Tag: KPMG

Accounting News Roundup: Financial Reform Fail; KPMG Wins Latest Round of Auditor Musical Chairs; Philly Tax Amnesty Close to Reaching Goals | 06.24.10

A Missed Opportunity on Financial Reform [WSJ]
Former SEC Chairman Arthur Levitt is none too pleased with the financial reform bill that’s likely to get approved by the Senate and he says exactly why in an op-ed in today’s Journal, “One of many bad ideas that made it into the bill: Public companies will now have a wider loophole to avoid doing internal audits investors can trust. This requirement was the most important pro-investor reform of the last decade, and it worked. Of the 522 U.S. financial restatements in 2009, 374 were at small firms not subject to auditor reviews.”

But that’s not all! Mr Levitt outlinespic failure including:

• “Chuck Schumer’s wise idea to let the Securities and Exchange Commission (SEC) become a self-funded agency will likely be killed by appropriators who are unwilling to give up the power of the purse.”

• “Barney Frank’s (D., Mass.) effort to pass a new law to overcome the legal precedent of the 2008 Supreme Court’s Stoneridge decision, which allows third-party consultants, accountants and other abettors of fraud to avoid liability. Again, another sellout of investor interests.”

• “Congress didn’t deal with the massive problems of Fannie Mae and Freddie Mac. It’s one thing to fail to see trouble before it happens. Now, there’s no excuse. The central role played by these two organizations in the financial crisis is indisputable. Congress had a chance to fully restrict these agencies from anything but the most basic market-making activities, and it didn’t.”

What does all this (and more!) mean? Oh, nothing really. Levitt says that we’ll just have to wait for the next financial apocalypse to get it right.

InfoLogix Announces the Engagement of KPMG, LLP as the Company’s Independent Registered Public Accounting Firm [PR]
McGladrey resigned on June 10th and the company’s filing stated that were no disagreements yada, yada, yada although McGladrey had identified a material weakness in the company’s internal controls and their most recent audit opinion included a going concern paragraph. It wasn’t enough to spook KPMG, who got the blessing from InfoLogix’s audit committee on Tuesday. Enjoy.

BP Relied on Faulty U.S. Data [WSJ]
“BP PLC and other big oil companies based their plans for responding to a big oil spill in the Gulf of Mexico on U.S. government projections that gave very low odds of oil hitting shore, even in the case of a spill much larger than the current one.

The government models, which oil companies are required to use but have not been updated since 2004, assumed that most of the oil would rapidly evaporate or get broken up by waves or weather. In the weeks since the Deepwater Horizon caught fire and sank, real life has proven these models, prepared by the Interior Department’s Mineral Management Service, wrong.”


Leadership changes at Wichita Grant Thornton office [Wichita Business Journal]
“Lori A. Davis is the new managing partner at the Grant Thornton office in Wichita, the company announced Wednesday.

Davis will take the place of Jarod Allerheiligen, who will become the managing partner of the Grant Thornton operations in Minneapolis. The change in responsibilities is scheduled to take place Aug. 1.”

Ex-Detroit Mayor Kwame Kilpatrick indicted by feds on 19 mail fraud, tax counts [Detroit Free Press]
“Despite Kilpatrick’s repeated claims to the contrary, the indictment says he used fund money for campaign and personal expenses, ranging from polling to yoga and golf lessons to college tuition for relatives.

Prosecutors contend he failed to report more than $640,000 in taxable income while mayor that he received in the form of cash, flights on private jets and perks paid for out of the civic fund.”

$2 million payment to Phila. tax-amnesty program [Philadelphia Inquirer]
Philly’s tax amnesty program received a $2 million payment on Tuesday, it’s biggest since the program started on May 3. Collections so far have reached $18 million, according to city officials. They also expect to reach their goal of receiving between $25 and $30 million by the end of the program on Friday.

Feinberg to quit pay czar post to focus on BP fund [Reuters]
This guy is a glutton for punishment.

Bonus Watch ’10: More Evidence That Promotions at KPMG Don’t Pay Like They Used To

From somewhere deep in the heart of Texas:

KPMG Dallas senior associate promotion bonus: $650 before tax. That’s down from $800 last year. Bullshit.


For those of you that don’t have a 10-ky handy, that’s a 19% drop. This correlates with the news from last month that the 1.25% for the summer bump and then a little follow up at fiscal year end.

Another source is seriously unmoved and makes an interesting point, “The bonus hardly pays for the charcoal so we can cook our Omaha Steaks.”

And just for the record, the freshly minted SAs get their new titles officially on July 1 but they should be comfortable correcting colleagues, family and clients for the next two weeks. Keep us updated.

UPDATE: Advisory out of NY chimes in:

KPMG NY Advisory Senior Associate announcements are being made by performance managers. Bonuses are a staggering $150 more then Dallas, thats $800 or 5.3% of the average salary here when annualized. I don’t dare think of what that comes to hourly with our SAS70 and Audit support busy season coming into swing.

Happy Birthday Phil Mickelson!

Philip Alfred Mickelson was born 40 years ago on this blessed day (shares with 2Pac!) and we’re guessing it will be a busy one for the reigning owner of the World’s Ugliest sports jacket.

We imagine he kicked things off with 40 Krispy Kremes donuts for breakfast, followed by a little prep round for this week’s U.S. Open, Five Guys for lunch, maybe another practice round and wrap it up a nice dinner with the fam.


All the while, screening calls from Tim Flynn who desperately wants to wish Phil a happy 40th, good luck on his quest for the KPMG Grand Slam and to congratulate him for the umpteenth time on his third Masters Tournament victory.

It really is a big week for Phil/KPMG, as the U.S. Open has dogged PM for his entire career and a good performance this week (i.e. anything less than a win is unacceptable) could vault him over Tiger Woods who has other problems.

So send some Happy Birthday/good luck/Father’s Day/thanks-for-wearing-our-hat-for-$3-mil-a-year wishes to Phil below or just let him know what you think his chances are.

Is KPMG Moving Out of DC?

Maybe! The AP is reporting that KPMG is expanding its Fairfax County Office (i.e. Tyson’s Corner) by moving people from its DC office.

According to an accountant close to the situation, “The Tyson’s Corner office switched buildings, and as a result, had a large amount of available office space. The DC advisory practice (including IRM or whatever it’s called now) moved from the M Street office to Tyson’s. I used to sit on the 7th floor whenever I worked from the office, but the place was in full move-out mode when I went in on Friday.”


Residents of the commonwealth will be thrilled to know that Virginia’s governor approved a $250,000 grant from the Governor’s Opportunity Fund for the “project.” In other words, Virginia taxpayers footed $250k to move dozens of coffee guzzling, poorly dressed 10-key tramps out of the District. And it turns out, many aren’t thrilled about it, “Advisory people are bitching about moving, especially the ones who live in the District.”

But our source also says that the rest of DC office might be packing up:

There’s rumors that the entire DC practice will be moved to Tyson’s, but I don’t know if that’s true [let’s just assume it is, shall we?]. KPMG might be the only one of the big four who still has an office in DC proper, but then again, we’re the biggest of the big four when it comes to Federal clients – and there’s a certain cachet to having that office building in Dupont Circle with the big “THE KPMG BUILDING” emblazoned on the side. [O]therwise it’s been the usual hooplah from management and torrent of “OMG SO EXCITING!” emails, and the staff I know are mostly just “meh.”

If it comes to leaving the District altogether, John Veihmeyer will probably just buy the sign and slap it on the side of his summer house. Can’t let something like that go to waste.

Satyam: Does Anyone Mind if We Take Another Three Months to Finish Our Restatements?

With just a couple weeks until the June 30 deadline for the company to issue its restated financial statements, Satyam is requesting just a little more time to get this mulligan nailed down. Three months to be precise.

Yes, they’re completely aware that it’s been nearly 18 months since the shit hit the fan. And yes, this is the third time they’ve asked India’s Company Law Board (“CLB”) for an extension on the filing but at this point they figure expectations are so low, no one will get too worked up over it.


Except for an “analyst with a leading brokerage house.” who is quoted in the Business Times, “There is no clarity on what is happening within the company. They should have at least provided the current sales figure or the bench strength. How is the shareholder supposed to rate their stock?”

Since more than a few people might be caught up in “sales figures” and whatnot, Satyam went to the trouble to let everyone know that they’re working hard, ordering in, etc. etc. so you can rest your pretty little heads:

A Satyam official said, “The records have been under the custody of investigating agencies and we recently got a court clearance. Also, our auditors (KMPG and Deloitte) told us they need some more time for the restatement. It’s only a matter of a quarter.”

See? It’s just a matter of a quarter. Plus, you can’t really blame them – KPMG and Deloitte are the ones saying they need more time. Satyam has likely been bugging them for months about wrapping up but KPMG and Deloitte are probably complaining, saying things like, “we can’t find any documentation to supports these numbers” and “this doesn’t add up.”

So, TFB if some whiny analysts don’t like it. We’ll just find out just how big of nightmare these financial statements will be in due course.

Accounting News Roundup: BP Weighing Options on Dividend; Will the “New Wealth Taxes” Affect You?; Medifast Keeps Things Vague | 06.14.10

BP unlikely to cancel dividend, but mulls several ideas: source [Reuters]
They may defer it, pay it in shares or “pay into a ring-fenced account until the oil spill liabilities become clearer.” All of which will please absolutely no one.

Auditors to reveal bank talks under new plans [FT]
Proposals by the ICAEW would require auditors to disclose their private discussions with bank audit committees afteshowed that “the value of bank audits had shown investors especially were dissatisfied by the audit report. The internal process involved was perceived as helping to keep bank executives in check, but investors felt the report was only a box-ticking exercise.”

The Big 4 have historically resisted these types of proposals, arguing that it will expose them to additional legal liability.

Suggestions cited include assurance on the “front half of annual reports,” as well as an audit of the banks’ summaries of risks. The ICAEW said it was aware that this would add to the auditors’ workload.


Vantis trading suspension follows difficult financial period [Accountancy Age]
The court-appointed liquidator for Allen Stanford’s bank, Vantis, has had trading of its shares suspended by the AIM after the company was unable to obtain any funds for their services related to the Stanford case, among other financial difficulties.

Ernst & Young had issued a going concern opinion for the company back in February, warning that continued lack of cash flow would have to be remediated quickly for any possibility for the continuation of the business.

How the New Wealth Taxes Will Hit You [WSJ]
Are you one of those “rich” people? That is, do you have an adjusted gross income of $200,000 or more ($250,000 for joint filers)? If so, you’ll probably want to know that two new tax levies will come your way in 2013 as a result of the new healthcare legislation – a 0.9% levy on wages and a new 3.8% tax on investment income.

The 0.9% tax is on any wages over $200k/$250k. For example, if you are single and made $300,000, your additional tax would be $900.

Similarly, the investment income tax would tax any investment income in excess of the $200k/$250k threshold and the 3.8% tax would be applied. What’s investment income you ask?

Interest, except municipal-bond interest; dividends; rents; royalties; and capital gains on the sales of financial instruments like stocks and bonds. The taxable portion of insurance annuity payouts also counts, unless it is from a company pension. So do gains from financial trading, as well as passive income from rents and businesses you don’t participate in. All are subject to the 3.8% tax on amounts above the $250,000 or $200,000 threshold, as described above.

Income that is not considered investment income include: distributions from IRAs, pensions and Social Security, annuities that are part of a retirement plan, life-insurance proceeds, muni-bond interest, veterans’ benefits, and income from a business you participate in, such as a S Corporation or partnership.

KPMG considering move to 1801 K [Washington Businsess Journal (subscription required)]
KPMG might move their Washington, DC office location to 1801 K St. NW from 2001 M St. NW according to “real estate sources.” KPMG’s spokesman said that the firm is continuing to “examine all of our options.” The situation is fluid.

Open Letter to the [SEC]: Why You Must Review Medifast’s Revenue Accounting Disclosures [White Collar Fraud]
Sam Antar would like to put the SEC on notice that Medifast seems to be less than transparent when it comes to its disclosures, “it seems that Medifast is recognizing revenue upon shipment and not delivery. As a minimum, Medifast, like Overstock.com, should be required to expand and clarify its disclosures to avoid confusing investors.”

The KPMG New York Exodus Picks Up Steam

Last month we touched on a possible exodus starting in KPMG’s New York office with the news that a number of people had given their notice to leave the firm. A few readers were not impressed with the news including Hyperbole:

6 people leave a massive office in an industry that even in a slow year expects 10-15% voluntary turn. I’m all for ripping on the firms, but this is a little ridiculous…

“DAMANGE CONTROL BEGINNING: 26 FANS LEAVE LAKERS GAME AT HALF TIME

EXODUS!!!!”


However, another commenter, blah felt that this was just the beginning:

I believe the exodus is coming. Folks are pretty pissed off these days and there are a lot of career opportunities out there right now for us.

Now, here we are, a month later and it sounds as though the numbers are increasing quickly as we have had multiple sources confirm that approximately 12-15 professionals have given recent notice between the banking and asset management groups – two of the largest in the New York office. The majority being SA2s, SA3s as well as experienced managers.

Our sources have indicated that many more are actively looking and that this is not the “normal attrition” that is expected by a firm. One recent SA that gave their notice was kind enough to send us a copy of their farewell email that sounds – oddly – inspired. After drying your eyes (or throwing up in your mouth), feel free to discuss the latest conga line going out of 345 Park.

Allow me to leave you with a few words of inspiration on this most joyous day:

BLOOD ALONE MOVES THE WHEELS OF HISTORY!

Have you ever asked yourselves in an hour of meditation – which everyone finds during the day – how long we have been striving for greatness?

Not only the years we’ve been at war the war of work but from the moment as a child, when we realize the world could be conquered. It has been a lifetime struggle a never-ending fight, I say to you and you will understand that it is a privilege to fight. WE ARE WARRIORS! Accountants of New York City, I ask you once more rise and be worthy of this historical hour. No revolution is worth anything unless it can defend itself. Some people will tell you accountant is a bad word. They’ll conjure up images of used car dealers, and door to door charlatans. This is our duty to change their perception. I say, accountants of the world… unite. We must never acquiesce, for it is together… TOGETHER THAT WE PREVAIL. WE MUST NEVER CEDE CONTROL OF THE MOTHERLAND…

Let’s Welcome the KPMG Interns with…

…kind words from John Veihmeyer? Obviously! Bagels with schmear? This isn’t 2007. Happy hours where the booze flows like wine? TBD.


The Klynveld interns started this week (an official Tweet from the KPMG Go says there’s over 1,000 coffee go-fers this summer) and we hear they’re starting out with some stimulating training for a couple of days before they head to national training which we hear will be at a HoJo in Fargo, ND. Cutbacks, you know.

We know some of you KPMG vets will be asked to mentor these blades of grass and we’re a little curious about what the guidance has been re: coffee, lunches, booze etc. since TPTB are still squeeze all the hairs out Lincoln’s beard but still want you to convince the hot and/or smart interns that KPMG is the place they want to be.

Anyhoo, we’ll try and bestow some wisdom on this year’s crop with some key thing to remember:

1. Get things started off right and start kissing the new managers’ asses.

2. Business casual does not consist of sweat pants.

3. If we send you on a scavenger hunt, try not to make it obvious.

4. Showing up with booze on your breath isn’t allowed until you’re well into your first year as full time employee.

5. We’re out of ideas… help them out.

PFF Bancorp Creditors Want to Probe KPMG So They Can Determine if They Can Sue KPMG

In anything is better than the shit BP has on its hands news, Reuters reports that creditors of PFF Bancorp Inc are requesting permission from a U.S. Bankruptcy Court in Delaware to snoop around “information in KPMG’s possession” to find out what the firm knew about PFF’s over-leveraged, under-capitalized, risk-loving ways.


The company’s committee of unsecured creditors wrote in their request that “Information in KPMG’s possession may support potential claims against third parties and against KPMG itself, if, for example, it becomes apparent that KPMG knew or should have known at an early date of any overly-aggressive or inadequately-controlled loan practices of the (company).”

So in other words, PFF would like to – pretty please – sue someone’s ass and they’d like to confirm whether or not KPMG will be a good candidate for said ass suing. So assuming the bankruptcy court gives them the thumbs-up, PFF will send in the hounds to find out what’s what. And they’ve covered themselves nicely by using the wonderfully subjective “knew or should have known” so KPMG’s only option will be to invoke the “we were duped” excuse, which isn’t such a flattering option.

KPMG didn’t respond to Reuters’ request for comment or our email but we’re guessing they’re less than enthused about sharing what is in their audit workpapers. Not necessarily because the documentation will have a smoking gun but more so because they might discover that the partner on the engagement has a bad habit of doodling and that’s just embarrassing.

PFF Bancorp creditors seek probe of auditor KPMG [Reuters]

It’s Ridiculous to Think That Enterprise Financial Dismissed KPMG Because of the Restatements

KPMG has been kicked to the curb by Enterprise Financial according to an 8-K that was filed on Friday by the company. The ubiquitous claim of “no disagreements with [insert firm]” was there along with a mention of a material weakness that was related to the restatements issued for both 2008 and 2007 but that couldn’t possibly have anything to do with the dismissal of the auditors:

In connection with the identification of the loan participation accounting error described in Item 7, Management Discussion & Analysis and in Item 8, Note 2 of the consolidated financial statements and elsewhere in the Form 10K dated March 16, 2010, the Company also determined that a material weakness in its internal controls over financial reporting existed during the periods affected by the error, including as of December 31, 2008. The Company’s management concluded that the material weakness was the Company’s lack of a formal process to periodically review existing contracts and agreements with continuing accounting significance. To remediate this material weakness, during the fourth quarter of 2009 the Company implemented a formal process to review all contracts and agreements with continuing accounting significance on an annual basis. As a result of the review conducted in the fourth quarter, management did not identify any other errors in its previous accounting for such contracts or agreements. Management believes that this new process has remediated the material weakness in the Company’s internal control over financial reporting.

So in other words, “Yeah, maybe we should have been looking at these contracts but we weren’t and so some material misstatements slid through. We’ve slapped some duct tape on it and it’ll be fine from here on it. End of story.”

The esteemed pleasure of auditing Enterprise now belongs to Deloitte who has now snagged three clients from KPMG this year (by our count) – picking up Jefferies and Select Comfort back in March.

Enterprise Bank parent dismisses KPMG [St. Louis Business Journal]

Accounting News Roundup: Ernst & Young Wants Lawsuit Dismissed; KPMG Study Finds Goodwill Impairments Slowing; Deloitte Names New Tax Partners | 06.07.10

Lehman, Nortel, Bank of America, Google in Court News [Bloomberg BusinessWeek]
Dick Fuld and the rest of the ex-Lehman Brothers management team as well as Ernst & Young asked a judge to throw out the lawsuit against them brought by the Alameda County Employees’ Retirement Association in Oakland, California, and the Government of Guam Retirement Fund.

This lawsuit focuses on the failed disclosure by Fuld et al. of the use of Repo 105 and E&Y’s confirmation of its usage as being in accordance with U.S. GAAP.


George Clinton in funk: Accountants sue Parliament-Funkadelic star over fees [NYDN]
GC engaged Wlodinguer Erk & Chanzis to audit his royalties from Universal Records and EMI in 2003. The firm claims that they have only been paid $25,000 while the agreement they had stated that WEC would receive 20% of the $1.2 million settlement Clinton received.

KPMG Study Shows Tapering Off in Goodwill Impairment [Compliance Week]
How bad of a year was 2008? KPMG’s recent study of goodwill impairment charges of 1,700 U.S. public companies found that ’08 was a bloodbath “KPMG’s study shows goodwill impairment charges across the 1,700 companies fell from $340 billion in 2008 to $92 billion in 2009. Only 12 percent of companies in the study took a charge for goodwill impairment in 2009 compared with 17 percent in the prior year.”

And of that bleeding, banks were considerably less involved, “The study showed the technology hardware sector accounted for 23 percent of total goodwill impairment charges in 2009, followed by telecommunication services. Banks had the highest level of goodwill impairment charges in 2008, but represented only 4 percent of the total goodwill charges in 2009.”

Inquiries mount after PwC ‘failed to notice’ mistakes [Times Online]
JP Morgan settled with the UK’s Financial Services Authority (“FSA”) last week over its mishandling of client funds, fining the bank £33.3 million. Now the Financial Reporting Council and the Institute of Chartered Accountants in England and Wales, who both oversee accountants in the UK, are now expected to launch inquiries into PwC’s role in JPM misallocation of client funds of £1.3 billion to £15.7 billion between 2002 and July 2009:

In addition to serving as principal auditor, PwC was retained by JP Morgan to produce an annual client asset returns report — a yearly certification to prove that customers’ funds were being effectively ring-fenced and therefore protected in the event of the bank’s collapse. But PwC signed off the client report even though JP Morgan was in breach of the rules.

MOVES-Barclays Wealth, Deloitte, BlueCrest Capital, RFIB [Reuters]
Reuters reports that Deloitte’s tax practice promoted eight new partners: Pippa Booth, Andy Brook, Stephen Brown, Christie Buck, Sue Holmes, Anbreen Khan, David McNeil and Marcus Rea and three associate partners: Andrew Cox, Ashley Hollinshead and Claire Wayman.

KPMG’s Investment in Phil Mickelson Is Working Out Pretty Well, Sayeth KPMG’s Leadership

We just assumed that we had heard the last of the cubicle-side chats with KPMG’s leadership but lo and behold, this morning we find yet another convo with KPMG’s three amigos – T Fly, JVeih, Keizer Soze – sitting in the mailbag.

And yes, Phil comes up.


KPMGconversation

Okay, some thoughts –

In response to Inquisitor #1, Johnnie V. says “our goal is to make sure to not sell services into a company” but then qualifies by saying, “[Making] sure we’re bring the full suite of..services to help them deal with those issues and those problems.” In other words, there is a very fine line between hustling clients for more business and actually serving them to suit their needs.

Re: “Mid-market” – This can be summed up by saying: KPMG is having the most success winning smaller clients from the next tier firms.

And finally to the most important question – Inquisitor #3 thinks Phil is great and all but for the love of everything that is good and holy, are there any other plans to get the name out there? This Five Guys obsession has him worried.

Since Tim and Phil are BFFs, he’ll take this one…except he doesn’t say anything that really means anything. JVeih jumps in (no doubt give him the “WTF are you talking about?” look) to say that KPMG’s Mean Girls strategy is working and the firm is getting far more attention from CFOs than it was just one year ago. The rest of the Big 4 have plateaued and Phil has been instrumental in the glad-handing and back-slapping efforts.