CPA Who Gave Up Public Accounting to Drive an 18-Wheeler Says He Made More Money Driving a Truck
*post image is not Steve, just some guy from iStock Letters to the editor are great because they clue you in to how a reader identifies with what you’ve written and often the writer will share their own experience viewed through the lens of your story. In this case, the reader-submitted letter we’re about to […]
Senators to SEC Chair Jay Clayton: What the Hell Is Going On At the PCAOB?
It seems we weren’t the only ones who were disturbed by the Wall Street Journal article last week detailing the dysfunction at the PCAOB under the tremendous leadership of chairman and meetings hater William Duhnke. In a letter dated Oct. 17 to SEC Chair Jay Clayton, Sens. Sherrod Brown (D-OH) and Jack Reed (D-RI) called […]
An Open Letter to Anyone Thinking of Asking the Accountant in Their Life for Help on a Tax Return
Dear friend, There’s an accountant in your life. He or she may be a relative, acquaintance, or someone who foolishly answered your terrible icebreaker “So, what do you do for a living?” honestly. It dawned on you that tax season will soon be upon us. You have probably received documentation informing you that a precise […]
FASB Might Take a Breather on Standard Setting After Some People Yelled at Them
I'm sure working at the FASB is harder than I imagine it to be. What I imagine it to be is a bunch of people who like to read about accounting reading a lot about accounting. Then every once in awhile a few people get together to kick around crazy ideas about how to make […]
Most CPAs Don’t Get to Send Letters Like This One
Unlike some people, I'll bet Dean Smith sent his tax stuff to his CPA in a timely and orderly fashion. Coach Smith willed his trust to send a $200 check to each his former players following his passing. #DeanSmith pic.twitter.com/NyiBhU9taQ — Jiimmm Demmpseeeyyy (@ChestPassDemps) March 26, 2015 [via Deadspin]
Tax Nerds Feeling Vindicated After Their Long-held Viewpoints Are Paid Lip Service
Tax Policy Center co-director Eric Toder is feeling good today. Why? Some people known for not doing much of anything productive are saying things that sound remarkably like some people who plan to do something productive! The House Ways and Means Committee, in a letter signed by all its Republican members to Budget Committee Chairman […]
Deloitte Achieves Another Unflattering Milestone in Audit Quality
As you well know, the quality of work performed by Big 4 auditors has been called into question aloud on a regular basis since the fall of 2008. Oh sure, you might say that ever since there was a Final 4 (circa 2002) there have been haters, but since we all came to the brink […]
Warren Buffett Has No Problem Backing the Buffett Rule
The Oracle said as much in a letter to Buffett Rule scribe, Senator Sheldon Whitehouse (D-RI): Billionnaire investor Warren Buffet said in a letter Wednesday that he was “delighted” to support legislation to implement the “Buffett Rule,” which would ensure that those making over $1 million annually pay at least a 30 percent effective tax […]
This Letter Is Ironclad Proof That the IRS Has a Sense of Humor
Just don't tell Doug Shulman.
Senator Carl Levin Wants Auditor Names
Back in October, the PCAOB officially proposed that audit partners be required to slap their name on the audit report of clients that register with the SEC. For those inside the profession, this proposal isn't exactly popular, as that would put a specific name and a specific face with audit failures. In other words, no […]
Ohio CPAs Want Some Answers On This Whole Criminals With PTINs Thing
This is from the November issue of the Ohio Society of CPAs' CPA Voice: OSCPA submitted a comment letter to IRS Commissioner Doug Shulman and Director of the IRS Return Preparer Office David R. Williams, regarding fingerprinting of certain non-signing PTIN applicants. Written on behalf of OSCPA’s more than 22,000 members, the letter commended the […]
Prometric Responds to the Candidate Burned By Their Note on Test Day
Before I dropped off the planet for my birthday, I received an email from the very generic marketing team at Prometric in response to Prometric Disses One CPA Exam Candidate…with a Note, a post I wrote last month based on an email I received from one CPA exam candidate on the Sunday after Thanksgiving (ouch). […]
Muddy Waters CEO: There Are Some Big 4 Partners in China Conspiring to Defraud Investors
As you probably heard, the PCAOB officially put out a proposal earlier this week for audit partners to be named in the annual reports of public companies. It would also require “registered firms to disclose the name of the engagement partner for each audit report already require the form” and “disclosure in the audit report of other accounting firms and certain other participants that took part in the audit.”
While most Big 4 audit partners are probably feeling a little chapped by this whole proposal, there is at least one person going on record (by way of PCAOB comment letter) that feels that it doesn’t go far enough. That would be Carson Block, the CEO and founder of research firm Muddy Waters. In Block’s letter (in full on page 2) to the Board he writes that not only should the engagement partner be identified but that he or she should be putting their name on the audit opinion because “[it] will decrease investors’ future losses to fraud and gimmicky accounting by billions of dollars.”
That on it’s own is enough to get more than a few people riled up. But as we indicated, there are some conspiracy and fraud accusations as well:
Even the most reputable auditors in China seem to be in a race to the bottom. We believe that there are particularly egregious situations in which some Big Four partners in China offices have actually conspired with their clients to defraud investors. Further, it is a reasonable proposition that the conflict of interest inherent in the Chinese auditors’ business model also affects the quality of US company audits.
Now before your knickers in a twist, don’t forget that this is the guy who called Sino-Forest a “Ponzi Scheme for the 23rd Century” which more or less looks to be accurate. Further, if you consider all the trouble Big 4 firms have had with Chinese companies listed in the U.S. and elsewhere, it doesn’t seem to be that much of a stretch that some partners would just say fuck it and work with their clients to keep a lid on the shenanigans than go through the pain of actually doing their jobs.
Regardless, with these accusations the PCAOB may try to make another run at getting the Chinese to play ball.
CPA Exam Quitter Sends Epic Hate Mail to AICPA, NASBA
Note: I am choosing not to spell or grammar check this letter A) because last time Braddock dared to do the same, you guys slaughtered him for being a dick and B) as much as I hate truly awful grammar (a few steps below the typo-filled crap Caleb we writes here), I think the point is sufficiently expressed if you can simply ignore some of the obvious errors. In fewer words: we get it.
The following rant is presented without comment. Please note that its publication here does not constitute an endorsement ssed therein. Caleb took the exam back in the day with stone tablet and cave drawings of journal entries and I, as we all know, have not and will not sit for the CPA exam so neither of us have the experience to draw from here to form an opinion. Over the years, I have heard of issues at Prometric but usually along the lines of minor software failures that did not really impact the candidates’ experiences. I would be curious to get feedback from you all, the dedicated capital market servants, who have had examination snafus seriously impact your momentum.
For this guy, it was enough to get him to quit.
I remind you all here that a lot has changed since 2007. The AICPA and NASBA are getting better at communicating and always looking for ways to improve that process.
May 19, 2011
Subject: Uniform CPA Exam (glitches & bugs in exam software)
To Whom This May Concern,
My name is Matthew Grosso, former C.P.A. exam candidate back in 2007 who had experienced tremendous difficulties with the software that powers the Uniform Certified Public Accountant exam (or “C.P.A. exam”) as well as various communications with NASBA (National State Board of Accountancy). My hardship has been well documented in a section below, titled “Timeline”….however, first, I would like to explain the nature and intent of this letter. In short, this letter is a call to action — a voice if you will — of many frustrated C.P.A candidates who have studied long and hard to attain the prestigious C.P.A designation, but have tragically fallen short because of undocumented barriers to entry into the profession; specifically, “software glitches and bugs” in the C.P.A. testing software package as well communication hurdles with NASBA.
Although I withdrew my candidacy a couple years ago, I continue to read and hear about candidates’ exam hardships (and, I’m not referring to passing difficulties). The fact is, candidates adversely affected by C.P.A. software issues are focused more on passing the exam rather that drafting grievance letters. Moreover, many distressed candidates are uncertain to who exactly they should contact regarding the nature of a testing issue…..is it NASBA, the State Board, the AICPA, Becker Convisor, or the Prometric Testing Center? The C.P.A. is daunting enough on a stand-alone basis, but for a candidate to experience a computer failure and have to blindly navigate a maze of reporting lines, in hope of finding answers to complex questions, is something entirely different. Because candidates are more concerned with “candidacy” and long busy season hours (as they should) and less so with detective work and grievance letters, is in my opinion, the reason difficulties with the software powering the Uniform C.P.A. exam has been grossly understated. Still, even if a handful of grievance letters had indeed made its way upstream to NASBA, The State Board Committee (SBC), The AICPA Board of Examiners (BOE), I’m curious why the C.P.A exam governors failed to address the software glitch/communication issues in an expeditious manner……or have decided to pull the plug on computerized testing altogether? Even if these issues were still in the discovery phase, I would have expected NASBA/AICPA to have contacted current and former candidates regarding the pervasiveness of the issue; the quality control time needed to correct the issue; and more importantly — a remedy.
Given consideration of the facts mentioned above – as a former (unlicensed) candidate, I’m left wondering whether the BOE has specific controls in place to detect issues with the software powering the C.P.A?, If so, whether the controls are working as designed with issues being sufficiently and timely communicated up the reporting hierarchy? I’m certainly aware of the pervasiveness of the exam software issue (and have facts to support it!), but perhaps the BOE isn’t! Perhaps the BOE is aware of the software issue, and has considered the issue to be statistically, De minimus. Even if the later was true, why weren’t candidates (like myself) notified of the shortcomings of the computerized testing approach and the potential for its effect on licensure?
Given my understanding of the imperfections of the Uniform C.P.A. exam and the organizational structure of The AICPA, NASBA and its affiliates, I’m under the impression the COE and its working cabinet has grossly underestimated the frequency of the glitches and bugs in the C.P.A. software – specifically the essay portion. Having made a significant time and financial investment in the program, I firmly believe my experience would have been different had the operational deficiencies in exam software been attended to, and NASBA – Candidate communications (via “NASBA Candidate Care”) fostered stronger ties.
In closing, as a friendly recommendation I would appoint a “Director of Customer Support” to research candidate concerns and help implement corrective action. This appointment would certainly enhance communications inside and outside the organization, thereby protecting the interests of candidates and prevent undue hardships in the C.P.A. community.
Regards,
Matthew M. Grosso
So? Would anyone else care to share their “undue hardship” with the class?
The National Society of Accountants Has a Bone to Pick with the AICPA
A couple weeks back the AICPA gave its members the go-ahead to Crtl+C, Crtl+V its letter to the IRS about how certain parts of the proposed tax preparer regulations were a load of crap.
We just assumed that everyone in the accounting biz was on the same page here but boy we’re we wrong. The National Society of Accountants sent this letter to Treasury honcho Geithner stating that they don’t want any tax preparers exempted from obtaining a PTIN (among other complaints):
NSA Letter Regarding CPA Firm Exemption
What’s especially interesting is that the AICPA is not named in this letter once, however they are named specifically in the NSA’s press release:
Now, at the 11th hour, just before the registration process is scheduled to begin, some – including the American Institute of CPAs – are demanding that staff members of ‘CPA firms’ be exempted from the registration requirements. This flies in the face of why this registration program was set up. The point of the new regulations is to ensure that all tax preparers are accountable for their work in preparing returns, and that should include anyone who paid to prepare all or substantially all of a return, no matter where they may work.
The basic tenet here is that big firms will get away with letting the underlings preparing the returns not be held accountable for their (apparently) shoddy work. The NSA’s position is that if every single legit tax professional is registered then they can track down the shitty ones and the IRS can act accordingly. The NSA claims that the “loophole” proposed by the AICPA will let these amateurs skate the testing and registration requirements and thus won’t be serving taxpayers one iota.
On the one hand you might have been totally against the tax preparer regulations from the start but now that they’re unavoidable, the AICPA’s request for exemptions in some cases may burn the unlucky bunch that wouldn’t get to enjoy waiver.
PCAOB to Congress: “Nonpublic nature of Board disciplinary proceedings has serious adverse consequences”
Something for the members to chew on for the long weekend.
PCAOB Chairman Goelzer Letter to HFSC Regarding Transparency of PCAOB Disciplinary Proceedings
Email to Bob Herz: “It saddens me that you are a member of my species.”
Chris Gibson – obviously not wanting to disappoint the ABA – wants that to be clear.
Earlier:
The Two Best Comment Letters Written to the FASB You’ll Ever Read
The AICPA Doesn’t Mind If You Copy and Paste Their Letter for the Expressed Purpose of Telling the IRS That the Preparer Regs Suck
The AICPA is following the ABA’s strategy of mass letter sending by urging its members to inundate the IRS with tearful pleas to reconsider the Service’s Tax Preparer Registration Proposal.
The issue is so serious that the Tax Vice President, Edward Karl, went on the Hill today to testify about the AICPA’s concerns, in what had to have been one raucous hearing:
The AICPA has serious concerns that the proposed IRS regulations are an overreach and would place immense burdens on CPA firms, particularly small- and medium-size firms. Further, the AICPA questions whether the IRS has adequately examined the costs that would be imposed on tax preparers and American taxpayers.
The IRS has proposed four broad new requirements for paid tax return preparers including: mandatory registration, application of enforceable ethical standards, competency testing and continuing education requirements. At [today’s] hearing, the IRS specifically requested comments about registration and the fees tax preparers will be charged for newly required personal taxpayer identification numbers, or PTINs.
While the AICPA has consistently supported the IRS’s efforts to increase tax compliance and elevate ethical conduct through the adoption of a registration process for paid tax return preparers, the AICPA does not believe other elements of the policy are fully justifiable or necessary, according to Karl.
The AICPA is urging all of its 360,000 members to contact the IRS about the proposed regulations to express opposition to elements of the plan.
Adrienne urges everyone to do the copy and paste thing ASAP and since there’s no mention of the IRS being anti-form letter, then we’d probably say that it’s safe to proceed with the letter with the AICPA’s language.
That being said, that’s a pretty boring approach and if you can muster the passion of either side of the fair value debate, we suggest you write from the heart.
The Two Best Comment Letters Written to the FASB You’ll Ever Read
Last month we told you about how the American Bankers Association encouraged anyone that disagreed with the FASB’s proposed fair value rule to write a letter telling Herz & Co. how much the proposal su ind enough to provide a template for said “FASB Blows” correspondence so the anti-fair value crowd could get the gist of what needed to be said.
The ABA did warn, however, that the FASB hates, loathes, DETESTS form letters, so in order to make a valid point, it was advisable to not simple slap your name in the appropriate place but to articular your own special brand of hatred for the FASB.
As you may recall, many ABA groupies did not heed this warning, which no doubt resulted in Bob Herz and the rest of the Norwalk team using the letters to stoke their mid-summer weenie roast bonfire.
As disappointed as the ABA must have been with the lack of originality, we were sent this shining example that has been making the rounds at the Big 4 (or so we’re told). Our guess is that this is more of what the ABA had in mind:
Bravo, James C. Blaine. Bravo. You are most definitely into the brevity thing. You have, presumably, made the ABA proud. But wait, there is a pro-fair value letter worthy of these pages.
Granted, it was written back in May but Brian Cowell is no less passionate than Mr Blaine:
Nicely done, both of you. Everyone take note.
Just to Clear It Up: Grant Thornton Is an Accounting Firm Not a Law Firm
We stumbled upon this letter recently that appears to indicate that there was some confusion between the Grant Thornton Atlanta office and a Judge in Florida about what kind of services GT provides.
So it appears Mr Bowles has a little bit of responsibility here since he admits, “I did not submit a written request to appear as an other qualified representative in the form specified in [rule] which would have triggered a specific determination by you about my qualifications to go forward.” The lengthy explanation that follows kinda sorta indicates that maybe, he feels like this was his bad that the mistake got made. If you disagree and would like to blame the judge, fire away.
That being said, we figured that GT had enough of a reputation as an accounting firm to be recognized as such with little or no investigation. Apparently that is not the case. We left messages with both Judge Holified and Mr Bowles to get an explanation but so far neither of them have returned our calls.
Dear CFO, Tell Us Everything We Want to Know About Your Repos or We’re Coming in with Guns Blazing. Sincerely, the SEC
As we mentioned this morning, t wn to brass tacks on these repurchase agreements that have captivated the entire financial world. Maybe “captivated” is overstating it but there’s been no shortage of commentary out there blaming Lehman’s shifty accounting ways for nearly ending the entire world as we know it.
The SEC let Lehman Brothers and Ernst & Young take their public beatings but now they’re moving on. The Commish’s Division of Corporation Finance sent out the following letter to “certain public companies” (aka banks) this month in order to get the scoop on their repos.
Furthermore, you should probably take this letter as a good indication of how the SEC feels about them in general, sayeth Edith Orenstein, ” would suggest companies, auditors, legal counsel, and audit committees consider such “Dear CFO” letters as illustrative of the SEC’s general view on accounting and disclosure matters for the issue(s) addressed in the letter.”
Oh yeah, about that letter. It’s long and has plenty of standard SEC vernacular so we’ll give you the abbreviated version (although the full thing appears below for you sickos).
“For those repurchase agreements you account for as collateralized financings, please quantify the average quarterly balance for each of the past three years. In addition, quantify the period end balance for each of those quarters and the maximum balance at any month-end. Explain the causes and business reasons for significant variances among these amounts.”
Translation: “Listen you shifty bastards, we know you move that sh*t off the books right before the end of the quarter. You won’t be able to hide it when we ask you for the averages.”
“[I]f you accounted for repurchase agreements, securities lending transactions, or other transactions involving the transfer of financial assets with an obligation to repurchase the transferred assets as sales and did not provide disclosure of those transactions in your Management’s Discussion and Analysis, please advise us of the basis for your conclusion that disclosure was not necessary and describe the process you undertook to reach that conclusion.”
Translation: “We’re guessing you didn’t tell anyone that you were parking a bunch of capital sucking crap off your books in your MD&A. If that’s the case, you get to explain to us, in excruciating detail, how you came to that asinine conclusion.”
If the Commission isn’t satisfied, it’s likely that the next step will be an interrogation in a poorly lit room. When your handlers leave, an incessant buzzing sound will commence until you soil yourself. Then they’ll try asking you again. Keep your fingers crossed that you don’t get a letter.
Dear Chief Financial Officer:
We are currently reviewing your Form 10-K for fiscal year ended ______. In our effort to better understand the decisions you made in determining the accounting for certain of your repurchase agreements, securities lending transactions, or other transactions involving the transfer of financial assets with an obligation to repurchase the transferred assets, we ask that you provide us with information relating to those decisions and your disclosure.
With regard to your repurchase agreements, please tell us whether you account for any of those agreements as sales for accounting purposes in your financial statements. If you do, we ask that you:
• Quantify the amount of repurchase agreements qualifying for sales accounting at each quarterly balance sheet date for each of the past three years.
• Quantify the average quarterly balance of repurchase agreements qualifying for sales accounting for each of the past three years.
•Describe all the differences in transaction terms that result in certain of your repurchase agreements qualifying as sales versus collateralized financings.
•Provide a detailed analysis supporting your use of sales accounting for your repurchase agreements.
• Describe the business reasons for structuring the repurchase agreements as sales transactions versus collateralized financings. To the extent the amounts accounted for as sales transactions have varied over the past three years, discuss the reasons for quarterly changes in the amounts qualifying for sales accounting.
• Describe how your use of sales accounting for certain of your repurchase agreements impacts any ratios or metrics you use publicly, provide to analysts and credit rating agencies, disclose in your filings with the SEC, or provide to other regulatory agencies.
• Tell us whether the repurchase agreements qualifying for sales accounting are concentrated with certain counterparties and/or concentrated within certain countries. If you have any such concentrations, please discuss the reasons for them.
• Tell us whether you have changed your original accounting on any repurchase agreements during the last three years. If you have, explain specifically how you determined the original accounting as either a sales transaction or as a collateralized financing transaction noting the specific facts and circumstances leading to this determination. Describe the factors, events or changes which resulted in your changing your accounting and describe how the change impacted your financial statements.
• For those repurchase agreements you account for as collateralized financings, please quantify the average quarterly balance for each of the past three years. In addition, quantify the period end balance for each of those quarters and the maximum balance at any month-end. Explain the causes and business reasons for significant variances among these amounts.
In addition, please tell us:
• Whether you have any securities lending transactions that you account for as sales pursuant to the guidance in ASC 860-10. If you do, quantify the amount of these transactions at each quarterly balance sheet date for each of the past three years. Provide a detailed analysis supporting your decision to account for these securities lending transactions as sales.
• Whether you have any other transactions involving the transfer of financial assets with an obligation to repurchase the transferred assets, similar to repurchase or securities lending transactions that you account for as sales pursuant to the guidance in ASC 860. If you do, describe the key terms and nature of these transactions and quantify the amount of the transactions at each quarterly balance sheet date for the past three years.
• Whether you have offset financial assets and financial liabilities in the balance sheet where a right of setoff — the general principle for offsetting — does not exist. If you have offset financial assets and financial liabilities in the balance sheet where a right of setoff does not exist, please identify those circumstances, explain the basis for your presentation policy, and quantify the gross amount of the financial assets and financial liabilities that are offset in the balance sheet. For example, please tell us whether you have offset securities owned (long positions) with securities sold, but not yet purchased (short positions), along with any basis for your presentation policy and the related gross amounts that are offset.
Finally, if you accounted for repurchase agreements, securities lending transactions, or other transactions involving the transfer of financial assets with an obligation to repurchase the transferred assets as sales and did not provide disclosure of those transactions in your Management’s Discussion and Analysis, please advise us of the basis for your conclusion that disclosure was not necessary and describe the process you undertook to reach that conclusion. We refer you to paragraphs (a)(1) and (a)(4) of Item 303 of Regulation S-K.
As noted above, we seek to better understand the basis for your decisions and your disclosure. Please provide us with a written response to these questions within ten business days from the date of this letter or tell us when you will respond. Upon our review of your response to these questions, we may have additional comments that we will provide to you with any other comments we may have on your Form 10-K.
Please contact me if you have any questions.
Sincerely,
Senior Assistant Chief Accountant
Grant Thornton Loses Its Fire in Letter to the SEC
Despite getting all bent out of shape in their earlier statement:
“The fraud was apparently conducted by a longtime, trusted senior financial executive who was hired and supervised by senior management,” a Grant Thornton spokeswoman said Tuesday. “The company (Koss) did not engage Grant Thornton LLP to conduct an audit or evaluation of internal controls over financial reporting. Establishing and maintaining effective internal control is management’s and the board’s responsibility.”
Grant Thornton is less enthused in their letter to the SEC:
We have read Item 4.01 of Form 8-K of Koss Corporation dated January 4, 2010, and agree with the statements concerning our Firm contained therein. We have no basis to agree or disagree with the statements and conclusions in Item 4.02(a), some of which were not disclosed to Grant Thornton LLP prior to receipt of this filing.
The only thing we read here that might be a dig at Koss is “some of which were not disclosed to Grant Thornton LLP prior to receipt of this filing.” If this is intended to be the firm’s version of the finger — straight up, at you Koss — the passive-aggressiveness is at a level that even impresses us.
At least in the Overstock letter the firm flat out called Pat Byrne and his company liars. This latest opportunity to lay the smackdown on a client in a regulatory filing seems to have been squandered.
Jeremy Newman Has Had It
So much so that he wrote a letter. The BDO International Global Coordiation CEO and infrequent blogger sent his letter to the Financial Times today in response to previous letters to the FT that unequivocally placed the blame for the financial apocalypse on accounting rules.
Newman, who strikes as the mild-mannered sort, comes as close to telling all the haters out there, “OH, HELL NO” as one might expect:
Sir, It is unfortunate if people are persuaded that accounting rules are to blame for bad lending decisions and poor investments (Letters, December 29). Banks, and other financial institutions, needed injections of monies from governments (and others) because they lost money and were short of cash – not merely because of accounting issues. Inadequate bad debt provisions, if such was the case, may have resulted in unduly large bonuses being paid but it was not the bonuses that created the cash shortages – it was the poor lending decisions that resulted in such bad debts. Equally, accounting rules did not result in companies overpaying for acquisitions – it was the poor investment decisions that resulted in a decision to overpay.
It’s pretty clear that J. New is sick and tired of everything being blamed on accounting rules and he figured writing a stern (but cordial) letter to the FT was the best way to draw the line in the sand. While that might have some effect, we would invite him to cut loose (read: go completely ape shit) on his blog to tell those IFRS haters what they can do with their pointer fingers. If you want us to read a draft JN, we’re here for you buddy.
Poor business decisions were behind losses [FT]