Going Concern

Big 4

Don’t Sulk Big 4, Things Aren’t That Bad

Caleb Newquist
October 13, 2009

Regardless of what accounting firms may say about their current troubles because of “tough economic conditions”, lots of these “conditions” can be pret-tay good for business.
Reuters reports that several companies, including your favorites, have pulled down more than a fair amount fees related to the “asset protection scheme” that insures risky assets held by Royal Bank of Scotland and Lloyds Banking Group.
KPMG (£6.5M), E&Y (£4.3M), and PwC (£4.2M) were the top earners assisting the Brits with their version of the magic money printing machine. Oddly, Deloitte is no where to be found in this article but maybe that’s got something to do with the £59 million they received from RBS. That seems to make up for it.
Stateside, E&Y is pulling down $60 million for its work with the New York Fed on AIG which makes the RBS/Lloyds fees look like a lemonade stand.
Since misery loves company, it might be poor taste for any firm to be excited about the money that is rolling in. So nevermind our tendency to focus on the positive. Go back to feeling sorry for your slumping revenues.
KPMG Earns Most From Bank Asset Plan [Reuters]

Big 4

PwC Lends a Hand to the Insurance Industry

Caleb Newquist
October 12, 2009

We’re confident that you all enjoy talking about healthcare reform. If it wasn’t for the long hours you had to work, we’d be reading about all the accountants showing up at the town hall meetings to bring sanity to what otherwise appears to be a meeting of escaped mental patients.
Now, just when you thought that the debate had saturated the country into submission, America’s Health Insurance Plans has put out a new report, courtesy of P. Dubs, that states that the costs of health insurance would rise significantly under the plan submitted by Senator Max Baucus of Montana.
Continued, after the jump

From the executive summary:

There are four provisions included in the Senate Finance Committee proposal that could
increase private health insurance premiums above the levels projected under current law:
• Insurance market reforms coupled with a weak coverage requirement,
• A new tax on high-cost health care plans,
• Cost-shifting as a result of cuts to Medicare, and
• New taxes on several health care sectors.
The overall impact of these provisions will be to increase the cost of private health insurance coverage for individuals, families, and businesses. The net impact of these increases on households would include the impact of these increases and the new subsidies provided under the bill.

The report states that on average, costs will go up 79% under the current system between 2009 and 2019 and 111% for the same time period if the provisions are implemented.
Politico calls bullshit, “The industry, which didn’t like last week’s [Congressional Budge Office] report, bought its own analysis and will tout the PricewaterhouseCoopers findings in new ads.”
On the one hand, you can’t really expect PwC to do put out a report like this for nothing but did anyone really expect them to come to a different conclusion?
As we pointed out recently, accounting firm reports typically don’t get lots of attention but when they do, it’s usually over something that causes people to get all crazy for their particular side.
PwC will certainly be perceived as the insurance industry whore here but since they aren’t actually an insurance company, the firm won’t likely receive the worst of the populist chastisement and will just enjoy some free publicity.
Insurers, docile till now, go to war [Politico Pulse]
Potential Impact of Health Reform on the Cost of Private Health Insurance Coverage [PwC Report]

The JDA

Comverse: One More Epic Regulatory Failure

Adrienne Gonzalez
October 12, 2009

Telecom company Comverse hasn’t filed financial statements in 4 years and the SEC has just now gotten around to settling with them. Does that make sense to anyone?
Continued, after the jump

Three years after getting caught in a huge stock-options backdating scandal, technology company Comverse appears to be nearing the end of its crisis. The company recently reported that it had come to an agreement with the U.S. Security and Exchange Commission, consenting to a permanent injunction over any future violations by the company of American securities laws.
Comverse will also have to meet its periodic reporting requirement to the SEC no later than Feb. 8, 2010.
The agreement acknowledges that Comverse neither admits nor denies the allegations that the SEC filed against the company, and no fines will be imposed. The settlement is subject to court approval.
Comverse President and CEO Andre Dahan called the settlement an important step forward. “With these matters resolved, we remain focused on our plan to be relisted and on carrying out our strategies for the long-term success of Comverse Technologies,” he said.

(source)
That’s all well and good but no fines? That sounds like encouraging bad behavior to me. What the SEC is saying, in effect, is that companies don’t really need to file financial statements, and if they do they can backdate all they want and perhaps the SEC will come around eventually to slap them on the wrist. Sounds like effective regulating to me.
Comverse subsidiary Ulticom finally filed 2005 – 2008 financial statements with the SEC this month and the company promises it will resume issuing quarterlies to the SEC in 2010. Well shit, why?

During the probe of the effects of the options backdating affair, following which Comverse CEO Kobi Alexander fled Israel to Namibia, Ulticom discovered additional accounting irregularities in the company’s financial statement preparations. Mistakes had been made in the recognition of postponed revenues in the years 1998-2004, and the expenses on intangible assets during 1999-2004 had been incorrectly assessed.
The correction of these irregularities resulted in a $6.8 million write-off from revenues prior to 2005, after which the company filed complete statements.

(source)
What’s the lesson here, kids? Do whatever the hell you want, it’s not like the SEC is going to stop you. It’s the IRS you’ve got to be afraid of, not the children over at SEC Elementary.
Also see: Where’s the Sex Tape, Comverse?

Uncategorized

Deloitte Closes Reno Office, Employees Not Totally Munsoned*

Caleb Newquist
October 12, 2009

Deloitte is closing its Reno office, according to the Reno Gazette-Journal. The firm isn’t letting any of the eighteen employees go, rather they will either work from home or at client locations.

Bad news is that we wouldn’t expect the community colleges in the Reno area to get any attention any time soon and if you’re looking to get in on some free donuts, law enforcement is probably your best option.

Deloitte firm closing Reno office [Reno Gazette-Journal]

*We’re not sure this is necessary but whatevs.

Salaries

Problem of the Day: Your Staff Makes the Same Money As You (Maybe More)

Caleb Newquist
October 12, 2009

Apparently it’s happening, people. With several firms freezing pay for this fiscal year, some already hinting at an additional freeze for fiscal year 2010, and with ~~less~~ fewer offers being made on campus, it’s not outside the realm of possibility that the new associate nearly has the same salary as you.
It goes without saying that this is a contentious issue amongst the staff and it can be made worse if it is known to exist between members of the same team.
If you’ve been busting your ass for the last two to three years and seen very little appreciation in the form of merit increases and suddenly the new associate walks in making virtually the same as you, your motivation may evaporate on all fronts.
From a staff perspective, no new associate, no matter how virtuous will ever ask, “Is that what a senior associate makes? I wouldn’t be comfortable making that much without any experience.” Nice thought but not gonna happen. Firms will claim that they have to keep salaries competitive in order to win the best talent and may even encourage it in order to foster the “competitive environment”.
So discuss how prevalent this is on your team, in your office, or at your firm. Is there any good solution here? We’re talking about money, so there has to be some opinions.

Uncategorized

Trend of D-List Celebrities Abusing Accountants Likely to Continue

Caleb Newquist
October 12, 2009

In a major win for D-List celebrities being able to treat regular people like animals, Kerry Katona, who reportedly punched her accountant and threw tea on him, has had the charges against her dropped, according to several reports.

Katona, who’s fame is still a mystery to us, will not face charges and will likely continue to enjoy the ability to abuse shiesty accountants until they are afforded protection under hate crime status.

This is troubling news as global economic conditions continue to stagnate, Mark-Paul Gosselaar-types here in America will likely remain out of work since the masses will only tolerate entertainment from the C-List and up.

The rest of the D-List community will no doubt take this dismissal of charges as a cue that regardless of where they fall on the fame hierarchy, their celebrity status will ensure that they are always right about everything. Including their dire financial situation and how they ARE NOT broke and the IRS cannot be right and everything will be fine just as soon as they catch a break.

No charges for Kerry Katona over accountant attack [Accountancy Age]

Katona escapes charges over alleged assault [AFP]

Preliminary Analytics

Preliminary Analytics | 10.12.09

Caleb Newquist
October 12, 2009

• Stanford wins ruling in battle over fraud case defence – Court ruled that Stan can use proceeds from a corporate insurance policy to pay for his defense. Can we get on with the circus trial now, please? [FT]
• A Case Pitting Spin Against Fraud – “How far can Wall Street firms go to put a positive spin on bad news?” Used car salesmen should probably pay attention. [WSJ]
• BofA urged to seek external chief executive – Big institutional investors want fresh blood and not the next KL. [FT]
• Citi fined amid tax crackdown – $600k for derivatives that were partly designed to avoid taxes is supposedly going to scare other banks into compliance. [FT]
• Iceland Shrinks 8% as Prices Increase 11% in Deepest Recession – “The stock market has lost 97 percent of its value, and more than 780 companies have buckled under the weight of foreign currency loans as the krona plunged.” So, that’s not good. [Bloomberg]
• Improving your credit vs paying down debt – Americans can’t win. [Felix Salmon/Reuters]

Announcements

GC Weekend: We’re with You in Spirit

Caleb Newquist
October 11, 2009

We’re not going to pretend like there aren’t people working today. With a major deadline just four days away we’re sure some of you have had to watch your favorite gridiron match ups or playoff baseball courtesy of some piss-poor “real-time” updates. We’re sorry. That sucks
But hey, since you’re in the office, semi-concentrated on work, you might as well take a short survey that’s going to help us learn more about you and give you a chance to tell us what you like and dislike about GC.
And you’ll have a chance to win a $100 AMEX gift certificate so that could make working this weekend all worthwhile.
Okay, we apologize for that. Thanks for participating.

Review Comments

Review Comments | 10.09.09

Caleb Newquist
October 10, 2009

• GC October Survey – A chance for a $100 AMEX gift certificate people. Get on it.
• $100 million settlement for bankrupt Phila. lender – American Business Financial Services is bankrupt. Now the trustee wants BDO to pay $962 million. Ouch. [Philadelphia Inquirer]
• Internal Audit Staff Hit Hard by Recession [Web CPA]
• Corporate bully of the day: Hertz – Audit Integrity called out Hertz. Hertz sues Audit Integrity. That’s mature. [Felix Salmon/Reuters]
• FASB Finalizes New Revenue Recognition Rules – Yes, the wait is over. [Compliance Week]
• Tax Consequences of President Obama’s Nobel Prize [TaxProf Blog]

Uncategorized

Obvious Sign of Fraud: You’re Having Sex with the Client

Caleb Newquist
October 10, 2009

In case you young auditors thought you needed to have highly acute senses to detect fraud at your clients, you’re dead wrong.
Best thing you can do is immediately become skeptical if you find yourself trying to figure out the best posish for the client’s office supply room:
More, after the jump

“These auditors from the Big Four accounting firms are usually single kids just a few years out of school. What do kids in their 20s think about all the time? Sex,” said [Sam] Antar, who was at the center of a multi-million dollar fraud 20 years ago.
So Antar would pair “cute hot female” employees with male auditors as part of his distraction strategy. “In effect, I was a fraudster, matchmaker and pimp,” said Antar, who avoided jail time by working with the U.S. government, and now advises government agencies and businesses on avoiding accounting fraud.

As we’ve covered, the opportunities for accountants to get some action can be few and far between so this strategy makes perfect sense.
This will put many of you in a very difficult situation. We really wish the best for all you of in the getting laid department especially when it involves someone that would ordinarily be way out of your league.
But you may have to decide: Do you uncover the next diabolical Ponzi scheme or do you totally cave to the irresistible charms of the guy that looks way too much like Chace Crawford?
Who would it take for you to overlook a few million in misappropriated funds? Discuss in the comments.
Financial fraud — accounting for criminals [CNN]

Big 4
Video

Since When Do They Let Accountants on CNBC?

Caleb Newquist
October 10, 2009

What were these guys really saying? Other than accountants are NOT to be blamed for anything. Discuss. And for crissakes Jim, learn how to tie a Windsor knot.