Tag: Rumors

Did Ernst & Young Convince Republicans to Skip Last Week’s Senate Subcommittee Hearing?

If you followed last week’s “Role of the Accounting Profession in Preventing Another Financial Crisis” hearing before the Senate Banking Subcommittee on Securities, Insurance, and Investment, you may have noticed that “Ernst & Young” was never uttered by anyone on the panel, although Lehman Brothers was mentioned a number of times throughout the hearing. Anton Valukas, the bankruptcy examiner for the Lehman, was there after all and “Ernst & Young” appears in his report probably thousands of times. So why wouldn’t Ernst & Young be mentioned? This is a hearing about the accounting profession preventing, after all and Mr Valukas has stated in his report and elsewhere that “colorable claims” could be filed against E&Y. Stands to reason that perhaps the firm would come up at some point.


Also, if you followed the hearing with us on our live-blog, you definitely heard Francine McKenna and I complaining about the sorry turnout by the members of the subcommittee. The majority of questions coming from the subcommittee chairman, Senator Jack Reed (D-RI), with a few from Senators Kay Hagan (D-NC) and Jeff Merkley (D-OR). The eight GOP members were nowhere to be found. Now maybe accounting isn’t the sexiest of topics but it’s hard to argue that this wasn’t an important hearing where many questions could have been asked of an industry that witnessed excrement coming into contact with an old Century. However, after a tip from a person familiar with situation, we may have an idea why there was such a pathetic turnout:

[T]he auditing firms did not like it they were holding the hearing and E&Y really was complaining to Reed that Valukas had been invited. As a result, the Republicans agreed that none of them would attend the hearing which in fact, none did.

Gotta love spiteful absence! Obviously we had to call around on this one and Ernst & Young spokesman Charlie Perkins declined to comment. As for the Republican members of the subcommittee, we have…well, nothing else to share at this point. But we’re hopeful! It’s entirely possible that all eight GOP members had something better to do than ask questions of industry experts that had a front row seat to the financial crisis, but then again the hearing was pretty early in the morning.

UPDATE: A spokeswoman for Senator Mike Crapo, the ranking member on the subcommittee, informed us that Mr Crapo was sick last Wednesday and canceled all his appointments for that day.

Unfounded Rumor of the Day: Grant Thornton About to Announce a ‘Big West Coast Deal’

Remember those GT/Moss Adams rumors from back in January? At the time, our post sent both firms calling for plumbers but we still mangaged to get a copy of an email from Moss Adams CEO Rick Anderson that denied the rumor in an email to the firm’s partners. Everything has been quiet since then mostly because…well, it’s busy season. Granted, firm leaders like Stephen Chipman and Rick Anderson aren’t thigh-deep in spreadsheets like most of you so the fact it’s entirely plausible that while you’re all distracted, TPTB have been courting each other.

We received this brief note from a tipster yesterday:

Rumor is [Grant Thornton] [is] about to announce big west coast deal.


Our source originally speculated that a tax/valuation/consulting boutique was the target because of an old Andersen connection but then told us that the latest word from the west coast is that Moss Adams is back in the picture. In our original post, we went over the reasons for and against the GranMoss merger and frankly it still could go either way (we’re leaning “no” at this point). That said, Grant Thornton has been on a buying spree, most recently picking up some attest services from the LECG Corp. fire sale, so a merger of some kind wouldn’t be a surprise but WHO?? We’re listening to any and all well-founded or crackpot theories.

Moss Adams has declined to comment on the rumor thus far and Grant Thornton did not return an email requesting comment.

UPDATE: This just in from a Grant Thornton tipster:

While I have no actual basis for substantiating this, we have a Moss Adams wireless signal in our office in the central region. There is no Moss Adams office in our building, or even out state, its been there since about January when the rumors first popped up. I just thought it was interesting. I have no insight into any of this, I’m just a lowly peon staff…

Perhaps there’s an explanation for this but I’m no expert on the wireless signals and whatnot so I’ll leave it to you to reason this out.

Big 4 Aspirant Requests Some Myth Busting

Welcome to the first Friday in February edition of Accounting Career Emergencies. In today’s edition a future Big 4 soldier isn’t sure what to make of all the myths and rumors swirling around the quad about said four firms. He’s asked me to debunk.

Are you in desperate need for a regime career change? Have a gassy cube neighbor? Need some tips on how to turn that frown upside down during busy season? Email us at advice@goingconce serve you better than Dr. Phil (or his dopplegänger).

Back to our Big 4 mythbuster:

Hey GC,

I was wondering if there were any truth to the rumors/legends that seem to percolate through campuses about Big 4 accounting. Here’s a short list of stuff that I’ve heard while attending accounting job fairs, business frat/club meetings, and associates from Big 4 and regional firms that come back to campus for recruitment events.

1. During their respective busy seasons, new tax and audit associates at a Big 4 work so many hours that their monthly salaries break out into an hourly rate that is less than minimum wage.

2. It is nigh impossible to study for and pass any portion of the CPA exam while simultaneously working at a Big 4.

3. Internships are virtually the only way for new graduates to break into a Big 4.

4. Becker is better than Kaplan is better than Bisk.

5. Beginning a career at a Big 4 will open more doors down the road than starting at a mid-tier , regional or local firm.

6. At Big 4 firms, advisory associates make more money than audit associates make more money than tax associates.

7. The average Big 4 associate leaves/quits/defects before their 3rd year.

8. Evan after taking raises into account, Big 4 associates that were hired during the brunt of the recession will actually be paid less than new hires this year.

So is there any truth to these rumors? I’m guessing that there’s quite a bit of embellishment that come from associate ‘war stories’ so I’ve tried to take everything with a grain of salt.

Thanks,

Big 4 Mythbuster

Dear Mythbuster,

There’s a lyric in “I Heard it Through the Grapevine,” that goes, “People say believe half of what you see, Son, and none of what you hear,” which we find to be generally a good rule of thumb (with the exception of what you read at this fine publication…most of the time).

ANYWAY, we’ll tackle these one at a time:

1. During their respective busy seasons, new tax and audit associates at a Big 4 work so many hours that their monthly salaries break out into an hourly rate that is less than minimum wage. – Let’s keep this simple: if you calculate an average salary based on this year’s starting salaries and 2,000 chargeable hours, it’s pretty difficult to get down to the federally mandated minimum wage of $7.25. Now, can you work far more than the 2,000 hours? Of course but even if you doubled the hours, you’re still above the minimum wage. MYTH.

2. It is nigh impossible to study for and pass any portion of the CPA exam while simultaneously working at a Big 4. – Is it difficult to balance a work schedule, studying, arranging to sit for a section, having a shred of a personal life, finding time to take out the dog AND still pass a portion? Yes, absolutely. “Nigh impossible”? No. People working at the Big 4 pass portions of the CPA every month. MYTH.

3. Internships are virtually the only way for new graduates to break into a Big 4. – When the Big 4 firms were hiring everyone and their dog back in the mid-Aughts, this would have been a myth. These days, with hiring budgets being a little tighter, the internship route is a must. Most interns end up taking the full-time offers which leaves just a few spots, so that doesn’t make for very good odds for any outsiders. TRUTH.

4. Becker is better than Kaplan is better than Bisk. – God, sorry to say but this is fruitless exercise. I don’t endorse any of the CPA review courses (FULL DISCLOSURE: I used Becker and passed and some companies happen to advertise with us.) out there. The companies will present stats that presents their pass success rate in the best light possible. That said, ranking the review courses in some arbitrary order like you’ve done above is meaningless. If you hear from someone on campus that Becker is the best because that’s what they used (Tim Gearty’s handsome wardrobe notwithstanding) or that Roger is the best because that’s what they used (and not because they have a thing for hipster chicks) that doesn’t mean you will necessarily have the same success. And if someone tells you that they’ve tried more than one review course, you should know that this person probably just sucks at taking tests. MYTH.

5. Beginning a career at a Big 4 will open more doors down the road than starting at a mid-tier, regional or local firm. – As a general rule this is true. Having the exposure to the most complex accounting systems, transactions and business models will allow you to work at these companies if you so choose. Working at Big 4 firm (and in some markets, mid-tier firms) will give you that exposure. Does that mean you’re doing yourself a disservice by accepting a position with a regional or local firm? Of course not. It all depends on what your career goals are. But does a Big 4 firm name on your résumé get more attention than a non-Big 4 firm. Yes. TRUTH.

6. At Big 4 firms, advisory associates make more money than audit associates make more money than tax associates. – In my experience, I’ve found that salaries for tax and audit associates are extremely close with a slight edge to the tax side, so you’ve got those two backwards. But yes, Advisory associates are paid the most. ONE-THIRD TRUTH.

7. The average Big 4 associate leaves/quits/defects before their 3rd year. – Again, the “average” number of years that an associate works at a Big 4 firm is a complete arbitrary statistic. I’m not sure when people started throwing numbers like this but it’s pretty useless information. Typically when people state an average number of years that an associate stays, it’s not backed up with any stats. I’d be surprised if the firms themselves even know what the average shelf-life of an associate is. I may be wrong about this and would love to see some stats if they’re out there but for now we’re going with: MYTH.

8. Evan after taking raises into account, Big 4 associates that were hired during the brunt of the recession will actually be paid less than new hires this year. – Pay freezes and meager increases certainly put a damper on salaries in ’08-’09 but this past year saw the Big 4 return to some reasonable increases across the board as well as bonuses in various forms. Starting salaries for new associates will always keep up with the market (as is popular to say) but with coverage of salaries being more transparent than it used to be, it will be impossible for firms to allow new hires to earn more than their superiors. MYTH.

Whew! There you have it; discuss as needed.

Compensation Watch ’11: KPMG Transactions and Restructuring Services May Get Some Extra Love

From the mailbag:

Thought y’all might be interested in hearing about a practice specific mid-year salary adjustment announced today [Monday]. Transactions and Restructuring (aka Transaction Services/TS; 750 people nationwide) had a national update call today during which, the partner in charge, Dan Tiemann [a Top 25 Consultant, no less], announced that he is very close to having firm leadership approve a mid-year comp adjustment for up to 5% for all members of the practice.

He mentioned that he is aware of the PwC iPad program and the Deloitte midyear raises and that it’s time that KPMG (well, at least the T&R practice) did something as well. This is in addition to the staff bonus program announced before xmas, and will be in addition to merit raises/incentive comp later this year

He said he’s well aware that somebody who wants to leave for a salary bump (as myself and many of my colleagues are considering) will not be deterred by a paltry 5%, but that he thinks the practice needed to do something to “show appreciation” for those who have sacrificed weekends and vacations during the past few months.

As our tipster notes, this is not yet approved by the brass but notes that “the recent barrage of defections” may have been a motivating factor. Also, our source doubted that anything like this would occur for large practices like audit or tax, “there is hope for the rest of advisory or other specialty practices.” If you hear any hopefulness for your practice – advisory, speciality or otherwise – email us.

Moss Adams CEO Denies Grant Thornton Merger Rumor in Email to Partners

In reaction to our post yesterday about the rumor of Grant Thornton and Moss Adams being united in wedded CPA firm bliss, Moss Adams Chairman and CEO sent an email to MA partners yesterday afternoon. The email, sent to us earlier today, let the partners know that no one is out of the loop, “[L]et me start by assuring you that you did not miss a partner call, a partner memo or any other such communication dealing with this.”


Mr Anderson also wrote that he has spoken to Grant Thornton, “Since we last had the all partner webinar, there have been no substantive discussions with GT – I say no substantive discussions because I have been at an AICPA major firms meeting where I not only had casual discussions with the GT leadership team, but I had similar discussions with the leadership of most of the 30-50 largest CPA firms in the country, exclusive of the Big 4.”

So you can interpret things like, “no substantive discussions with GT” and “casual discussion with the GT leadership team” how you like but Mr Anderson made himself a little clearer near the end of the email, “I can absolutely assure you that while we have had discussions with a large number of firms (of all sizes) over the past 12 months […] there are currently no negotiations under way with any firm regarding merger. But I can also tell you that I and other [Executive Committee] members will be talking to some west coast firms over the next several weeks.”

Moss Adams has not responded to our most recent request for comment. Grant Thornton sent back our carrier pigeon with it’s head cut off (very Chicago), which is the closest thing resembling a response that we’ve ever received from the firm. We’ll keep you updated.

Unfounded Rumor of the Day: Grant Thornton and Moss Adams in Merger Talks

This week we learned that Dixon Hughes and Goodman & Co. would be wedded in CPA firm bliss on March 1st. We’ve also seen a couple of smaller mergers announced this week in the tri-state area: Rosen Seymour Shapss Martin & Company LLP and Kahn, Hoffman & Hochman, LLP formed Kahn Hoffman & Hochman and Morrison, Brown, Argiz & Farra, LLC and ERE, LLP.

But eheard a rumor that trumps all of these:

The new rumor is that Grant Thornton and Moss Adams are merging. I have it on good authority (an industry consultant and the MP of a California firm).


Okay, so not exactly rock solid but intriguing enough for us to ask around. So far, Grant Thornton spokeswoman Kristi Grgeta has not returned our emails or voicemails and Moss Adams has declined to comment at this time. We’re poking around with other sources but still waiting to hear back.

So for now, let’s just go with the hypothetical. If GT and Moss were to combine, it would make them the 5th largest firm in the U.S., narrowly edging out McGladrey, with about $1.5 billion in revenues, going by Accounting Today’s most recent figures. Currently they are 6th (GT) and 11th (MA) on the AT100 list and 6th (MA) and 23rd (GT) on Vault’s flagship ranking. Their combined forces would have nearly 800 partners and over 7,100 total employees, if you assume no layoffs.

While all that might serve Stephen Chipman’s desire more dynamic clients (and perhaps more blogging fodder?), it would certainly require a few more hand-written notes. Not only that but GT already has a presence in every major market that Moss Adams does unless they’re looking to mine the Eugene, Oregon market for LOSERS and have reconsidered their divestment in Albuquerque. Also culturally, this seems like a strange fit as GT strikes us as pretty buttoned-down while Moss Adams is more laid back but maybe we’ve got that wrong. You tell us.

Regardless, Grant Thornton has voiced interest in merger possibilities and picked up Huron Consulting’s Disputes & Investigations practice last year, so who knows!? Both firms just closed the books on 2010 and maybe they’re laying some groundwork?

So, what do the GT and MA people make of this? Hell, anyone can chime in, we’re just finding this particular rumor pret-tay interesting. Some things make sense and some don’t, so we’ll leave it to you to hash out. And of course, if any of this sounds familiar because, you know, you heard something in a meeting about this very topic, email us. We’ll update you with anything we hear.

Ernst & Young Wasn’t About to Let Some Civil Fraud Charges Put a Damper on Their Holiday Season

A trusted source emailed us that things were getting festive last night:

EY had their FSO party last night at Cipriani’s downtown. Used to be at Tavern on the Green.


This is good news. And not just because this is an upgrade from last year’s party. Despite all the bad press the firm is getting, the celebration will go on! It must go on! Now whether the Governor-elect was aware of this and purposefully decided to make a few people’s hangovers a little worse by filing the charges today, we can’t possibly know (but he does seem to have an innate sense of timing).

What we would like to find out is the mood at this fiesta. Were there a lot of long faces, grumbling about Hank Paulson, weeping in their single malts? OR did people manage to convince themselves that this whole thing is NBD and people had a good time – enjoying the open bar, power smoking Cohibas, making awkward sexual advances, partners dancing?

We need, and the people demand details, so if you were at the party email us the details.

KPMG Partner Doesn’t Understand Why People ‘Are Dropping Like Flies’

From the mailbag:

Hey Caleb,

Was with a [Midwest city] KPMG Advisory partner this weekend. She said that employees are dropping like flies because KPMG finally unveiled raises after 2 yrs without. Only EP’s were awarded (less than 5%). She said the numbers were in the double digits. What the hell did they expect?


If this sounds a little confusing, it was. We asked our tipster to clarify:

[A]re you saying that she’s under the impression that people are just now leaving because they are upset that they didn’t get raises for two years? And she’s surprised because the raises in the double digits when they were actually in the single digits?

And their response:

[S]he is surprised that so many are leaving especially given the unemployment rate in [midwest city] regardless of how long it’s been since raises were given. It’s not a secret that the other big four have not only given raises but as you report, awarded mid-yr bonus/raises as well.

We went back to some of this year’s KPMG comp threads and the 5% sounds a little suspect, as those rated as “exceptional” were pulling much better increases than that but then again, maybe there were some exceptions that weren’t reported. Also, it seems a little strange that a partner would be so clueless about raises but anything is possible, s’pose.

And as far as the gnashing of teeth because mid-year raises and bonuses are being handed out at other firms, keep in mind that KPMG isn’t even out of their first quarter yet. The rest of those firms have fiscal years that end prior to KPMG’s and they know how the first half of the year is shaping up. Expecting KPMG to start throwing money at people with less than three months in the books is a little ridiculous. At this point, the rumors around the idea of a mid-year surprise should keep you hopeful (but don’t go expecting anything).

It’s been no secret that people have exiting the House of Klynveld (and other firms) – regardless of the unemployment situation – prior to the end of the year (as is typical this time of year). Frankly, people we talk to are pretty optimistic about the job situation for most Big 4 types looking for something new, so this partner may be even more clueless than we thought.

Whatever the case, only 17 shopping days until those left will likely settle for sitting tight through another busy season. If we’re way off base here (or right on the money), feel free to jump in.

Comp Watch ’10: KPMG Town Hall Results in More Questions Than Answers

After hearing that KPMG was following suit with a mid-year compensation surprise, we’ve now been tipped that any hope you had of seeing a little extra moolah has been crushed:

Last night was KPMG’s New York Office (NYO) townhall meeting. During this meeting, close to 2,000 NYO employees of the firm gathered in a hotel in Time Square to listen to a series of presentations from the CEO, COO and Office Managing Partner (OMP). During this four hour presentation, they covered an array of topics, including: compensation and benefits, technology, etc.

Depsite hearing that the firm will be allowing staff (associates and senior associates) have KPMG email access on their iPhone, Android or BlackBerry phones, no further details were provided about what they will be paying for, if anything.

They also announced that they were keeping up with the average regarding compensation, but made it a point to mention that with every average, someone must be below the average, hinting that we were that someone. After finding out that there will be no mid-year bonsues or raises, some left the meeting rather disappointed… at least there was free booze and food (like any other normal KPMG event).

But wait! This sounded a little weird to us since our sources on the original story were solid, so we checked in with another source who told us the message was simply non-committal, “They didn’t really confirm/deny what was going to happen with the mid-year stuff.”

So all this “Yes? No? Maybe so,” probably isn’t so helpful but that’s where things appear to stand.

Back to our original tipster, who is now hearing talk of next fall’s associates receiving a boost in their starting salaries:

Later that evening, however, many of the recent hires (new associates in 2010) were beginning to hear that the 2011 new hires (for next year) were already receiveing salary adjustments (upwards into the $60,000’s), in addition to their already higher starting salaries and sign-on bonuses.

So my question is: Does KPMG plan on compensating the new associates (that started in 2010) that did not receive a sign-on bonus this year, or perhaps have any plans to bring their salary closer towards the industry average?

Starting salaries have been consistently rising over the years and with increased competition among the firms for the best recruits, you can expect that to continue. Whether that results in adjustments for KPMG’s latest class of new associates remains to be seen, since a mid-year surprise is still uncertain. We should say, however, expecting more money after being on the job for 2-3 months is a little presumptuous. We understand the frustration but, seriously? You can barely open Excel at this point.

As you hear more regarding the mid-year compensation (or lack thereof) email us with the scoop.

Compensation Watch ’10: KPMG Discussing a Mid-Year Bonus (or Something)

After moves by Deloitte, PwC, McGladrey and now Grant Thornton, we have now heard that KPMG is discussing a mid-year surprise.

The only thing is, there aren’t a lot of details at this point. The firm’s first quarter is not over until the end of this month, so the pool likely hasn’t been determined and it isn’t known whether the mid-year comp will be paid as a bonus or as a merit increase. Our source on the matter speculates that it will be a bonus rather than a raise but it is fairly certain that it will be structured in a way that will incentivize employees to stay with the firm. There has been steady stream of people leaving (which is not atypical this time of year) and there are hopes that this show of love will stem the tide.

So while it appears that the House of Klynveld has heard your grumbling about anteing up, time (and the amount of money) will ultimately determine if this will satisfy the troops.

If you’re familiar with the talks or you have more details, email us the details and discuss your thoughts below.

UPDATE – circa 2:10 pm: Some thoughts on a non-bonus approach:

Pure (educated) conjecture on my part, but I would assume that the mid-year “surprise” would be a raise, as the firm is apprehensive at this point about giving bonuses, because people could just take them and leave. Harkening back to our SOX-404 years (2005), we gave multiple raises, bonuses and awards throughout the busy season (i.e., if you worked 60+ hours in a week, immediate $200 award) with a bonus at the end of the tunnel. I seriously doubt any early 2011 compensation would be front-loaded.

And then, in case you weren’t already aware, there’s this:

In other news, [the Dallas] office has been reaching out and giving offers to people they have previously laid off and are seeking out experienced hires. Not sure if it’s firm-wide, but an interesting sign of desperation nonetheless.

Ernst & Young Employee Disappointed with Boston Office’s Party Planning, Lack of Boozehounds

From the mailbag:

EY Boston Tax had their end of busy season party last week. On Tuesday, we had beer and wine in the office. Considering everyone had to work through the first football sunday of the year, the least they could do is get us drunk on a Thursday so we can enjoy ourselves. Who’s gonna get drunk in the office on a Tuesday? [Ed. note: show of hands?]

I have to say I’m disappointed with the social/drinking scene at this place compared to other Big 4s in this market. Pretty stiff, but I feel like the firm takes pride in that–I have no idea why.

Without the proper context, it’s difficult to know what kind of a drinker our tipster is. If he/she is merely a two wines/beers and out person then E&Y Boston is really bucking the trend in that fair city. However, if the tipster is Charlie Sheen, then there’s no cause for concern.

Any Bostonians familiar with the situation are invited to elaborate on the Big 4/next tier drinking scene below or share with us directly.

Some People Are Wondering When/If KPMG and Ernst & Young Will Ante Up

From the mailbag, courtesy of an E&Y senior associate:

I work for EY. Roommates are Deloitte and PWC. I’m hearing from the PWC employees that in addition to a holiday bonus, as well as a March compensation adjustment similar to Deloitte’s, PWC is also giving their employees the last two weeks of December off without requiring them to use their vacation days.

Thoughts on whether EY or KPMG will ante up? Hot topic at my client site today as you can imagine 🙂


Before we get to E&Y and KPMG, it should be noted that PwC is really playing hardball here. A quick recap:

• Mid-year bonuses that include an option for an iPad. Steve Jobs hater or not – that’s a cool bonus.

• Rumors of poaching seniors in Chicago and New York.

• New Yorkers given the option to shovel Thanksgiving sustenance at a Manhattan location to be named later (btw, we really want to know where, so get in touch with details when known).

• iPhones are now available and Christmaskuh festivities return.

Now there are rumors of a merit increase in March and two free weeks of time off? This is quite the run of employer gratitude. We won’t say “unprecedented” but it is an impressive show of generosity.

Maybe PwC has gone on this offensive because they had a kick-ass first quarter. Or maybe it’s because they lost the number one spot to Deloitte and they still want everyone to know that they’re still capable of equating love with money. OR maybe they’re trying to make people forget about Logogate. Whatever the motivation, the firm is throwing money around with the gusto of Charlie Sheen and they are getting a relative amount of attention for it.

Now, then – Ernst & Young and KPMG. Maybe these two firms are spreading the wealth on the Double-DL but if not, TPTB have to be aware of the what the competition is up to. If not, maybe someone should clue them in. Regardless, there has to be heat to act in some way.

One explanation for the House of Klynveld is that the fiscal year just ended, so it is too early for leadership to communicate “the great first quarter,” thus rationalizing a mid-year bonus. If KPMG comes out to soon with the news, they risk the “Monkey see” effect.

As far as E&Y is concerned, we’re stumped. They have the same fiscal year as PwC and should have a pret-tay good idea how Q1 went. Now that PwC has made the first move, any action by E&Y is going to look reactionary .

So for the E&Y and KPMG crowd – you clearly have some expectations for something but are you hearing anything about mid-year bonuses or will the belly aching continue into the holidays? Discuss below and get in touch with details.