Going Concern

Review Comments

Review Comments | 10.21.09

Caleb Newquist
October 22, 2009

• Galleon to Begin Wind-Down of Funds – At least one person is optimistic. [DealBook]
• Tax (Return) Stories: F. Scott Fitzgerald – Apparently FSF was not so spendy. [TaxProf Blog]
• Pay Czar to Slash Compensation at Seven Firms – “Kenneth Feinberg, the Treasury Department’s special master for compensation, will lower total compensation for 175 employees by an average of 50%, these people said. As expected, the biggest cut will be to salaries, which will drop 90% on average.” Special master? [WSJ]
• The Top Five Twitter Feeds for Job Hunters in Accounting – Use it. And follow us while you’re at it. [FINS]

PwC Employees Don’t Need AmEx Gift Cards to Motivate Them

Caleb Newquist
October 22, 2009

That’s right! We’ve confirmed that PwC’s annual employee survey went out Monday and unlike other firms, the rank and file at P. Dubs are more than happy to tell TPTB exactly how they feel without being bribed (but it would be nice).

Ernst & Young Pranks Involve Heavy Lifting, Possibly Spending $200-$300

Caleb Newquist
October 22, 2009

In these tough times, office pranks are the perfect remedy for all the bad attitudes out there. Except for you no-fun-under-any-circumstances types.
From an E&Y office in (we’re assuming) the Northeast:

our latest prank was to get the nascar fan in the office a thrill by putting a race car bed over his cube when he returned from his trip to dover for the weekend with some co-workers for the Dover 400 race.

Photos, after the jump

Wonder Bread getting a little exposure.

It’s one thing if one of perpetrators boosted this thing from their nephew. It’s a whole new level of prank-commitment if they put it on the expense report.

KPMG

The Moment You’ve All Been Waiting For

Caleb Newquist
October 22, 2009

If you work at KPMG anyway. We heard that the annual employee survey was sent out today so that’s exciting. The most thrilling news is that FIVE of you will win $200 AMEX gift cards for participating. If there are questions missing on the survey that are not addressed, feel free to bring those up in the comments.
The only other firm that we’ve heard about having their survey is E&Y so if yours is rolling out be sure to let us know.

The JDA

The IRS Has Control Issues

Adrienne Gonzalez
October 21, 2009

Editor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
The IRS is going after off-shore tax shelters and international banks to get its cut (presumably to make up for some tax revenue it has been missing out on in the last, oh, 8 years or so) but according to WebCPA, the IRS might want to tighten up its game on refunds.
It isn’t that the IRS is cutting checks for the heck of it – it turns out that the Treasury Department may need a quick refresher on controls for payments.

WebCPA:

[The Treasury Inspector General for Tax Administration report] found problems in the IRS’s handling of taxpayer payments that are subsequently dishonored by the banks in which they are deposited. Dishonored payments are not processed by banks for a variety of reasons, the report noted, including insufficient taxpayer funds. The IRS occasionally issues a refund to a taxpayer who had submitted an overpayment of taxes before the IRS realizes that the taxpayer’s check has been dishonored by the bank. This results in the taxpayer receiving an erroneous refund.
Between Jan. 1, 2008, and July 17, 2008, the IRS generated refunds as a result of dishonored check overpayments totaling approximately $53 million. TIGTA estimates that the IRS was unable to stop more than $20 million in refunds from being erroneously issued to nearly 14,000 individuals.

Well wait a minute, it was going to issue $53 million but was able to figure out $33 million were cut in error. That’s not so bad, is it?
The IRS cop out is that tricky stimulus check business of 2008 in which several dishonest taxpayers stopped payment on tax checks and made off with the stimulus booty instead of the money going towards offsetting the taxpayer’s tax liability. Sneaky!
Seriously, in the age of electronic funds transfers and billion dollar money market runs that cripple the financial system in a matter of minutes, how is it the IRS is still so far behind the times?
The TIGTA report claims that resolving this issue with proper controls on the IRS’ end could “protect approximately $102 million over the next five years from being issued to taxpayers in error.”
What’s $102 million nowadays anyway? That’s not even a fraction of an AIG bailout. No wonder the IRS isn’t trying too hard.

Uncategorized

$500k Will Not Satisfy One CPA’s Quest for Vindication

Caleb Newquist
October 21, 2009

A CPA in Redmond, Washington is receiving $500,000 from the state’s board of accountancy after battling with them for nearly five years over a disciplinary action that probably should have been NBD.

D. Edson Clark had claimed that the state Board of Accountancy was improperly pursuing unwarranted charges against him in retaliation for complaints he had made about the handling of another case. He requested tens of thousands of pages of public records and launched seven lawsuits against board employees over the past two years.

Clark was very determined to clear his good name. So much so that the Board of Accountancy claimed, “it has been disrupted by Clark’s requests, and that his demands for public records are burning up its budget and limiting its ability to function.” Apparently, the Board was so overwhelmed that it threatened Clark with an anti-harassment complaint because the volume of emails he was sending was disruptive.
This brings up some questions: A) How many emails does it take to disrupt an office? B) Did they try hiring a temp? C) Was Clark spending his entire day copying and pasting the same email over and over or was he drafting individually scathing rants? D) At what point does a person cross the line of crazy-ass obsession?
Despite the metric asston of emails received by the Board, a judge in one of Clark’s lawsuits was not impressed with the Board’s handling of the situation:

In an oral hearing in June, Judge Thomas McPhee, a judge in Thurston County Superior Court, said that the board had “developed a pattern of incompetence in answering these discovery requests that is just difficult to believe for a state agency.”

We’re all familiar with governments’ inability to do much of anything but for a judge to put the situation in this context might be a new low for bureaucratic inefficiency.
Don’t worry though, the saga isn’t over as Mr. Clark has indicated that he plans further litigation in order to FULLY EXONERATE himself. Nevermind that the $500,000 is over a third of the Board’s budget. This is obviously personal. We admire the gusto.
Redmond CPA to get $500K settlement from state board [Puget Sound Business Journal]
Redmond accountant, Washington regulator at odds [Puget Sound Business Journal]

Uncategorized

Bonus Watch: Follow-up on Grant Thornton

Caleb Newquist
October 21, 2009

According to a tip we received, less than “special” people at GT are receiving bonuses too:

Based upon my salary [the bonus is] about 2%….[I’m] assuming the criteria for a bonus wasn’t as stringent as Nusbaum made it out to be, or the pool was larger than we were led to believe. Based upon the call with Nus, I figured only 5.0 would get a bonus.

A pleasant surprise for some. This particular tip came out of the Southeast region. Apparently these conversations are occurring circa now so continue to keep us updated for your city or region.

KPMG

(UPDATE) Madoff Investors Sue KPMG, JP Morgan, Bank of New York Mellon

Caleb Newquist
October 21, 2009

By our last count KPMG had been named in ten lawsuits related to Madoff feeder funds. What’s one more?

KPMG, JP Morgan, Bank of New York Mellon, Oppenheimer Acquisition Corp. and Mass Mutual Life Insurance, along with the Tremont founders were all named in an amended lawsuit that was filed yesterday.

Cotchettt, Pitre, & McCarthy, the attorneys for the Plaintiffs, are not mincing words on KPMG’s part in the whole mess. From the firm’s website:

The sheer size and scope of the fraud make it impossible for Madoff to have acted alone. The complaint alleges JP Morgan and the Bank of New York as well as powerhouse accounting firm KPMG LLP and their international counterparts, KPMG UK and KPMG International were primary players responsible for the fraud.

The amended complaint further alleges that the phantom trades “should have been discovered by KPMG UK, the auditor for Madoff’s London based operation, Madoff Securities International Ltd. Instead, KMPG UK never raised any red flags that investors’ money was used by Madoff as his personal piggy bank.”

KPMG declined to comment for the Reuters article ~~but we’ll assume that they don’t take kindly to the complaint~~.
Madoff investors sue KPMG and major banks [Reuters]

MADOFF_WEXLER_FIRST_AMENDED_COMPLAINT.pdf

UPDATE: The UK Firm issued the following, per Accountancy Age:

KPMG considers the allegations in the complaint to be wholly without merit and will defend them vigorously. The complaint cites KPMG in its capacity as statutory auditor of Madoff Securities International Limited (MSIL), a London based company directly owned by the Madoff family. KPMG acted in this capacity for several years and issued unqualified audit opinions on MSIL’s financial statements. We are not aware of any suggestion that the financial statements of MSIL contain errors.

Preliminary Analytics

Preliminary Analytics | 10.21.09

Caleb Newquist
October 21, 2009

• Mets Win One: Owners Made Money on Madoff – “A partnership connected to the baseball team — which had widely been rumored to have lost money investing with Bernard Madoff — actually gained a net $48 million from its dealings with the convicted swindler, according to a bankruptcy-court filing.” [WSJ]
• Madoff adjusts to life in prison – Bottom bunk. He would’ve called the top but when you’re in your 70s, sometimes you just let things go. [BBC]
• CIT debt offer by obscure fund raises questions – Including: How desperate is CIT? [Reuters]
• A Sarah Palin Tax Problem? – Auctioning off a dinner with Governor Maverick makes for some IRS hoop jumping. [TPM]

Review Comments

Review Comments | 10.20.09

Caleb Newquist
October 21, 2009

• UBS Accidentally Leaks Names to Post Office – One day UBS will do something right. [Web CPA]
• Patricia Cornwell’s Latest Mystery – Suing her accountants and business advisors for allegedly losing $40 mil. [TDB]
• Wall Street on edge as SEC top cop gets aggressive – Khuzami seems to be doing fine and even has a sidekick. [Reuters]
• PwC’s Lehmans fees top £154m [Accountancy Age]
• Denham Receives AICPA Medal of Honor – Highest award given by CPAs to a non-CPA. [TaxProf Blog]
• Some Internal Audit Staffs Cut in Recession — But Not All – Good news: 2009 is the peak of layoffs! Bad news: They will still continue in 2010. [Compliance Week]

Overland Storage Probably Fired PwC Out of Spite

Caleb Newquist
October 21, 2009

It appears that Overland Storage’s audit committee was pissed off enough about a second consecutive going concern audit opinion that they just up and fired PwC last week.
San Diego-based Overland filed the 8-K, notifying the Commission of the dismissal, on October 16th which also named Moss Adams as the new auditors. At the request of Overland, PwC sent a two sentence letter to the SEC stating that they “agree with the statements concerning our Firm in such Form 8-K.”
The Register states that Overland was all bent out of shape because PwC didn’t explain why they issued the going concern opinions:

While even accountants are entitled to a view about the state of the struggling business, Overland was upset because PwC didn’t actually identify any specific factor in the accounts that led them to that conclusion.
Presumably PwC was expressing a view based on such business events as Overland avoiding running out of cash by factoring arrangements, repeated staff headcount reductions, Nasdaq delisting, declining revenues and losses. Overland’s thinking is that, if so, it shouldn’t have.

The most recent 10-K has all the gory details and as The Register pointed out, Overland didn’t think all those negative things really matter, so obviously, firing the auditors was the next logical step. Moss Adams will get the esteemed pleasure of holding Overland’s hand to the bitter, tragic end.

Rumor Mill: Ernst & Young Closing Manchester, NH Office

Caleb Newquist
October 21, 2009

Courtesy of our contributor, Francine McKenna who got the scoop from a Twitter source:

If you’ve got information on this office closure, including layoff numbers, let us know or discuss in the comments.

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