ballot sent out by Holly Leam-Taylor. Today would have been the day that she had sent out the results of her sluttiest future partner, hottest old man, et al. awards, if it had not been for her inexperience with sending out superficial emails about her colleagues.
If Holly had only consulted with someone, anyone with experience on such matters, they could have explained that Deloitte is not a place for such “fun” things and that using her work email was not the best way to solicit nominations.
Alas, our request for someone to pick up where Holly left off has been roundly ignored and here we are on a Friday with nothing to share about Deloitte’s hottest men in London.
So far we’ve been unable to track down Holly since her Deloitte email has been obliterated. Holly, if you’re out there, get in touch. We’ll get your side of the story out there. We know you’re fed up but this will be fun. We promise. Anyone else that can put us in touch with Holly, please help. We’re still getting over our disappointment.

KPMG

KPMG Global Revenue Drops 11.4%

Caleb Newquist
December 18, 2009

The wait is over Klynveldians. Your firm’s revenue results are out and — not to put fine a point on it — they’re disappointing.

The press release has the typical spin that we’ve come to expect from the Big 4 bigiwigs as Tim Flynn focuses on the, ‘high growth markets’ and the opportunities that arise out of ‘a markedly changed regulatory environment’ (code for: “Democrats are in power”).

These “opportunities” are noted but the numbers speak for themselves. As Big Four Blog notes, “A drop in revenue was expected, the surprise was the magnitude of the drop, which was higher than other Big4 firms.”

From the press release:

KPMG, the global network of professional service firms providing Audit, Tax and Advisory services, today announced member firm combined revenues totaling US$20.11 billion for the fiscal year ending September 30, 2009, versus US$22.69 billion for the prior fiscal year, representing an 11.4 percent decline in U.S. dollars.

“While overall revenue results for the 2009 fiscal year reflected the global economic downturn, we were pleased that our continued investments in high growth markets resulted in continued growth in those country member firms,” said Timothy P. Flynn, Chairman of KPMG International.

The drop in revenues breaks down like this:

• Audit – $9.95 billion in FY09 versus $10.69 billion in FY08, a 6.9% decline in U.S. dollars.

• Advisory – Revenues of $6.07 billion in FY09, versus $7.27 billion in FY08, a 16.6% decline in U.S. dollars.

• Tax – $4.09 billion in FY09 compared with $4.73 billion in FY08, a 13.4% decline in U.S. dollars.

The numbers certainly speak to the tough year that KPMG professionals have witnessed through many rounds of layoffs and several shake-ups that appear to be part of major restructuring in the U.S.
So now that the 2009 earnings season has come to a close, all the firms can focus on making 2010 less crappy. That should be breeze. We shall see. If you’ve got thoughts on the Radio Station’s year, or want to talk about how psyched you are for 2010, discuss in the comments.

KPMG reports 2009 revenues of US$20.1 billion [Press Release]

See also: KPMG 2009 Revenues of $20 B Drop 11%, Most Among Big Four Firms [The Big Four Blog]

Section 409A: Worst Tax Enactment of the Decade

Joe Kristan
December 18, 2009

Editor’s note: Welcome to GC’s first edition of “Taxes: Because We’re the Little People” by Joe Kristan. Joe Kristan is a tax shareholder for Roth & Company, a Des Moines, Iowa CPA firm, where he works with closely-held businesses and their owners. Prior to helping start Roth & Company, he worked for two of what are now the Final Four CPA firms. He writes the Tax Update Blog and is available for seminars, first communions, Bar Mitzvahs, etc.
Sure, those Northwest pilots who missed Minnesota were off the mark. So was Arthur when he signed off on the Enron audit. But as badly as they missed the target, they look like Annie Oakley compared to Congress in its response to Enron.
Congress takes aim at the national firms whose audits failed to spot the looting at places like Enron. The result? SarBox, the greatest gravy train for the Final Four firms since the invention of the senior accountant.

The Congressional response on the tax side took a different approach. Rather than reward the guilty, they chose to beat the innocent. Hence Section 409A.
The Enron scandal featured elaborate deferred compensation plans to provide executives a gilded liferaft when the ship sinks. Congress responds with a code section affecting schoolteachers. They showed Ken Lay what for by designing a tax on folks on money they may never see because of somebody else’s foot fault.
Sec. 409A clobbers its victims two ways:
• It taxes employees on their deferred comp balances when the plan is out of compliance, even if the employee doesn’t get the money, ever.
• It hits them again with a 20% excise tax.
Worse, the code section imposing these penalties is so complicated that it took 3 years to complete the regulations that run to 200 pages, and are so complicated and intrusive that accidental noncompliance must be rampant.
This all makes Sec. 409A my choice as the worst tax enactment of the decade. But tastes differ. Let us know your nominee for the worst tax provision enacted from 2000 through 2009 in the comments and if we get some good submissions, we’ll put it to a vote.

Ernst & Young Pays $8.5 Million to Settle Charges with SEC Over Bally Fraud

Caleb Newquist
December 18, 2009

Six current and former partners at Ernst & Young were charged, along with the firm, by the SEC late yesterday in relation to the audits the firm performed of Bally Total Fitness’ financial statements from 2001 to 2003.
Bally settled accounting fraud charges with the SEC in 2008 that were related to its financial statements from 1997 to 2003.
Because everyone and their dog was freaking out over Enron in screws to their clients to follow GAAP, E&Y had identified Bally as “one of E&Y’s riskiest 18 accounts and as the riskiest account in the Lake Michigan Area.”

Floyd Norris:

The firm forced Bally to stop recording revenue in an improper manner that allowed it to claim earnings earlier than was allowed by accounting rules.
But in doing that, the firm allowed Bally to not admit to having violated the rules in the past, an action that would have forced it to restate its accounts and admit that losses in previous years had been much larger.

Mr. Norris also reported that a source of his at the SEC has stated that “he knew of no previous enforcement cases in which a partner of a major firm was cited for his actions as head of a national office.”
The partner in this case is Randy G. Fletchall, the partner in charge of E&Y’s National Office. He along with Mark V. Sever, E&Y’s National Director of Area Professional Practice, and Kenneth W. Peterson, the Professional Practice Director for the Lake Michigan Area office are the current E&Y partners who settled the charges with the SEC.
The former partners include: Thomas D. Vogelsinger, the Area Managing Partner for E&Y’s Lake Michigan Area through October 2003, William J. Carpenter, the E&Y engagement partner for the 2003 audit, and John M. Kiss, the E&Y engagement partner for the 2001 and 2002 audits.
While the news of a current partner of such lofty heights is notable, an extra twist that isn’t being reported in the MSM comes from GC contributor, Francine McKenna, who tells us that Mr. Fletchall served as the former AICPA Chairman from 2007-2008 and Mr. Sever, a former chairman of the Accounting Standards Executive Committee:

What none of the stories that just hit tell you, though, is that at least two of the EY partners charged, Fletchall and Sever, held leadership positions with the AICPA in the past.
…
Did Mr. Fletchall get off with a slap on the wrist given his AICPA leadership position, AICPA PAC contributions and significant campaign contributions to Senator Christopher Dodd? Mr. Fletchall is used to telling the SEC what it should do. Quite used to it.

These are interesting questions that the SEC probably doesn’t want to address. The connection, in appearance, is shady and we can only speculate as to what happened during the negotiations of the settlement.
The Commission, remaining stoic, gave a standard issue boilerplate statement, saying:

“It is deeply disconcerting that partners, even at the highest levels of E&Y, failed to fulfill their basic obligations to the investing public by not conducting proper audits. This case is a sharp reminder to outside auditors that they must carry out their duties with due diligence. The $8.5 million settlement, one of the highest ever paid by an accounting firm, reflects the seriousness of their misconduct,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

So it appears E&Y is getting sent to their room here, despite the $8.5 million fine being “one of the highest ever paid by an accounting firm.”
The firm also agreed “to undertake measures to correct policies and practices relating to its violations, and agreed to cease and desist from violations of the securities laws.”
Were the AICPA connections enough to keep them out of really hot water? At the very least, it didn’t hurt anything. If you have any information regarding this story, get in touch with us, and we will update you with any developments.
SEC Charges Ernst & Young and Six Partners for Roles in Accounting Violations at Bally Total Fitness [SEC Press Release]
EY Settles SEC Charges Re: Bally’s Fraud-Lives To Audit Another Day [Re: The Auditors]
Ernst to Pay the S.E.C. $8.5 Million [Floyd Norris/NYT]

Preliminary Analytics

Preliminary Analytics | 12.18.09

Caleb Newquist
December 18, 2009

• Stalling on Sarbox – “The regulatory-reform bill passed by the House last week suggests that lawmakers will either exempt smaller companies from getting internal-controls audits or put off the decision for yet another year.” Hell, it’s only been seven years. What’s one more? [CFO]
• Agencies in a Brawl for Control Over Banks – “Connecticut Democrat Christopher Dodd, the Senate Banking Committee chairman, has proposed revoking almost all of [FDIC Chair Sheila] Bair’s powers to supervise banks, as part of a sweeping financial-regulation bill now under consideration in the Senate.” [WSJ]
• Blue Ribbon Panel On Private Company Accounting Standards Formed – Blue Ribbon Panels always mean that something is about to get serious. Right? [FEI Financial Reporting Blog]
• Should Gay Couples Pay the Same Taxes as Straights? – Even if a state allows gay couples to marry, they aren’t recognized on the federal level and that causes problems, “[M]any businesses now provide spousal benefits to gay couples, the value of the non-employee’s benefits is taxable for unmarried couples, but tax free for those who are married.” [Tax Vox]

Review Comments

Review Comments | 12.17.09

Caleb Newquist
December 18, 2009

• Rangel Introduces Mutual Fund Tax and Regulation Bill – Charlie Rangel. Working for you. [TaxProf Blog]
• SEC: Negative Equity Doesn’t Mean No Impairment – This implies that this rationale worked on someone at some point. [Compliance Week]
• Is Your NFP in Danger of Losing Tax-Exempt Status? – “The IRS requires that if an organization has not filed any version of the Form 990 for three consecutive years, it will automatically lose its tax-exempt status on the due date of the third year.” [CB&H Not-for-Profit Blog]
• Senate Panel Backs 2nd Bernanke Term – Much to the dismay of some. [WSJ]

Luckily for Nicolas Cage, Ghost Rider 2 Is In Development

Caleb Newquist
December 18, 2009

Today in getting-sued-by-your-ex-but-my-name-isn’t-Steven Cohen news, Nicolas Cage is now being sued by his ex-girlfriend, Christina Fulton for $13 mil.
She’s claiming that Ghost Rider and his accountant, Samuel Levin (no relation), were really not very fucking good with the money and now she owes $1 million to the IRS annnnnd she has $250,000 in credit card debt annnnnd she lost her house.
If that’s not enough, Cage and Levin already don’t think too much of each other as they’ve been suing/countersuing each other over whether Cage sucks more at spending money ($1.6 million comic book collection) or Levin at managing it (risky real estate investments).
Good luck lady. The ex-Mrs. C’s chances seem better.
Nicolas Cage’s Ex Sues Him and His Former Accountant [Web CPA]

Uncategorized

Accenture Is Giving Tiger the Arthur Andersen Treatment

Caleb Newquist
December 18, 2009

You’ve got to hand it to Accenture, if you’re not the ‘metaphor of high performance’ any more (i.e. a married man with two kids screwing everything that moves), they will make Enron audit workpapers out of you.
After the hammer came down on Sunday, the marketing crew — who spent the last six years making T. Dubs’ mug the mug of Accenture — has some work to do:

By Monday afternoon, Accenture staffers had swept through the company’s New York office and removed any visible Tiger posters. The next day, marketing and communications employees around the world were asked to turn in any remaining Tiger-emblazoned posters and other materials.

Considering the fact that Accenture is one of the remaining derivatives of Arthur Andersen, destroying all this stuff should be a piece of cake (shredder sure but we’re guessing they’ve got an incinerator chute). The best part for them is, they aren’t obstructing justice, they’re maintaining their sterling (?) reputation.
Maybe easier said than done since they spent “$50 million on advertising in the United States last year, and Mr. Woods appeared in 83 percent of the company’s ads.”
They really just need to get someone (anyone!) else in there ASAP to make us sorta forget (but not really) that T Dubs was shilling for them for six years.
Accenture, as if Tiger Woods Were Never There [NYT]

Deloitte

Deloitte Survey: The Next Generation of Employees Will Not Stand for the Inability to Update Their Status

Caleb Newquist
December 18, 2009

In Deloitte’s Survey Du Jour we learn that your future underlings are going to want — nay — DEMAND the ability to move up in Farmville while they’re at work (at least one person understands your obsession).
Okay, demand is a stretch but dammit the kids these days are an ethically conscious bunch so you can trust them to get their work done while checking all their hot friend of friends.

Nearly nine-in-10 (88 percent) teens surveyed use social networks every day, with 70 percent saying they participate in social networking an hour or more daily. More than half (58 percent) said they would consider their ability to access social networks at work when considering a job offer from a potential employer. This comes as many organizations have begun implementing policies that limit access to social networks during the workday due to concerns about unethical usages, such as time theft, spreading rumors about co-workers or managers and leaking proprietary information, among other reasons.
Most of the teens surveyed feel prepared to make ethical decisions at work (82 percent) and a significant majority of teens say they do not behave unethically while using social networks (83 percent).

There’s really no cause for concern when you’ve got newbies out there asking their friends to vote for their sluttiest co-worker using a work email address. We do realize that some people make better decisions than others.
Overall, we don’t see what the BFD is. Commercials on the tube portray “responsible” adults on Facebook so to allude that the next wave of corporate soldiers would be the only ones that wouldn’t take a job with limited access to social networks seems weak. There’s plenty of people working already that have that point of view. Plus, pretty soon everyone on FB, Twitter, et al. will have phones that can run those apps. Just let people do what they want and they’ll be much happier.
Now excuse us, we’ve got strawberries to harvest.
No Facebook at Work? No Thank You! Teens Expect Access to Social Networks On-The-Job [Junior Achievement/Deloitte Poll]

CPA Exam

More CPA Exam Scores Are Released for the October/November Window

Caleb Newquist
December 18, 2009

NASBA has announced via Twitter that more scores have been released for the final window of the year. Bad news is that it takes 24 – 48 hours for them to post. Our recommendation would be to jump over to NASBA and spend the next 24 hours refreshing the page until it posts. Or chew your fingernails until they bleed, whatever works for you.
If you end up with an early Christmaskuh gift, please share. If you got coal, also share before you go into the corner sobbing.

Career Center

Job of the Day: Bring Your Extensive GAAP Knowledge to Fannie Mae

Caleb Newquist
December 17, 2009

It’s already been determined that Fannie Mae is TBTF so any concerns that you have about company security should be put to rest.
Plus, as a quasi-government entity (or is it just a government entity now?) your country will owe you a debt of gratitude.
Get the details for a Senior Manager of Accounting Policy position in Washington, D.C. after the jump.

Company: Fannie Mae

Title: Senior Manager – Accounting Policy

Location: Washington, D.C.

Minimum experience: 4 – 6 years public accounting experience or equivalent experience

Description: This Senior Manager of Accounting Policy will work with his/her Director and peers to ensure up-to-date company-wide accounting policies in compliance with relevant authoritative accounting literature. The Senior Manager will interact with internal customers (e.g., business units, Accounting Operations and financial reporting) to understand new transactions/business changes, research technical accounting literature and provide applicable accounting guidance.

Responsibilities: Evaluate new business initiatives, products and changes to the business through interaction with internal customers, understanding the facts and researching applicable technical accounting guidance; Write accounting policy memos documenting facts and applicable accounting policy guidance and discuss proposed accounting guidance with Directors, VPs and others within Accounting Policy Address implementation issues and questions; Interact and coordinate with consultants, auditors, and other stakeholders; Monitor accounting developments through the accounting setting process, communicate status of projects and impact to Fannie Mae, and provide guidance on the implementation of new accounting standards; Prepare and review SEC and other external reporting relating to assigned areas.

Skills: CPA required; Experience in the interpretation and application of SFAS No. 166, SFAS No. 167, FIN No. 45, SFAS No. 133, SFAS No. 5/114, SFAS No. 15/65, SFAS No. 115 and/or SFAS No. 157; Relevant SEC experience preferred

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

KPMG

Rumor Mill: Tim Flynn Paying a Visit to Montvale Today?

Caleb Newquist
December 17, 2009

That’s what we’re hearing! A source has informed us that TF is in the Garden State today “announcing a significant amount of outsourcing within the IT practice of the firm.”
Our source also indicated that TF — currently running second in the Accountant of the Decade vote — is:

…making general statements about the firm as a whole in regards to outsourcing. We were told that if we were getting outsourced there would be “advanced warning” or that they would try to move people around without letting them go, etc.

“Advanced warning” like a flare gun? Church bells? A lighthouse? The people need something more specific, TF.
It sounds both internal IT and advisory IT professionals are getting the pleasure of the pep talk so if you were there (or going this afternoon, rumor is there’s two meetings), send us your thoughts and discuss.

Careers

Big 4

News

Technology

Practice Management

Site Search

Twitter Feed

Get the Accounting News Roundup

Quick Reads

Sponsored Content

Get the Accounting News Roundup

Remote Tax Advisor, CPA Firm

Remote Tax Manager

Remote Accounting & Tax Director

Remote Tax Advisor, CPA Firm

Remote Tax Manager

Remote Accounting & Tax Director