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Tuesday Morning Accounting News Brief: EY and PwC Get a New Scandal; Stop Trying to Make Sexy Accountants Happen | 1.16.24

fluffy black cat in a cafe

Yo. It’s another week. Yay. In case you’re wondering why this is a Tuesday news brief and not a Monday one, it’s because we don’t work on MLK Day. Hope the same is true for you.

Anyway, some news.

Supposedly accounting is the hottest in-demand remote job:

The most sought-after remote job companies are hiring for isn’t in tech, as you might expect. Accountant is the hottest work-from-home job on the market right now.

Accountants claimed the top spot in FlexJobs’ annual ranking of the top remote jobs in the U.S., thanks to increasing demand for these skilled professionals across several industries, including finance, health care and government.

A shortage of accountants in the U.S. — driven by retiring Baby Boomers and a sharp decline in the number of students enrolling in accounting programs — has led companies to offer more remote or hybrid accounting roles as a way to bridge the gap.

“It’s an industry that’s under tremendous pressure to appeal to new generations of talent to modernize and re-envision roles, to improve work-life balance, and remote work is the number one way to assure people that you’re giving them some degree of autonomy and flexibility,” ZipRecruiter chief economist Julia Pollak tells CNBC Make It.

The No. 1 in-demand remote job companies are hiring for—it can pay over $100,000 a year,” CNBC Make It January 14, 2024

Speaking of remote work, fully remote workers were promoted 31% less frequently than their in-person peers last year, according to Live Data Technologies.

In the data company’s analysis of 2 million white-collar workers, 5.6% of employees who were going into the office on at least a hybrid basis received a promotion last year, compared to 3.9% of fully remote individuals, the Wall Street Journal reports. And it’s not just a coincidence:

  • About 90% of 400 CEOs surveyed last year by KPMG said they’d be more likely to give in-person employees raises, promotions, or better assignments.
  • Amazon, for one, is enforcing its strict three-days-in-the-office policy for corporate workers by blocking promotions for anyone who doesn’t comply, according to internal materials reviewed by Insider.

Project Everest head cheerleader Andy Baldwin had some things to say at Davos:

Breaking up EY into separate consulting and auditing companies would have increased growth potential as the company grapples with the need for capital to invest in technology and AI to stay competitive, EY’s global managing partner Andy Baldwin said on Tuesday.

The “Project Everest” plan to spin off EY’s consultancy activities, closely watched by KPMG, PwC and Deloitte, who along with EY make up the “Big Four”, was paused last year due to opposition from the company’s U.S. partners.

Baldwin told Reuters’ Global Markets Forum at the World Economic Forum in Davos that EY expects “double-digit” growth under EY’s new CEO Janet Truncale and her three-year strategic plan from July as the firm invests in technology and AI.

The strategic rationale for a split had not gone away, however, Baldwin said.

“Obviously the separation would have unlocked a lot more market growth potential,” Baldwin said. “I don’t see us revisiting the sale of the consulting business in the short term.”

EY’s Baldwin says rationale for break up remains,” Reuters January 16, 2024

Wake up babe, new scandal just dropped.

Accountants from EY and PwC are braced for questioning by the public inquiry into the Post Office scandal, which is expected to turn its attention to the embattled institution’s external auditors later this year.

The Big Four firms, which audited the Post Office during the period affected by the Horizon IT scandal, are expected to be among those questioned in the sixth phase of the Williams Inquiry this summer.

EY audited the Post Office throughout the roll out of the problematic Horizon technology at the heart of the scandal. The firm started signing off the accounts for Royal Mail in 1986 and continued auditing the Post Office after 2012, when the two bodies separated. It was replaced by PwC in 2018.

Accountants only have to keep record of their audits for six years, meaning that EY may not have any of the relevant paperwork for its work by the time it is called to the inquiry in the summer.

Last week, [Prime Minister] Rishi Sunak announced legislation that would exonerate hundreds of postmasters who were wrongly convicted of fraud, false accounting and theft.

EY and PwC face questions at Post Office inquiry,” The Times January 14, 2024

We might need the backstory on this. BBC explains:

What is the Post Office scandal?

The Post Office had prosecution powers and, between 1999 and 2015, it prosecuted 700 sub-postmasters and sub-postmistresses – an average of one a week – based on information from a computer accounting system called Horizon. Another 283 cases were brought by other bodies including the Crown Prosecution Service.

Some went to prison for false accounting and theft. Many were financially ruined, even though they had repeatedly highlighted problems with the software.

After 20 years, campaigners won a legal battle to have their cases reconsidered. To date only 93 convictions have been overturned. Under government plans, victims will be able to sign a form to say they are innocent, in order to have their convictions overturned and claim compensation.

Looks like that story is worth a deep dive.

The University of Toronto student paper talked about the MOVEit ransomware attack:

U of T’s financial auditor Ernst & Young LLP (EY) contacted impacted students and staff members in November about a security breach that may have compromised sensitive personal information.

Since 2014, EY has worked as the external auditor for U of T, entrusted with examining a number of records for the university, including its enrolment records. To conduct the auditing process, EY obtains information about U of T students and employees, and transfers files using MOVEit. When CL0P intercepted the system, it gained access to sensitive information from the EY database.

An email from EY to affected students and employees sent in November 2023 states that CL0P may have accessed personal data, including impacted community members’ “name, gender, date of birth, information relating to your employment (such as your employee ID and compensation and benefits), and information relating to your education (such as your student ID).”

In a statement to The Varsity, a U of T spokesperson wrote, “Before U of T shared information with EY, precautionary steps were taken to redact any unnecessary data to protect personal information.” While data from U of T was affected, CL0P did not gain access to systems at U of T itself.

Data from U of T students threatened by MOVEit ransomware attack,” The Varsity January 15 2024

Earlier reporting on this ransomware thing from us: EY Regrets Any Inconvenience Cybercriminals Having Your Credit Card Number May Cause You

The Canadian PCAOB has banned a Colorado firm from taking Canadian clients. Here’s the scoop on what happened to Borgers:

According to the CPAB enforcement action, Borgers does not have offices within Canada but was, “at all relevant times, registered with CPAB.” The firm had the distinction, based on data provided to Canadian Accountant by Audit Analytics, of acquiring the highest number of new engagements in Canada in 2022.

Under new transparency rules implemented by CPAB in 2023, Borgers is the second American accounting firm to have its ban publicly disclosed by the audit watchdog. In January 2023, CPAB similarly censured Marcum LLP, a public accounting firm based in New York, when CPAB began to publicly disclose its enforcement actions. As reported by Canadian Accountant, Marcum agreed in September 2023 to pay $1.2 million to the Ontario government and the Chartered Professional Accountants of Ontario.

In addition to the ban, which includes public companies and any “existing private company audit client seeking to become a reporting issuer through initial public offering, reverse takeover,” the firm is prohibited from assigning an unidentified “Partner A” to Canadian engagements, unless the accountant is “properly licensed to provide public accounting services” by one of the profession’s provincial regulators. The firm must also undergo extensive oversight and measures to improve its audit quality.

Canadian audit watchdog CPAB bans American accounting firm BF Borgers,” Canadian Accountant January 12, 2024

Australia’s Accountants Daily wrote a whole bunch of words about “the year the accountant shortage got worse” and said “hurdles to skilled migration and people departing the field without being replaced by new entrants have forced the profession into introspection.” Introspection huh? The solution to accounting’s talent crisis has been offered to firms many, many times.

“I want to make accounting sexy again,” declared Sarah Lawrance, founder of boutique accounting firm Hot Toast, during an interview with Accountants Daily in September.

Sitting on Xero and CPA Australia’s advisory committees, she talked of the “struggle” businesses and member organisations faced in getting people into the industry.

“People have taken their eye off accounting, and focus has gone off into data and finance instead,” she said.

The numbers back up her observations. The ABS forecast that Australia would require 338,362 accountants by 2026 – almost 10,000 extra a year.

A study by recruitment firm People2people found almost half (46 per cent) of accounting teams needed personnel with 6 per cent “significantly short-staffed”.

This dearth was only made worse by reports of those in the profession also wanting out, citing issues like work pressures and inflexible hours.

People2people found that talent retention was the primary challenge for 46 per cent of accounting leaders while cloud accounting platform Dext said over a third of accountants it surveyed were considering a career change in the next five years.

Indeed, the past year saw the industry confront uncomfortable truths about the profession’s declining appeal. Xero Australia manager Will Buckley theorised that stereotypes painting accountants as boring “numbers people” were partly to blame.

The year the accountant shortage got worse,” Accountants Daily January 15, 2024

Stop it. Stop that right now. Stop trying to make accounting sexy and start making it lucrative for young recruits.

We knew it was going to happen sooner or later: Robots are taking your job. Well, maybe not your job specifically. FT talks about generative AI and job cuts:

A quarter of global chief executives expect the deployment of generative artificial intelligence to lead to headcount reductions of at least 5 per cent this year, according to a survey unveiled as world and business leaders gathered in Davos, Switzerland.

Industries led by media and entertainment, banking, insurance and logistics were most likely to predict job losses because of cutting-edge AI tools, according to the poll of top directors conducted by PwC ahead of this week’s World Economic Forum. Engineering and construction firms were least likely to anticipate cuts because of automation, alongside technology companies.

Some 46 per cent of those surveyed said they expect the use of generative AI — systems that can spew out humanlike text, images and code in seconds — to boost profitability in the next 12 months, the survey added. However, 47 per cent said the technology will deliver little or no change.

Generative artificial intelligence will lead to job cuts this year, CEOs say,” Financial Times January 15, 2024

A bunch of Deloitte India partners are retiring early. Seems sus but OK.

Around 35 senior partners will hang up their boots early from Deloitte India as part of a massive organisational revamp, sources directly aware of the matter said. According to the sources who did not want to be named, the transition is part of a ‘golden handshake’ program being offered by Deloitte India to a section of its senior leadership team in India from its audit, consulting, financial advisory, risk advisory, and tax practices, as it looks to replace its leadership with younger professionals.

“As in the past, some partners have expressed their desire for early retirement to pursue their passions and other interests after dedicating several years to Deloitte India. The organisation is grateful and acknowledges their contribution over the years,” a Deloitte India spokesperson told Moneycontrol.

Exclusive: 35 senior partners to take early retirement from Deloitte India,” Moneycontrol January 15, 2024

Hey, that was more news than I expected on the Tuesday after a federal holiday. Should be some good stuff coming out of Davos this week, we’ve got the mailman drama in the UK to write up, and we still need to talk about that big ERC mill that went bust. Always nice when the news in our quiet little sector is buzzy enough to justify our continued existence.

You all have a great week. Gimme a shout if you need anything, have something to say about a story linked here or written up elsewhere, or just want to complain.