Guy Proposes Not Terrible Ideas to Get People Into Government Accounting
For some time now municipalities have felt the crunch from the accountant shortage and unlike public accounting firms feeling the same, these entities don’t have the luxury of turning down work to ease it nor can they overwork their people with no overtime. In March, Bloomberg reported that city credit ratings are at risk due […]
Some Guy in Montana Thinks Audit Firms Are Corrupt, Untrustworthy
Jim Elliott writes an opinion column for the widely-distributed Missoula Current (that’s a joke) and in today’s column he decided to address the EY cheating scandal. His familiarity with the ethics exam EY auditors cheated on begins and ends with a quick Google search but as an outsider to accounting and a member of the […]
More Scary Anti-WFH Headlines: Is Remote Work Bad for Your Mental Health?
The anti-WFH propaganda is in full swing and why shouldn’t it be? Commercial leases still have to be paid whether offices are full of bodies or not, might as well try to weaponize pandemic loneliness against workers to force them back under the fluorescent lights while they can. First we heard that remote work might […]
Why is the Accounting Profession Scaring Everyone Away?
Saw this on our Twitter timeline, thought I’d throw it to the sharks and see if anyone has some thoughts: Accounting industry. We all agree there numerous issues & major changes are needed. The ultimate question is even with all the issues, why are ppl not willing to overcome all of them & either enter […]
Is Accounting an Obsolete Major?
Is accounting an obsolete major? That’s the question posed by John “Jack” Castonguay, PhD, CPA, in the August/September 2021 CPA Journal. He writes: Accounting — at least as an independent field of study — is becoming obsolete in today’s technology- and analytics-focused world. Its value lies in its interdisciplinary applicability and position as a foundational […]
Despite 65-Hour Weeks, You Should Consider Doing Client Work on the Side, Says Guy Who Did Side Work Back In His Day
I would like to preface what I’m about to write with an important note. I have the utmost respect for Ed Mendlowitz (not like he gives three quarters of a rat’s butt cheek what I think of him because who the hell am I), he is an OG of the profession, and we are all […]
Opinion: The Profession Is Not ‘Diluted,’ It Is Evolving
[Ed. note: The following is a letter we received in response to a reader letter we published in September which lambasted the AICPA for diluting the profession. We are publishing it with permission from its author, who we have chosen to keep anonymous due to the anonymity of the original letter writer. We hope this […]
Opinion: It’s the AICPA’s Own Fault No One Wants to Be a CPA Anymore
[Ed. note: we received the following in response to my newsletter column dated September 14, 2021. In the column, I referenced the 2019 AICPA Trends report, which stated that non-accounting majors made up 31% of all firm new hires at that time. The reader comment is published here with permission from its author who wishes […]
The Trump Administration Will Drain the PCAOB Swamp
The election of Donald Trump is likely to transform the Public Company Accounting Oversight Board (PCAOB). While the PCAOB is technically a non-partisan private regulator, it will not likely escape Trump’s commitment to drain the swamp. Jim Doty’s term as PCAOB chairman expired in October of 2015. The PCAOB chairman is nominated by the SEC […]
The SEC Manages to Get Softer on Big 4 Audit Firms
Incredibly, the SEC has done something I didn't think was possible. It has, in its implicit blessing of Herbalife's selection of PwC as auditor, given the Big 4 and other audit firms more leverage in future debates over independence with regard to past non-audit services. And the last thing the Big 4 needs is more […]
Tax Pros Don’t Need to Sweat the IRS Budget Cuts
This is the first post from our slew of freelancer candidates. The following is by Jeremy Woodward. The House Appropriations Committee has settled on an IRS budget, and it’s not good news for everyone’s favorite group of suits and ties. The $11.8 billion allocation is $1.2 billion below what they requested. Probably not enough for […]
Memo to The New York Times: The Tax Shaming Has Gotten Old
Last weekend, the New York Times ran an exposé on Apple and its "sidestepping" of taxes. Since it's been a week-ish, I think things have quieted down enough so we can take this discussion in a new direction. Specifically, how the Times' tax coverage, of late, has been the equivalent of ten pounds of monkey shit stuffed […]
Analysis: Is The Going Concern Editor on a Power Trip?
Generally, we prefer that our tip box be used for actual tips (as previously stated, "eat shit" is not a tip) but every now and then, some non-tip makes its way through that we can't help but act on. I suppose the following "tip" is one such non-tip that I'm compelled to repost here. It's […]
KPMG, Center for Audit Quality Weren’t Too Keen on PCAOB Inspection Documents Being Subpoenaed
Last week, we told you about Jonathan Weil’s latest scoop exposing a PCAOB issuer in an inspection report. The issuer in question was Motorola and it, once again, featured KPMG as the auditor on the receiving end of the Board’s criticism. It was also noted that PCAOB Chair Jim Doty mentioned this particular case (without naming names) in his speech at USC the previous week when he described “one large firm t am was aware that a significant contract was not signed until the early hours of the fourth quarter. Nevertheless, the audit partner allowed the company to book the transaction in the third quarter, which allowed the company to meet its earnings target.”
J Dubs put this all together in a nice little package, citing court documents from a class-action lawsuit in Chicago. What isn’t mentioned in Weil’s column but is spelled out in other court documents that we’ve reviewed is that KPMG and the Center of Audit Quality fought the release of the documents related to the PCAOB’s inspection report because they’re afraid that more lawsuits could result if issuers’ identities are made public.
The CAQ submitted an amicus curiae brief (in full on the next page) stating:
The supervisory model of regulation created by Sarbanes-Oxley and implemented by the PCAOB has thus far worked well and has improved the quality and reliability of audits of public companies. It has worked to the satisfaction of both the Board and the regulated community.
Since the PCAOB’s own Investor Advisory Group issued a report entitled “The Watchdog that Didn’t Bark … Again,” one might say that the Center’s final point is debatable.
Yet, the CAQ argued that if the PCAOB inspection documents were released, “the [Sarbanes-Oxley] Act’s carefully supervisory model will be adversely affected.” That is, the confidentiality afforded to the communication between auditors and the PCAOB would be compromised and would allow Board information into the ‘hands of litigating lawyers.’ The CAQ declined to comment for this post, saying that they did not “have anything to add to the amicus brief.”
In her ruling denying KPMG’s motion (in full, on page 3) to squash the subpoena of the PCAOB documents, Judge Amy St. Eve cited KPMG’s argument that sounds very similar to the CAQ’s:
KPMG argues that “if litigants can compel production of materials related to the PCAOB’s confidential inspection process notwithstanding section 105(b)(5)(A), open and constructive engagement between the PCAOB and accounting firms could be chilled by the threat of increased civil litigation, and the statutory framework carefully crafted by Congress to improve the quality of public company audits could be frustrated.”
So basically auditors are afraid that if their super-special-secret discussions with the PCAOB are out there for all the world to see, they’ll get sued more often. But hasn’t suing audit firms already reached critical mass? Can they really fear more litigation? The only thing that keeps audit firms from being on the same level of litigation risk as tobacco companies is that they aren’t killing people.
Weil and those that agree with him argue that the PCAOB owes it to investors to name names in their inspection reports. To continue keeping issuers confidential protects them from legitimate criticism for shoddy accounting and perpetuating equally shoddy audits. Of course, if you’re an investor and that doesn’t bother you, then maybe you’re okay with auditors trying to stop the release of more information related to their work. Work that cost the investors in Motorola $244 million from 2000 to 2010.
Billionaire’s Heirs May Beat the Estate Tax and They Have Congress to Thank
The New York Times has interesting story on Dan Duncan, a Houston billionaire who couldn’t beat death but his heirs may just beat the taxes thanks to Congress falling asleep at the wheel.
Duncan did all right for himself. He became the richest man in Houston and was ranked 74th on Forbes’ latest list by creating a natural gas empire that he started with a couple of trucks and $10k. Getting self-made crazy rich involves a little bit of luck so now it appears that he has passed on a little of that luck on to his heirs who may be inheriting his $9 billion fortune tax-free.
In case you estate tax mess continues to drag on, and on and on.
The Times story says that the Treasury collected $25 billion in estate taxes in 2008. With that kind of haul how could Congress let this happen? Joe Kristan passed along a little background to us from a Tax Analysts report 2001, some time ago that explains:
Although President Bush is scheduled to sign the tax bill into law next week, the bill contains a sunset provision that invites further debate in Congress during the next decade on whether many of the provisions will become permanent or take effect at all.
Just after H.R. 1836 becomes fully phased-in and estate taxes are repealed, the entire tax cut bill would expire as of December 31, 2010, under the bill’s sunset provision unless Congress enacts new law before that date.
The sunset provision opens up a new arena for debate among conservatives who are eager to make the provisions permanent and liberals who would prefer to postpone phasing in the provisions to pay for other government programs. Meanwhile, tax planners are left questioning the final outcome as they examine the new law.
As originally designed, the bill would have extended through 2011 and made the tax cuts permanent. However, that bill would have been subject to a budgetary procedure known as the “Byrd Rule,” which requires 60 votes in the Senate to alter revenue beyond a 10-year period. To avoid the procedure, Republican taxwriters adjusted the tax cut agreement for H.R. 1836 by allowing the provisions to sunset by December 31, 2010.
Democrats have argued that the sunset provision masks the true cost of the bill because the revenue loss accounts for only nine years of the budget window and less than one year of the bill’s full effect, including repeal of the estate tax. “Not only have they increased the back-loading to hide the true cost of this tax bill, but they have actually eliminated a year from the calendar,” said Senate taxwriter Kent Conrad, D-N.D., in a May 26 floor statement. “What they have done is graduated to a whole new level of accounting gimmickry to disguise the full cost of this tax bill.”
Joe’s emphasis. He then wrote to us, “Stupid? Well, it’s Congress, what do you expect?”
Blame who you want – George W. Bush for signing the expiration into law in 2001 or the Democratic controlled Congress for letting it expire – but at this point in time, regardless of your political persuasion, Duncan’s family and other wealthy families (some wealthier than others) are catching a huge break.
The Duncans didn’t talk to the Times for the story but it does state, “Many lawyers say Mr. Duncan’s heirs have the means and motivation to wage a fierce court battle to challenge the constitutionality of any retroactive tax.”
Good for them. If Congress tries to pull a fast one on them with a retroactive tax they should fight it tooth and nail. Despite the fiscal situation facing the country, Congressional incompetence and inaction shouldn’t get a mulligan.
Convergence of Accounting Rules Is Still a Pipe Dream
God forbid I go so far as to say this whole convergence thing is a conspiracy but it’s starting to reek like a bad Saturday morning cartoon plot. First the evil leaders start scamming for world domination, then they form shady alliances in darkened lairs and eventually the population gets sold into slavery until the hero comes and drops the villains in a vat of acid. Or something like that. If global financial “reform” were a Saturday morning cartoon, we’d be horribly overrun with villains and in desperate need of a hero.
Since it’s real life, all we can do is watch.
A spokesman for IASB said the two boards are expected to issue their first joint quarterly progress report very soon. A spokesman for FASB said the various project updates posted by the two boards demonstrates “quite a bit of progress” in recent months.
“We remain committed to working with IASB,” said spokesman Chris Klimek. “(We) appreciate the SEC’s leadership and additional guidance on this important matter, and like everyone, we will be studying the work plan carefully in the days ahead and discussing what it means for us.”
It’s cool! There’s a plan for convergence and here it goes: the SEC waits around for the FASB and IASB to figure out how to convert GAAP statement to IFRS without costing American companies billions ($35 million/year x companies converting = well you get it). Eventually, they might just figure this out. In the meantime, kick back and don’t get too worked up over it, the two bodies are still battling it out because of the same cultural barriers that have always stood in the way of a true marriage of FASB/IASB positions.
As Number Insights pointed out in 2007 (see how long we’ve been trying to do this? And what do we have to show for it?), a single set of principles might not be the bad part of this entire plan. GAAP is notoriously constrictive but principles-based accounting requires qualified accountants and I’m not sure our accountants are quite ready either, ignoring the costs associated. And a world without FASB? I can’t imagine it.
It doesn’t look like I’ll have to any time soon.
Most Aren’t Ready for IFRS on the CPA Exam
Last year, the AICPA Board of Examiners made it clear that though a roadmap for IFRS adoption in US financial reporting might be a ways off, it intended to start testing IFRS in Financial Accounting and Reporting (mostly, we’ll get to that in a second) in the first window of 2011. Just a friendly reminder, that’s only three testing windows away.
But what gives? According to the 2009 KPMG-AAA Faculty Survey, only 8% of respondents felt as though at least half of their accounting faculty were qualified to teach IFRS. Meanwhile, 70% of professors said their most significant challenge to teaching IFRS was finding room for it in the curriculum.
As far as I am aware, State Boards of Accountancy have not shown a desire to require IFRS coursework to be eligible to sit for the CPA exam at this time.
The Big 87654 committed to pushing IFRS in college classrooms as early as May of 2008 (months before the SEC announced an IFRS adoption roadmap) and they are still tossing millions at the initiative.
In December of 2008, The Summa’s Professor Albrecht insisted that the Big 87654 had certainly chosen the right candidate, lobbying Obama to accomplish their IFRS goals. Why? “Obscene profits,” he says, pointing to campaign contributions and Obama’s subsequent pro-IFRS SEC Chair pick as signs that IFRS doomsday is upon us. A little over a year later, the SEC appears too busy chasing “crime” and playing catch up to issue a clear directive on IFRS in the US.
So? How can the AICPA BoE insist on testing information that A) accounting students still aren’t being taught and B) isn’t widely understood or practiced by most CPAs in the US?
I certainly get what the AICPA is trying to do and if nothing else, they probably want to show off that their awesome psychometric CPA exam technology is OMGamazing! and ready to adapt in a timely and efficient manner. But pushing IFRS on unsuspecting CPA exam candidates isn’t really the way to demonstrate that.
Is it just a coincidence that now the AICPA is prepared to reevaluate their scoring process after the first two testing windows of 2011? Even they know this is an awful idea.