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Social Media Poses Enough of a Risk to Overstock.com That They Disclosed It in Their 10-K

It’s been quite some time since we picked up the Overstock beat but Gary Weiss picked up something in the company’s recently filed 10-K yesterday that makes us wonder if the company was shooting for irony or if they’ve given up on blaming the “shorts” turning instead to “social media,” which, similar to the anti-short campaign would allow them to encompass a number of villains without naming anyone directly.


From “Note 1A: Risk Factors” section of the company’s notes to the financial statements:

There has been a marked increase in use of social media platforms and similar devices, including weblogs (blogs), social media websites, and other forms of Internet-based communications which allow individuals access to a broad audience of consumers and other interested persons. Consumers value readily available information concerning retailers, manufacturers, and their goods and services and often act on such information without further investigation, authentication and without regard to its accuracy. The availability of information on social media platforms and devices is virtually immediate as is its impact. Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning the Company may be posted on such platforms and devices at any time. Information posted may be adverse to our interests, it may be inaccurate, and may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also could be used for dissemination of trade secret information, compromise of valuable company assets all of which could harm our business, prospects, financial condition and results of operations.

As Gary points out, this disclosure is especially rich since Patrick Byrne had a goon using Facebook to stalk critics like Gary, Sam Antar, Barry Ritholtz among others which of course was disseminated in various social media outlets. Newsflash to Overstock’s risk managers: when people are being pursued by creeps on the Internet, they complain about to EVERYONE THEY KNOW.

One could easily argue that Segway accidents at the office pose just as great of a risk to key employees – and thus a disclosable item – but perhaps that’s covered under their D&O policy? It still seems plausible that disclosure would still be warranted. Additionally, the risk of a good snowfall might cause some of Salt Lake City-based company’s employees to call in sick to enjoy the fresh pow could have resulted in a late filing which is certainly something the SEC would want to know. We know KPMG has a crack squad of auditors all over this engagement but it’s conceivable that they overlooked some other risks. If you’ve got ideas on what those might be, let us know below.

Does Hollywood Always Portray Accountants as ‘Pathetic’ or ‘Despicable’?

That’s the question put forth by a reader across the pond to the group and since the Academy Awards have come and gone with nothing more than the cliché PwC jokes, it seems worth discussing.

But first, the Brit with the beef:

I watched the brillant [sic] Untouchables yesterday. This triggered the point about portryal [sic] of accountants by Holloywood [sic]. It is very poor in comparision [sic] to other professions.

Most accountants in the movies are either pathetic (think Rick Moranis in Ghostbusters) or despicable (Ed Begley Jr. as the sleazeball accountant who crosses a vengeful Roseanne Barr in She-Devil).

Other professions like, firefighters, doctors, and lawyers (Julia Roberts in the Oscar-winning Erin Brockovich), get their fair share of heroic roles. But when it comes to accountants we are pushed aside.

Well, for starters, comparing the work of firefighters and doctors to accountants makes as much sense as sending a team of interns into an audit committee meeting. If you’re looking for heroics, there are few opportunities for accountants in Hollywood; even a crook-turned-crime-fighter like Sam Antar would be a anti-hero at best. One exception would be Ben Kingsley as Itzhak Stern in Schindler’s List.

As for Morris in Ghostbusters, he scores with Annie Potts in Ghostbusters 2, so that hardly qualifies as pathetic. As for motive behind the unflattering portrayals, maybe enough people working in Hollywood have been ripped off by their own accountants that a slight vein of villainy is always written into their characters. The most recent muse being Ken Starr.

Despite that possibility, there are plenty of accountants in film that we like:

• Thandie Newton as Stella in RocknRolla

• Leo Bloom in The Producers (Wilder or Broderick, take your pick)

• Danny Glover as Henry Sherman in The Royal Tenenbaums

• It’s on the small screen but George Wendt as Norm Peterson on Cheers

Whether you see these characters as flattering or not, is your call but their awesomeness is not in question (I’m partial to Stella, frankly). We’re missing some, surely, so feel free to chime in with others.

Accounting News Roundup: Madoff Speaks; Why a Tax Pro Is Worth the Money; Crime Pays…Behind Bars | 02.16.11

From Prison, Madoff Says Banks ‘Had to Know’ of Fraud [NYT]
In many ways, however, Mr. Madoff seemed unchanged. He spoke with great intensity and fluency about his dealings with various banks and hedge funds, pointing to their “willful blindness” and their failure to examine discrepancies between his regulatory filings and other information available to them. “They had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know.’ ”

Why It’s Worth Paying for a Tax Pro [WSJ]
To save money last year, Anthony Fasano tried preparing his new business’s first tax return on his own. Then reality sank in. “I realized I really had no understanding of the tax laws from a business standpoint,” says Mr. Fasano, founder of Powerful Purpose Associates, an executive-coaching company he runs out of his home in Ridgewood, N.J. “I was just winging it.”

Nonprofits and International Financial Reporting Standards [AW]
Anyone who has looked at a nonprofit financial statement over the past two years might recognize the term “Fair Value Measurements” in the footnotes. This is just one example of how a joint project between the FASB and IASB has affected the reporting of U.S. nonprofit organizations. On an ongoing basis, U.S. nonprofits can expect to see changes in U.S. GAAP that will impact their reporting requirements for years to come.

Replace the Big Four with Audits by Government? More Heat in the Kitchen — and Less Light [Re:Balance]
An excellent column from Jim Peterson although I feel like he missed an opportunity to include a cockroaches metaphor.

Should Faculty be Required to Fill Out Time Sheets? [TaxProf Blog]
The billable hour goes to school.

Is Your Employee’s Cell Phone a Security Breach Waiting to Happen? [CPA Trendlines]
Not to mention the sexting!

A Question for the CFO of Green Mountain Coffee Roasters [White Collar Fraud]
Sam Antar is puzzled: “How was Green Mountain Coffee Roasters able to report income before taxes in its Timothy’s Coffee of the World Inc. subsidiary that exceeded revenues in the thirteen-weeks ended June 26, 2010?”


Trump and the Mets? Anything Is Possible [NYT]
Or running for President. Whichever.

Cheating IRS nets inmates $39 million [DFP]
Crime Pays!

When Should a Future Auditor Mention to His Firm That He’s More Interested in Forensic Accounting?

Welcome to the dead-seven-Irish-guys-in-a-garage edition of Accounting Career Emergencies. In today’s edition, a future Big 4 auditor wants to get into forensics ASAP but is concerned about appearances. How should he broach?

Have a question about your career? Need a post-Valentine’s Day/busy season break-up plan? Want ideas for cheering up your co-workers? Email us at advice@goingconcern.comDear Caleb,

I’m starting with a Big 4 firm in October. I had an audit internship last summer where they spoke about all of the ‘flexibility’ within the firm. I was always more interested in the fraud/forensics side of accounting than audit; however, I felt that I had a better chance of getting an internship in audit due to the larger number of positions available. After taking a fraud course in my masters program this year, I confirmed my initial thought that I would much rather work in that field instead of audit.

How realistic is it to try to switch from audit to forensics within a Big 4 firm? How long should I wait until I ask about switching without burning any bridges? I feel like I already know about the normal downsides of a career in auditing, are there any unique differences (good or bad) from a career in forensics?

-Confused New Hire

Dear Confused,

We’re impressed. It was quite the sly move on your part, playing the numbers game. And per usual for a new associate, you’re thinking WAY ahead, which is fine but don’t forget you haven’t even set foot on hallowed Big 4 ground yet.

Regarding the “realistic” question, we’d venture that it falls somewhere in between “somewhat” and “not very” given the fact that your start date is months away. It’s closer to “not very” at this juncture because you have no work experience whatsoever. Forensics involves turning over lots of rocks and that simply takes time and it’s helpful if you have experience in another investigative career. Now, a switch is “somewhat realistic” for you because you know exactly what career path you’re interested in taking. You have many of your future colleagues (and some superiors) beat in this regard. To appropriately address this with your firm, discussing your interest in forensics with your career counselor and mentors is the best way to go. Simply asking about a transfer in your first year or two at the firm is coming on a little strong. Besides, a few years of auditing will serve your skills well as you prepare for a career in forensics.

As for pros and cons in forensics versus auditing, you’ve already discovered one advantage – the work is far more interesting. It’s also a specialized area, so it can be potentially more lucrative and is a unique skill set. As for disadvantages, forensics is a hot area right now and the groups are relatively small. The groups and demand for services may be growing but lots of people have are exploring this area and spots will fill up quick.

Another big disadvantage is that there’s an intangible quality that forensics experts have, that some people don’t and that is an inherent skeptical attitude and investigative intuition. Here’s what forensic expert Tracy Coenen told us last year:

It’s common for people to think that a good auditor makes a good forensic accountant, and that’s simply not the case. Some people have a gift for thinking outside the box and can get a gut feel for what’s wrong. Others only have a gift for reconciling numbers and using checklists. The [AICPA] survey addressed investigative intuition, but it didn’t even make it into the top five of core skills. I think that’s wrong on many levels.

In that same post, GC friend Sam Antar talked about having additional qualities:

An effective forensic accountant must have a pair of double iron clad balls and a triple thick skin. Prospective forensic accountants can count on making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct. […] Effective forensic accountants must at least think like a scumbag to understand criminal behavior, techniques, and countermeasures.

So, in other words, you need to have raw talent and instincts. You may have wanted to be a professional baseball player when you were a kid but still couldn’t manage to hit a ball off a tee or catch a cold.

So to wrap it up, express interest in forensics but we don’t think you should come on too strong. If you do some time in auditing and perform well, you’ll give yourself a better chance of dipping a toe into a forensics group down the road. Good luck.

Accounting News Roundup: PwC Alum Will Be FASB Technical Director; Accounting Firms Excited for Cross-Atlantic Probing; AMD CFO Gets Unexpected Promotion | 01.12.11

SEC Inspector General Probes Khuzami’s Role in Citi Settlement [Bloomberg]
The U.S. Securities and Exchange Commission’s internal watchdog is reviewing an allegation that Robert Khuzami, the agency’s top enforcement official, gave preferential treatment to Citigroup Inc. executives in the agency’s $75 million settlement with the firm in July. Inspector General H. David Kotz opened the probe after a request from U.S. Senator Charles Grassley, an Iowa Republican, who forwarded an unsigned letter making the allegation. Khuzami told his staff to soften claims against two executives after conferring with a lawyer reprecording to the letter.

U.S. accounting board names technical director [Reuters]
The board that sets accounting rules for U.S. companies said it has named a former PricewaterhouseCoopers LLP partner as technical director to oversee staff work on new accounting standards. Susan Cosper will start at the Financial Accounting Standards Board on Feb 1. She succeeds Russell Golden, who was named to the board in September, FASB said in a statement on Monday.

Goldman Opens Up to Mollify Its Critics [WSJ]
In a 63-page report released Tuesday, Goldman says that for the first time in its 142-year-history, it will start disclosing how much revenue comes from the firm’s own trading and investing. The reporting change, which comes after an eight-month review and a bruising lawsuit against the firm by the Securities and Exchange Commission, will begin with Goldman’s fourth-quarter results later this month. The firm’s power and motives have been repeatedly questioned since the financial crisis erupted, in part because Goldman weathered the mess far better than most banks and securities firms.

Rosen Seymour Shapss Martin & Co. expands operations through merger [AW]
It was a busy merger Monday.

Accounting and Consulting Firms Morrison, Brown, Argiz & Farra, LLC And ERE, LLP Join Forces [MBAF]
Annnndd it continues.

Top six firms welcome US and UK audit co-operation [Accountancy Age]
International chiefs of PwC, Deloitte, Ernst & Young, KPMG, BDO and Grant Thornton, have produced a joint statement in which they say the agreement between the watchdogs will aid market confidence in the auditors’ work. Yesterday the US Public Company Accounting Oversight Board (PCAOB) and Professional Oversight Board (POB) in the UK agreed that they will co-operate in regulating audit firms.

The Audit Model Is Broken — “Re:Balance” Has Its Third Birthday — And The Message Hasn’t Changed [Re:Balance]
Happy Birthday to Re:Balance.

Amateur Fraud Fighters Who Do the SEC’s Job For Them Can’t Be SEC Whistleblowers, Sorry [JDA]
The Sam Antars of the world aren’t eligible for the glitz and glamour that so many SEC whistleblowers enjoy.


AT&T Preps iPhone Plan [WSJ]
On Tuesday, Verizon Wireless is expected to announce that it is getting the Apple Inc. phone around the end of the month, people familiar with the matter have said, ending AT&T’s three-and-a-half-year exclusive run with the iconic device. The announcement will kick off a battle as the two carriers fight to lure defectors and win over new customers. AT&T is expected to run new ads that will highlight what the carrier says are the iPhone’s greater speed and better functioning on its network, a person familiar with the matter said.

AMD CEO resigns, CFO named interim chief [Reuters]
Advanced Micro Devices Inc Inc’s chief executive resigned on Monday as the world’s No. 2 maker of PC microprocessor chips said it was seeking a new CEO to boost the company’s growth, sending shares down nearly 4 percent in after-hours trading. AMD said the resignation of Dirk Meyer was the result of a “mutual agreement” with the board of directors and that Chief Financial Officer Thomas Seifert will become interim CEO, effective immediately, as the company looks for a permanent replacement.

Accounting News Roundup: McConnell Promises to Block House Bill on Tax Cuts; Morrison & Co. Merges with WithumSmith+Brown; Section 409A Relief | 12.02.10

U.S. Bill to Extend Middle-Class Tax Cuts Likely to Stall After House Vote [Bloomberg]
At least six House Democrats said yesterday that they would vote against the measure or were considering doing so because they either agreed with Republicans or were concerned about the $3 trillion measure’s effect on the growing federal budget deficit. The House has 255 Democrats and 179 Republicans.

Even if the measure passes the House, Senate Minority Leader Mitch McConnell of Kentucky said Republicans would block its passage in his chamber because it would amount to a tax increase for high earners.

World Cup Bids Go Down to the Wire [WSJ]
As you may recall, PwC had a big hand in England’s push to land the 2018 Cup. The announcement comes today circa 9 am, although the Journal states, “keeping with the opaque nature of international football politics, no one knows exactly when or how the result will be announced.”

Morrison & Company merges with WithumSmith+Brown [AW]
Forensic accounting firm Morrison & Company, P.A., has merged with New Jersey-based CPA firm WithumSmith+Brown, P.C. (WS+B). Effective this week, the union adds 14 professionals to the WS+B roster.

The Morrison & Company staff currently based in the Paramus office will remain at that location, under the WS+B name.

Green Mountain Coffee Roasters, Time to Spill the Beans? [White Collar Fraud]
Sam Antar wants some hippies in Vermont to share all the details about their accounting errors.

Senate votes to exempt CPAs from ‘red flags rule’ [CPA Success]
The AICPA reports that the Senate has passed the “Red Flag Program Clarification Act of 2010,” a measure that narrows the definition of “creditor” in the Fair Credit Reporting Act and thus likely excludes CPAs and CPA firms from having to comply with the Federal Trade Commission’s “red flags rule,” which requires certain business entities to “develop and implement written identity theft prevention programs” that could detect the red flags that signal identity theft.


IRS Provides Additional Relief Under Section 409A Document Failure Correction Program [JofA]
Aka: “Relief for the Worst Tax Enactment of the Last Decade.”

The Obama Deficit Panel’s Tax Reform Version 2.0 [TaxVox]
The wonks at the Tax Policy Center feel that 2.0 is “specific and more realistic than their initial plan.”

Green Mountain Coffee Roasters: Gosh, We Ended Up Having Way More Accounting Errors Than We Thought

Back in September, Vermont-based Green Mountain Coffee Roasters put the world on notice that the SEC was asking some questions about their revenue recognitions policies. Despite the SEC Q&A, analysts we’re cool with the company and the GAAP the crunchy accounting group was putting out.

Also at that time, the company disclosed that there were some immaterial accounting errors that were NBD. That was until they dropped a little 8-K on everyone last Friday!


Turns out, there was a whole mess of accounting booboos and the company will be restating “previously issued financial statements, including the quarterly data for fiscal years 2009 and 2010 and its selected financial data for the relevant periods.”

From the aforementioned 8-K with all the bad news:

The Company has discovered the following errors:

• A $7.6 million overstatement of pre-tax income, cumulative over the restated periods, due to the K-Cup inventory adjustment error previously reported in the Company’s Form 8-K filed on September 28, 2010. This error is the result of applying an incorrect standard cost to intercompany K-Cup inventory balances in consolidation. This error resulted in an overstatement of the consolidated inventory and an understatement of the cost of sales. Rather than correcting the cumulative amount of the error in the quarter ended September 25, 2010, as disclosed in the September 28, 2010 Form 8-K, the effect of this error will be recorded in the applicable restated periods.

• A $1.4 million overstatement of pre-tax income, cumulative over the restated periods, due to the under-accrual of certain marketing and customer incentive program expenses. The Company also has corrected the classification of certain of these amounts as reductions to net sales instead of selling and operating expenses. These programs include, but are not limited to, brewer mark-down support and funds for promotional and marketing activities. Management has determined that miscommunication between the sales and accounting departments resulted in expenses for certain of these programs being recorded in the wrong fiscal periods.

• A $1.0 million overstatement of pre-tax income, cumulative over the restated periods, due to changes in the timing and classification of the Company’s historical revenue recognition of royalties from third party licensed roasters. Because royalties were recognized upon shipment of K-Cups by roasters pursuant to the terms and conditions of the licensing agreements with these roasters, Keurig historically recognized these royalties at the time Keurig purchased the K-Cups from the licensed roasters and classified this royalty in net sales. Management has determined to recognize this royalty as a reduction to the carrying cost of the related inventory. The gross margin benefit of the royalty will then be realized upon the ultimate sale of the product to a third party customer. Due to the Company’s completed and, when consummated, pending acquisitions of third party licensed roasters, these purchases and the associated royalties have become less of a factor, since the post-acquisition royalties from these wholly-owned roasters are not included in the Company’s consolidated financial statements.

• An $800,000 overstatement of pre-tax income, cumulative over the restated periods, due to applying an incorrect standard cost to intercompany brewer inventory balances in consolidation. This error was identified during the preparation of the fiscal year 2010 financial statements and resulted in an overstatement of the consolidated inventory and an understatement of the cost of sales.

• A $700,000 understatement of pre-tax income for the Specialty Coffee business unit, due primarily to a failure to reverse an accrual related to certain customer incentive programs in the second fiscal quarter of 2010. The over-accrual was not identified and corrected until the fourth fiscal quarter of 2010.

• In addition to the errors described above, the Company also will include in the restated financial statements certain other immaterial errors, including previously unrecorded immaterial adjustments identified in audits of prior years’ financial statements.

So naturally you shouldn’t rely on anything out there. Despite the discovery and disclosure of this massive fuckup and warnings from Sam Antar including some possible insider trading (it’s a theme today) and disclosure violations, an analyst at Bank of America Merrill Lynch thought it would be rad to upgrade the stock which has sent the price soaring. Why not, right?

In directly related news, anyone on the PwC audit team shouldn’t make any Thanksgiving plans.

Former Business Journalist Needs Help Becoming the Next Great Forensic Accountant

Welcome to the christ-is-it-next-Wednesday-yet edition of Accounting Career Couch. In today’s edition, a former business journalist is looking to get into forensic accounting. How on Earth can you do that?

Need help with your next career move? Want some advice on an awkward confrontation? Looking for a loophole in your firm’s dress code so you can show off your fantastic gams/guns? Email us at advice@goingconcern.com and we’ll recommend what to say/wear.

Back to Mikael Blomkvist:

I’m in my earr worked in accounting. I have a B.A. in liberal arts and am currently enrolled in a Masters in Accountancy program. I formerly worked 10+ years as a business journalist, during which I learned a fair amount of basic accounting and financial statement analysis. I especially enjoyed investigative business journalism, which led me to get a PI license and a CFE designation and work as a freelance fraud investigator for several years. But I quickly saw that I needed a CPA license and real-world accounting experience to command decent fees.

Once I get my M.Acc., I’d like to get a job in forensics at a public accounting or consulting firm and starting working toward the CPA. I know exactly what I want to do: forensics, and even more specifically, fraud investigations. I’d rather not toil in entry-level audit and try to worm my way into forensics if I can avoid it.

My questions are myriad. For starters, am I too old to do this? (Yes, I’m a married parent, have paid dues before, don’t mind paying them again as a career-changer.) Where should I apply? Would the Big 4 even be interested, or should I concentrate only on specialized/regional firms? Would I have more luck going the entrepreneurial/sole proprietor route than trying to get a firm to hire me? Will investigate for food. Anything helps, even a smile.

Dear Blomkvist,

Let us just start by saying two things as it relates to the age question: 1) it doesn’t mean shit and 2) it’s irrelevant at this point. Judging by your actions you’ve already made up your mind and you’re just looking for a little confirmation.

Now, then. As far as where you should apply – Big 4 is an option but not a great one. They have forensics practices obviously but getting your foot in the door can be tough as the groups are small and positions are hard to come by. That being said, it won’t hurt to get in touch with the experienced-hire recruiters at the major firms in your area to see if there are openings. You’re certainly a better candidate than someone internal that has no investigative experience and wants to get into forensics for the hell of it. A little pavement pounding could turn up a great opportunity.

That being said, it seems to make more sense to seek out opportunities at boutique or small firms in your city. You will likely get the opportunity to meet the owner(s)/partners of the practice who will probably value your experience as an investigative journalist. Someone like Tracy Coenen would be a good example of an expert that could take you under their wing and show you the ropes (assuming they need someone).

As far as starting hanging your own shingle, it’s an option but you’ll eat what you kill. Are you prepared to live that way? Is your family prepared to live that way? Conversations need to be had. You may be able to lend a hand to other forensics specialists to get your feet wet but it will be a tough sell to land your own clients for quite awhile.

You’ve got the investigator’s instinct and presumably the iron-clad balls that Sam Antar insists are a must and that cannot be taught. These intangibles are extremely valuable and should be a major selling point no matter what path you choose. Skål!

Accounting News Roundup: Debunking the Audit Industry Green Paper; Theories Behind the Tax Cut That Nobody Noticed; AIG Is Doing a Happy Dance | 10.22.10

The EC’s Green Paper, “Audit Policy: Lessons from the Crisis”: The Bureaucrats Blow Another Chance [Re:Balance]
Jim Peterson dissects the European Commission’s Green Paper on the audit industry and isn’t impressed with what is inside.

Interesting Issues in Timing of Green Mountain Insider Stock Sales and Disclosure of SEC Inquiry [White Collar Fraud]
Sam Antar is curious about GMCR executive Michelle Stacy’s sudden exercising of stock options. You see, GMCR was notified of the SEC investigation into their revenue recognition on September 20th. Ms. Stacy exercised and sold her options on the 21st. The company announced the SEC investigation on the 28th.

Regardless of what analysts think about Vermont hippies and their knowledge of revenue recognition, the timing will certainly get the attention of someone (who finds porn disgusting) at the SEC.

Why Nobody Noticed Obama’s Tax Cuts [TaxVox]
According to Tax Policy Center estimates, 96.9 percent of households enjoyed a tax cut that averaged almost $1,200. Just one measure—Obama’s Making Work Pay tax credit—put more than $116 billion into people’s pockets in 2009 and 2010.

Yet, a Times poll found that fewer than 10 percent of those surveyed had any clue. Remarkably, fully one-third thought their taxes went up—even though the actual number was about zero.

Poll: Financial crisis will force states to raise taxes [On the Money]
78% say it’s gonna happen.

Office Depot, execs settle SEC disclosure charges [Reuters]
The SEC had accused the company, its CEO Stephen Odland and former chief financial officer Patricia McKay of conveying to analysts and big investors that the company would not meet analysts’ earning estimates for the second quarter of 2007.

New Faces Enter Fray in Accounting [NYT]
Floyd Norris remembers the old cast at the FASB, IASB and introduces the new ones.


AIG Raises $17.8 Billion in Record AIA Hong Kong IPO [Bloomberg]
American International Group Inc. raised a record HK$138.3 billion ($17.8 billion) from the Hong Kong initial public offering of its main Asian unit, putting what was once the world’s largest insurer on course to repay its 2008 bailout.

AIG sold 7.03 billion shares, or a 58 percent stake, at HK$19.68 each, the top end of a marketing range, Hong Kong-based AIA said an e-mailed statement. It used an option to expand the sale offered from 5.86 billion, or a 49 percent stake.

Comment: EU audit proposals full of contradictions [Accountancy Age]
More debunking of the EC Green Paper.

Aetna CFO duties to expand under new CEO [Reuters]
Aetna Inc [AET.N] will expand the responsibilities of Chief Financial Officer Joseph Zubretsky to include leadership of the health insurer’s strategic diversification plans under the incoming chief executive officer.

Need Help Choosing Between a Career in Audit and Advisory at a Big 4 Firm?

Since we’ve already checked out for three-day weekend and a reader needs advice ASAP, we’ll dispense with another edition of “Accounting Career Couch.” An aspiring accountant is trying to decide between joining the advisory and audit practice of a Big 4 firm but – surprise! – can’t decide since she likes both. Sigh.

Have a question about your next career move? Worried that you’re not doing enough for your clients? Need help casting a satirical political ad? Email us at advice@. Like donuts, there’s nothing we can’t do.

Back to our indecisive co-ed:

Hi Caleb:

I feel as if I am facing a small dilemma at a pivotal point in my young accounting career. I am interviewing with one of the Big 4 tomorrow and have been asked which service area I would prefer to go into: Audit or Advisory.

To be honest, with this job market, I would love either and I am 100% sure I would be a good fit for either type of position. I am very actively involved in Beta Alpha Psi and my resume is very “plump” with positive customer service experience. I posses very strong soft skills at quite a young age and have a lot of leadership experience in school and through my role in BAP. The company I am interviewing with is my #1 and I have built two strong relationships, each in each service area. For my high interest in Advisory, I can say, I always gravitate toward the headlines that have become the new hot topics that include, fraud, forensic accounting, and investigation. This is consistent with my very investigative and curious personality. However, on the other hand, understanding and learning the breakdown of a specific client’s company as I am involved in an audit interests me very much. The point is, what are the pros and cons for the two different services: Audit v Advisory. What is the opinion for a positive, fulfilling career in each service area, as public accounting is my interest for a lifetime? Am I hurting myself by letting the company choose where to put me by saying I am interest in BOTH opportunities?

To answer your last question – yes, it’s our feeling that you are marginalizing yourself by saying you’re interested in both practices. If you’re on the fence about which to join, other candidates that are more sure about their preference may have an edge over you. Make a choice for crissakes.

With that in mind, let’s break down a few pros and cons.

Pros

Audit – Your schedule is more predictable; less travel.

Advisory – Money is better; work is sexier; better reputation.

Cons

Audit – If you’re the type of person that is easily bored, then you will eventually get bored with auditing; auditing practices are bureaucratic nightmares – keeping up accounting and auditing rule changes; audit does not enjoy a sterling reputation.

Advisory – Hours can be unpredictable – you might work late nights for weeks (sometimes months) away from your home office or quite the opposite – you might find yourself with nothing to do for weeks at at time; the advisory practice is more susceptible to changes in the economy which means if things get bad, layoffs are more likely in advisory than in audit.

The real question is – what path do you want your career to take? You say that “public accounting is my interest for a lifetime.” Call us cynical but we’ll be shocked – SHOCKED! – if this is true in 3-4 years. If you really, really, really think that it is true, then audit is probably the choice for you. You’ll find a business line you like and if you’re ambitious and active within your firm, you’ll be on the partner track.

On the other hand since you say you’re drawn to fraud, forensics, investigative nature etc., we feel you should go with your instincts and go for advisory. Granted, Sam Antar will also tell you that you need the proverbial ironclad balls but those come in over time.

Anyone else faced with this dilemma? Anyone made the choice and got some input? Fire away.

Accounting News Roundup: Investigation of E&Y Over Lehman Begins in UK; Study: Mortgage Interest Deduction Doesn’t Increase Home Ownership; PwC Announces Revenue Numbers | 10.04.10

E&Y auditors investigated over Lehman Brothers [Accountancy Age]
“The Accountancy and Actuarial Discipline Board (AADB) has begun an investigation of E&Y in its role in reporting to the FSA on audit client Lehman Brothers International Europe’s compliance with the authority’s client asset rules, which govern the protection of client money.”

And since they were on a roll, the AADB is also investigating PwC for its role in J.P. Morgan’s misuse of client assets.

Study Finds the Mortgage Interest Deduction to be Ineffective at Increasing Owneref=”http://www.taxfoundation.org/blog/show/26762.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+TaxPolicyBlog+(Tax+Foundation+-+Tax+Foundation’s+%22Tax+Policy+Blog%22)”>Tax Foundation]
“Proponents for the MID often offer the justification that it increases homeownership rates, which they say has positive benefits for society. But most economists seriously question the benefits of MID and many believe homeownership is greatly over-subsidized.”

Visa, MasterCard Antitrust Decision by U.S. Said to Be Near [Bloomberg]
“The U.S. Justice Department may decide as early as this week how to resolve its two-year antitrust probe of merchant restrictions imposed by Visa Inc., MasterCard Inc. and American Express Co., three people briefed on the matter said.

The department still hasn’t decided whether it can reach a deal with the three biggest U.S. payment networks or challenge their policies in court, one of the people said. The department likely will file a lawsuit, and MasterCard and Visa are expected to settle, people familiar with the matter said.

The talks focus on rules that bar merchants from charging extra to customers who use credit cards and steering them to competing cards, and require retailers to accept every type of card banks issue, said the people, who requested anonymity because the discussions are private. The department is leaning toward allowing the companies to maintain prohibitions against surcharging, two of the people said.”

Will KPMG Ever Wake Up and Finally Learn Its Lesson after Being Duped into Completing Crazy Eddie’s Audits Too Early Twenty Three Years Ago? [White Collar Fraud]
Today’s lesson in duping auditors – Sam Antar explains exactly how he fooled KPMG (then Peat Markwick Main) into signing off on incomplete audits back in the 80s.

PwC takes $26.6bn in global revenues [Accountancy Age]
Thanks to the miracle of rounding, $26.6 billion puts P. Dubs in a tie with Deloitte for largest firm in terms of revenues, who reported the same number last month. This obviously will not stand and we will investigate the matter further to the appropriate number of significant digits to determine who the top dog is.


Citi says CEO, CFO “rebutted” Mayo’s criticisms in meeting [Reuters]
On Friday, banking analyst Mike Mayo met with Citi execs including CEO Vikram Pandit and CFO John Gerspach and they discussed, among other things, why Citi hasn’t been writing down their DTAs. Citi says that successfully rebutted the Mayo Man who is issuing a report today with his thoughts on the sit-down.

Accountant gets year-and-a-day in Petters scam [Minneapolis Star-Tribune]
“Harold Katz, the hedge fund accountant who doctored financial statements to hide the Petters Ponzi scheme from investors, was sentenced Friday to 366 days in prison after apologizing to family, friends and investors.

Katz, 43, will be eligible for parole in about 10 1/2 months. He was sentenced for conspiracy to commit mail fraud.

‘I made a colossal error in judgment,’ Katz told U.S. District Judge Richard Kyle. ‘I hope I can use this horrific experience to help others not make the same mistakes as I have.’

Katz created false financial statements at the behest of Gregory Bell, manager of Lancelot Investment Management, a Chicago-area hedge fund, to mislead investors about the stability of Petters Co. Inc., which was defaulting on various promissory notes as its decadelong Ponzi scheme unraveled in 2008. Katz also assisted Bell in making phony banking transactions with Petters Co. Inc. to make it appear the Petters Co. was paying off notes it owed to Lancelot.”

Accounting News Roundup: Liz Warren to Be Geithner’s Sidekick; Chicago Accountant Gets 23-Year Sentence for Ponzi Du Jour; Gibbs, Boehner Tweet Over Tax Cuts | 09.16.10

White House Taps Consumer Adviser [WSJ]
“President Barack Obama this week will appoint Elizabeth Warren to a lead role setting up the new Bureau of Consumer Financial Protection, two Democratic officials said, a move that will allow the White House to avoid a messy Senate fight over her role.

Ms. Warren, currently a professor at Harvard Law School, will be named an assistant to the president and special advisor to Treasury Secretary Timothy Geithner in charge of launching the new agency and setting its mission. She was a candidate to be the agency’s first director, a position that remains unfilled, but would likely have confirmation because of opposition in the Senate.”

What is Accounting? [White Collar Fraud]
It’s sort of like arithmetic but not really. Former Sam Antar nemesis, Howard Sirota, explains in a video over at WCF.

Chicago-Area Man Is Sentenced to 23 Years for Running 22-Year Ponzi Scheme [Bloomberg]
“Frank Castaldi, who ran a Chicago- area Ponzi scheme for 22 years that cost victims $31.6 million, was sentenced to 23 years in prison today in federal court.

For 22 years, Castaldi, 57, of suburban Prospect Heights preyed upon elderly Italian immigrants, U.S. District Judge John Darrah said today before handing down the sentence.

‘This is an offense of huge magnitude,’ the judge said after hearing from victims of the scheme in a packed courtroom. ‘It involved hundreds of victims. It involved millions of dollars.’

In an August 2009 plea agreement, Castaldi said he had raised more than $77 million from 473 groups and individuals. First charged in January of last year, he admitted to mail fraud and to trying to thwart a U.S. Internal Revenue Service probe.”

Regulators to Target ‘Window Dressing’ [WSJ]
“Federal regulators are poised to propose new disclosure rules targeting “window dressing,” a practice undertaken by some large banks to temporarily lower their debt levels before reporting finances to the public.

The Securities and Exchange Commission is scheduled to take up the matter at a meeting Friday and is expected to issue proposals for public comment. The action follows a Wall Street Journal investigation into the practice, which isn’t illegal but masks banks’ true levels of borrowing and risk-taking.”


Banks take over record number of homes in August [Reuters]
“A record number of homeowners lost houses to their banks in August as lenders worked through the backlog of distressed mortgages, real estate data company RealtyTrac said on Thursday.

New default notices decreased at the same time, suggesting that lenders managed the flow of troubled loans and foreclosed properties hitting the market to limit price declines, the company said.

Root problems of high unemployment, wage cuts, negative home equity and restrictive lending practices persist, however, pointing to lingering housing market pain.”

Jon Stewart: Robert Gibbs and John Boehner on the Bush Tax Cuts [TaxProf Blog]

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