There was some bad decision-making going on at Deloitte Touche Tohmatsu in Japan. Dozens of its employees had bank accounts at the subsidiary of a client for which Deloitte Japan issued audit reports, which is a no-no because Securities and Exchange Commission rules don’t allow accountants to have bank accounts with audit clients that have […]
It's intriguing that when interviewed by the New York Times, PwC's Bob Moritz (a.k.a. BoMo a.k.a. Adrienne's man crush) chose to highlight the fact that he learned all about diversity when he spent time in Japan and got his ass kicked. Unless you're having a particularly slow day, you can pretty much skip this interview […]
Great news, folks, I have the brand new 2011 NASBA Candidate Performance book in my hands as of yesterday and have to tell you, I'm pretty excited about this new and improved version. It's substantially thicker than the last version (size does matter and don't let anyone tell you otherwise), which means it's packed with […]
Today, Bloomberg's Jonathan Weil wrote his fourth column exposing clients of a Big 4 audit firm whose PCAOB inspection report reveals that the audit performed was less than stellar. This time around, JW exposes two clients of PwC's Japanese Affiliate Kyoto Audit Corp.: The report [in full, below] said the board’s staff reviewed the firm’s audits for […]
Not sure how we missed this story but thanks to the random commenter who brought it to our attention. New KPMG Global Chairman Michael Andrew was recently interviewed by The Australian and it sounds like KPMG had a pretty kickass fiscal 2011.
We’re still waiting for the official revenue numbers (I’m guessing they’ll be out next week) but Drew kinda spilled the beans already:
New KPMG global chairman Michael Andrew revealed to The Weekend Australian yesterday that the company had recorded a 10.1 per cent increase in revenue in the past financial year, to $22.7 billion. The numbers are due to be released officially later this month.
“If we had not had the Japanese earthquake, I suspect we would have gone past Ernst & Young. Japan is a good market for us. We had really good growth in the Americas and really good growth in tax,” he said yesterday.
FUCKING JAPAN AND YOUR EPIC NATURAL DISASTER! You just cost one of the premier professional services firms on EARTH the chance to leave a rival in the dust. Since there was enormous death and destruction, I guess everyone at the firm will let this go but they’re trying really hard not to throw out some pro forma numbers just for the sake of argument. ANYWAY, for those of you scoring at home, the $22.7 bil puts the House of Klynveld slightly behind E&Y who racked up $22.9 billion for FY ’11. It will also make for the second straight year of a bumper crop of Omaha Steaks for the employees at the firm.
But despite earthquakes and actual hard numbers, Mike is calling it like he sees it:
“We are basically equal No 3. There is still a big gap to PwC and Deloitte, which have been buying large consulting practices in the systems implementation area.”
In other words, if all things were equal, KPMG would probably be the largest firm. They’re just keeping their heads about it.
KPMG grows to match rival Ernst & Young [The Australian]
Just a few days ago, Caleb asked why anyone would care if Olympus fired KPMG after a dispute over an accounting matter, but early this morning we learned the answer to that seemingly obvious question.
The question now is, why did KPMG wait around to get fired and not run the hell out of there? Well, because the issue at hand at that point was “goodwill impairment,” which ended up being a series of $1 billion transactions that added up to possible fraud. We won’t say Japanese regulators haven’t had the chance to dissect the evidence yet. We can only assume KPMG did not notice that glaring $1 billion error or surely they would have alerted the financial authorities. No, dismissed “quietly,” swapped out for Ernst & Young. Like Uncle Ernie needs this heat right now.
Fine. Now we’re at tonight (here, at least) and WSJ is live-blogging the press conference at which Olympus’s new president suffered a media grilling over revelations that the company used phony mergers to hide investment losses from shareholders.
“I was absolutely unaware of the facts I am now explaining to you,” new CEO Shuichi Takayama told the press conference. “The previous presentations were mistaken.” Right. First thing you do in this situation is CY-MFing-A, bro.
The Japanese medical equipment and digital camera maker admitted to using acquisitions to cover its securities losses going back to the 1990s. Think about that for a moment. Many of you weren’t even aware of the world around you in the 90s, that was a long fucking time ago. So much for confidence in fragile financial markets.
It wasn’t that long ago that Olympus fired its British CEO Michael Woodford. Takayama had to answer more than a few questions about Woodford at his press conference:
There is a question about Mr. Woodford. “There are no plans for him to return,” Mr. Takayama said.
A reporter asking why the company is not thinking about revoking Mr. Woodford’s dismissal.
Mr. Takayama said Mr. Woodford was dismissed for his management style and therefore, there is no thought of revoking that dismissal.
A reporter asks Mr. Takayama if his impression of Mr. Woodford has changed in light of the revelations, his response: “No, it has not.”
It’s very interesting how they are holding the line against Mr. Woodford. It almost seems personal.
It couldn’t possibly stem from a feeling of betrayal and anger! A 20-year-old (alleged) fraud is suddenly trotted out into the 24-hour Internet news cycle (they didn’t have that in the 90s when they started this scam) and these guys have to apologize to shareholders because this asshole went sniffing around their completely obviously fake M&As.
“It is truly extraordinary and frankly unbelievable that Olympus, a major Nikkei listed public company, made a series of payments approaching USD 700 million in fees to a company in the Cayman Islands whose ultimate ownership is still unknown to us, preventing the auditors from verifying that no related parties were involved,” Woodford wrote in an Oct. 11 letter. “In putting the company first, the honorable way forward would be for you and Mori-san to face the consequences of what has taken place, which is a shameful saga by any stretch of the imagination.”
Woodford hired PwC, who wrote a damning report exposing Olympus’s shady M&A activities. PwC spokesman Derek Nash said he “could neither confirm or deny” that the firm had done any work for Olympus.
Fuck! When will these whistleblowers stop?
The good news: plenty of work coming up for you, GC faithful.
Once in awhile, management and their auditors don’t see eye to eye on things. If semi-well adjusted adults are involved, usually cooler heads prevail and differences are sorted out. On the other hand, if there are egomaniacs or individuals of Irish descent involved, then things can sometimes go badly. Not badly in the physical sense, mind you. Badly in the sense that auditors usually get fired. When that happens it usually raises eyebrows of investors and people start asking all sorts of questions. Luckily, footnote disclosures usually detail the dispute and everyone moves on. That’s precisely what didn’t happen at Olympus:
In May 2009, Tsuyoshi Kikukawa, the then president of the camera-maker and medical equipment firm, announced that the contract for its then auditor, KPMG, had ended and that another global accounting firm, Ernst & Young, would take over. Kikukawa made no mention of any row with KPMG, although Japanese disclosure rules require companies to notify investors of “any matters concerning the opinions” of an outgoing auditor. In a confidential internal document, Kikukawa wrote to executives in the United States and Europe, revealing that there had been a disagreement with KPMG which he did not plan to disclose to the stock market. “The release to be published today says that the reason of this termination is due simply to expiry of accounting auditors’ terms of office,” Kikukawa said in the letter dated May 25, 2009, which was written in English.
You may have recently heard that Olympus is in a bit of situation. They up and fired their new CEO after he was on the job for two weeks because he was asking a few too many questions. You see, Michael Woodford was of the opinion that the $687 million advisory fee the company was paying for to a firm assisting them with a purchase the company in the UK was a tad steep and wouldn’t keep [yapping motion with hands]. Mr. Kikukawa – who has a reputation as an ‘emperor‘ – didn’t care for that, so he and the Board of Directors told Woodford that his services were no longer needed, chalking it up to Woodford being a little too British.
Fast-forward to today’s news – The accounting issue in question – goodwill impairment – was related to the company, Gyrus Group Plc., Olympus purchased back in 2009. And who do you suppose gave Reuters the memo outlining the whole we’re-firing-KPMG-because-they-disagree-with-us-and-we’re-not-telling-anyone-about-it thing?
The confidential letter was given to Reuters by former Olympus CEO Michael Woodford who was ousted after just two weeks in the job on October 14 for what he says was his persistent questioning over the Gyrus advisory fee and other odd-looking acquisitions. Woodford says the letter was addressed to him in his role as head of Olympus Europe at the time and to Mark Gumz, then head of Olympus Corp America.
Apparently this is no big whoop as long as it’s not material and “the numbers add up” says an accounting professor who has ties to Olympus. Oh! In that case, I guess everyone should just move along.
On the day of Sir David Tweedie’s retirement, no less.
Japan is considering postponing the mandatory introduction of global accounting standards for all listed companies beyond the original target date of 2015, amid strong opposition to the change from the country’s business community. Japan’s financial services minister, Shozaburo Jimi, said Thursday at a Business Accounting Council meeting, hosted by the Financial Services Agency, that making Japanese companies adopt the rule—known as the International Financial Reporting Standard—within a few years could be a big burden and costly for businesses. “If Japanese firms are required to move to IFRS, we will need enough time, five to seven years, for preparation,” Mr. Jimi said, adding that discussions over the matter will take time.
By disasters, we don’t mean that thing that happened with scoring.
When Katrina hit in 2004, NASBA granted affected CPA exam candidates an automatic extension. This time around, they are asking Japanese CPA exam candidates directly affected by the earthquake and tsunami disasters to contact them for assistance.
Here’s the official word from NASBA:
Our hearts go out to those in the Japan area who are dealing with rebuilding their lives and communities after the recent earthquake and tsunami disasters in that region. Japanese candidates who are scheduled to test in the near future, (United States or at our Guam Testing Center) and who may not be able to do so now due to the logistical issues that the disaster caused, should know that we are here to assist during this time of uncertainty.
Japanese candidates who may need to request an NTS extension and/or rescheduling, should contact NASBA’s Candidate Care department by emailing firstname.lastname@example.org and we will handle each concern on a case by case basis as we receive requests.
We recommend that all concerns of this type be directed to NASBA’s Candidate Care department. For this particular issue, only those affected by the earthquake/tsunami disaster should email us at email@example.com.
We assume that last line means “please don’t use the Candidate Care department to yell at us about scores” but did not ask to be sure. Let’s just pretend it did just to be safe.
• Japan embraces new fair value rule [Financial Times via Accountancy Age]
Here’s a novel idea: making a decision on IFRS! Japan’s Financial Services Agency will be allowing companies to adopt the international version of the new fair value rule developed by the IASB, starting Wednesday. Since the world’s second largest economy is opting to pull the trigger on IFRS it may throw the G20’s request/demand for the world to get all kumbaya when it comes to accounting rules.
“Fair value accounting…as unleashed one of the most divisive debates to have emerged from the credit crisis, threatening to disrupt a pledge by the G20 group of leading economies to create a single, global accounting system by mid next year,” reports the FT and judging by the SEC’s indecisiveness, they may be right. With this latest development, now leaders will be able to blame each other’s securities agencies for their particular actions that will likely lead to divergence.
The allowance of Japanese companies to adopt IFRS 9 could also give Knight of the Accounting Roundtable, Sir David Tweedie, even more leverage when dealing with countries around the world to adopt the IFRS.
Right or wrong, the Japanese are sending a signal that they are prepared to move forward while the SEC prepares to have more meetings.
• GAO Criticizes PCAOB Approach to Audit Risk [Web CPA]
The General Accountability Office, never shy to point out the faults of others (that’s kind of what they do, after all), isn’t so keen on the PCAOB’s latest “risk assessment” audit standards. This after the PCAOB originally proposed standards in 2008 and then revised and re-released them late last year.
The GAO feels that the ‘duplication and inconsistencies’ created by the PCAOB’s new standards would likely lead to…more billable hours! So, as you might imagine, some firms are on board:
PricewaterhouseCoopers told the PCAOB, “We fully support the board’s objective to update interim standards regarding risk assessment,”
And some, not so much:
McGladrey & Pullen…warned that “unnecessary differences between the board’s standards and those of other standard-setters increase the costs of performing all audits because firms must develop and maintain two, and even three, audit methodologies and training programs, with no corresponding benefit to audit quality.”
Personally, we’re skeptical of anything that has the unmitigated support of the biggest players in the industry but from a more practical standpoint, do auditors really need more rules to follow? And now this could add to the workload? Is that really necessary?
• Oscar Swag Bags to Result in $91k Income to Celebrity Presenters [TaxProf Blog]
Celebrities have enough tax trouble the way it is, how is giving them gifts going to make their tax returns easier? We’re guessing most of them have smart CPAs working for them that will suggest that they give it all to charity but we may be underestimating the temptation of free luxury swag.