Going Concern

Fraud

Even as the Doors Were Being Busted Down, Tom Petters Was Sure Everything Would Be Fine

Caleb Newquist
November 13, 2009

The trial of Cocker Spaniel/Ponzi boy Tom Petters is moving along as more and more witnesses are giving testimony that pretty much solidifies Petters’ statement that his business was “one big fucking fraud”.
Testimony on Tuesday (there were no proceedings yesterday due to the holiday) included that of James Wehmhoff, an accountant for Petters Company Inc. (“PCI”).
Wehmhoff said that Petters and Robert White — Petters’ CFO — were taking money out of a subsidiary for personal use. In addition, he also testified that Petters was panicking about an audit and was desperate to stonewall them:

In an email Petters sent to Wehmhoff and other insiders, Petters allegedly wrote, “We need to send the auditors something every day no matter what and keep them from coming to Minnesota. We must pacify them.”

Yet when the Feds were raiding his businesses last September Petters thought everything was hunky-dory, allegedly telling one investor, ‘everything would be fine’. This despite Petters’ fear of getting clipped and, you know, having to explain just where the hell $3.5 billion went.
We’ll keep you updated until they find this guy guilty.
Accountant Testifies Petters Panicked Over Audit [KSTP]
Accountant: Petters execs misused investor cash [Minneapolis Star-Tribune]
Earlier: Ernst & Young and McGladrey & Pullen Both Have a Petters Problem

Fraud

Fraud Examiners Can’t See the Silver Lining

Caleb Newquist
November 13, 2009

The Association of Certified Fraud Examiners (“ACFE”) is bellyaching about the Garret-Adler amendment.
This is the measure that was passed by the House Financial Services Committee that would exempt small issuers (market cap less than $75 mil) from complying with section 404 of Sarbanes Oxley.
ACFE President, James Ratley:

“At a time when the economic downturn has heightened the risk of fraud for organizations large and small, it simply does not make sense to weaken accounting rules that are in place to protect investors,” he said in a statement. “The bottom line is that internal controls are one of the best fraud prevention tools for any organization to have in place. Providing exemptions for some public companies from the SOX 404 requirements only leads to an increased risk of fraud.”

Ratley very well may be right but let’s not forget who we’re talking about. Nobody — especially accountants — is going to stop the train wreck that is the U.S. Congress. Accordingly, the ACFE should embrace this as a golden opportunity to boost their membership and shout from the rooftops about the benefits of having a CFE certification.
Nobody seems to understand that it isn’t auditors’ job to detect fraud and most companies only seem interested in detective controls, so what’s the point?
Get on this ACFE. It’s fraud awareness week after all. We shouldn’t have to explain this to you.
ACFE Warns Not to Change SOX Rules [Web CPA]

Uncategorized

The Knighted One Keeps His Promises

Caleb Newquist
November 13, 2009

Sir David Tweedie and his fellow non-knighted wonks have released IFRS 9, Financial Instruments today to much anticipation. For those companies that were chomping at the bit, you can adopt pronto but nothing is mandatory until the end of 2012.
You got to hand it to Tweeds. The BSD at the G20 demanded that the IASB take another look (read: change) at this fair value thing ASAP and he delivered, AS PROMISED:

We have delivered on our commitment to the G20 and stakeholders internationally to provide an improved financial instrument standard for the classification and measurement of financial assets for use in 2009. Benefiting from unprecedented levels of consultation with stakeholders around the world, the IASB has made significant changes in its initial proposals to improve the standard, provide enhanced transparency and respond to stakeholder concerns.

Very impressive, so the ball is your court, Norwalk. You better get off your asses and come up with something good because none of you have knighthood and we haven’t seen much evidence of your re-quadrupled efforts. We already know that you’re talking Plan B but give us something, anything. You’re worried about Congress, sure but the Europeans are making you look bad. Is there any American knight-ish equivalent that Bob Herz could get that would help give him a boost in confidence?
If you’ve got suggestions, leave them in the comments. We’re at a total loss.
IASB completes first phase of financial instruments accounting reform [IASB Press Release]
New fair value standard rushed out by IASB [Accountancy Age]

Ernst & Young Layoffs: The Latest

Caleb Newquist
November 13, 2009

From a reliable source on the west coast we have learned that the advisory practice of E&Y was feeling left out and has decided to get into the act.
Twelve advisory professionals — we’re speculating that it was all staff at this point — were laid off today in the Pacific-Northwest Region. The only confirmed city that we have so far is San Jose. Emails were sent out last night and meetings with partners were held this morning. For an added personal touch, our understanding is that the staff met with partners that they were not previously acquainted.
~~Our calls to E&Y have gone unreturned.~~ An E&Y spokesperson declined to comment.
Jump back to this post for all the details on this round of E&Y layoffs and get in touch with details for your city, practice, and severance.

New Deloitte Consulting CEO Plugs Magazine Lists, Shuns Facebook Fans

Caleb Newquist
November 12, 2009

Deloitte Consulting has appointed a new Chairman and CEO, Punit Renjen, succeeding Douglas Lattner. This […]

PwC Needs to Recognize Marketing Genius When They See It

Caleb Newquist
November 12, 2009

Accountancy Age has a extra puffy puff piece on P. Dubs’ “head of sport” Julie Clark and how PwC will be everyone’s hero — and she’ll be a regular Einstein — if England can land the World Cup for 2018.
Sidebar: According to the piece, E&Y is sponsoring the Ryder Cup next year and Deloitte is sponsoring the Olympics in 2012. This brings up two points: A) Real original E&Y and B) What the hell, KPMG? If you want to keep up with the Joneses you better dump that always-a-bridesmaid (okay, occasional champion) golfer and get those letters on a BCS bowl or something.
Not only does Accountancy Age not give any details on Clark’s plans but they also manage to completely ignore the ingenious marketing campaign/sponsoring opportunity that would all but lock this thing up.
Need we remind everyone of our first brilliant (albeit subtle) suggestion regarding an accounting firm and a certain sponsored golfer? Working out, isn’t it?
Make no mistake, I’m sure Ms. Clark knows what she’s doing and we’re not expecting her to take our suggestion that seriously but if she blows it…We’ll be expecting a call.

Big 4

Are We Experiencing a Big 4 Exodus?

Caleb Newquist
November 12, 2009

Maybe! Nevermind people leaving involuntarily for a second.
We’re hearing from many that people are heading for the exits en masse and it’s getting the bigwigs’ attention. According to one reader:
“[A]pparently its got higher ups here a bit worried. It was an agenda [point] for a [recent manager] meeting. Just wondering how it was elsewhere. “
Of course, this leads to many, many, many teams finding themselves short-staffed. We just heard that the New York office of one Big 4 firm has been contacting other offices aggressively recruiting audit personnel for huge advisory engagements. This has been received with a resounding “GET BENT” since those offices desperately need the people for their local audit engagements.
It can be easily argued that the reason people are bolting is because of the pay freeze trend or since no one’s job seems to be safe, people are simply taking matters into their own hands.
So discuss in the comments what you’re seeing, hearing, and speculating about regarding people leaving your firm. This may be an office by office phenomenon so we’ll put out to you to give us the details for your office, your team, your firm in general.

Announcements

GC Reminders: November Survey and Caption Contest

Caleb Newquist
November 12, 2009

Good morning servants of capital markets. We don’t mean to impose upon you while you engage in your morning routine but we’re here to remind you of two matters of critical importance going on at this fine publication:
• November survey – One question. One email address. A chance to win a $50 AMEX gift card.
• Caption Contest Poll – You’ve got until 11:59 pm EDT tonight to throw support behind the most suitable description for the AICPA spokesswine. Don’t scoff. It’s important.
Thanks for your participation.

Preliminary Analytics

Preliminary Analytics | 11.12.09

Caleb Newquist
November 12, 2009

• Costco CFO: Fingers crossed consumers will spend – Sounds like a winning strategy. [Reuters]
• Wall Street Faces ‘Live Ammo’ as Congress Aims to Unravel Banks – The bank lobby is finally a little concerned that this break up of TBTF is for real… [Bloomberg]
• The Kanjorski “We’re Tough on TBTF” Headfake – …or maybe they’re just playing along. [Naked Capitalism]
• White House Aims to Cut Deficit With TARP Cash – Not only that, there’s talk of, GASP, tax reform: “[Office of Management and Budget] is also reviewing a host of tax changes. The President’s Economic Recovery Advisory Board will submit tax-policy options by Dec. 5, including simplifying the tax code and revamping the corporate tax code.” [WSJ]
• G.E. Sells Security Unit for $1.8 Billion – The industrial conglomerate is a little less conglomerate-y, saying the fire alarm and security unit is a “noncore” business. [DealBook]

Uncategorized

Ironic Photo of the Day: Paperless Audit Edition

Caleb Newquist
November 12, 2009

A friend of GC passed along the following photo:

Telling us: “This is our paperless audit training. An associate had to print out 46 copies. He stayed late on Friday and used three printers.”
Oh the humanity.

Review Comments

Review Comments | 11.11.09

Caleb Newquist
November 12, 2009

• Reminders: Kindly vote in our caption contest poll and take our short November survey ($50 AMEX gift card people, get on it).
• Tax Havens Suddenly Not All the Rage – Thanks IRS. Our dreams of having a Swiss bank account are totally dashed. What’s the point if we’re still paying taxes? [Tax Girl]
• Benmosche Says He Is ‘Totally Committed’ to A.I.G. – That thing this morning? Never happened. [DealBook]
• Citigroup stands by deferred tax asset valuation – Last we checked, banks are not in the habit of saying, “GD, you’re right. We totally jacked that valuation up. Thanks for letting us know.” [Reuters]

ACORN Stonewalled on VITA Funds but Questions Remain

Caleb Newquist
November 12, 2009

Yesterday the IRS released the list of recipients of $8 million in matching grants for the Volunteer Income Tax Assistance program. Many of you participated in this fine program back when you were focused on developing a drinking problem, which may explain the high error rate but that’s neither here nor there.
Of the 360 applications submitted for funds, one notable organization that was DEEE-NIED was ACORN.
Despite the grave dancing that is likely going on in certain corners of the media, is anyone asking the important questions here? Including but certainly not limited to:
• Who will real sex workers depend on for tax advice?
• What non-profit organization will the two “investigators” entrap next?
• Will Glenn Beck finally calm down? He has appendicitis for crissakes.
Questions worth noting. If you have answers to any of these, kindly enlighten us in the comments (without suffering from an aneurysm).
IRS Leaves ACORN Off VITA Grant List [Web CPA]
IRS Awards $8 Million in Grants to 147 Organizations for Tax Prep Assistance — $0 to ACORN [TaxProf Blog]
No IRS VITA “Seed” Money for ACORN [Tick Marks]

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 AI Trainer, Data Science Expert

Remote Accounting Expert, AI Trainer

Remote Client Controller, CAS Firm

Remote AI Trainer, Data Science Expert

Remote Accounting Expert, AI Trainer

Remote Client Controller, CAS Firm