Today, in how your firm spent your bonus news, we present you with Zitor, an alien who somehow ended up in Uncle Ernie’s shop. Zitor then ended up being assigned a counselee for year-end reviews which is fairly realistic considering his lack of expertise and work experience.
Zitor was apparently designed and plugged into the Ernstiverse to demonstrate how to be completely unprepared for a the year-end review process as a counselor.
What’s odd is that most counselors seem to be using logic from another planet so it’s not outside the realm of possibility that this was based on actual methods used.
Regardless of the genesis of this idea, it probably goes without saying that this had to be complete and utter failure for those of you with maturity levels above the age of 13. Nevermind that no one can decipher how accounting firms determine who the best performers are anyway.
Included with this frivolous attempt to relate to the troops, if you were so inclined, you could submit ideas for the line below from Zitor to end up in the next video for this “Coach from Another Planet”. While that sounds incredibly lame and worthy of our ridicule, we’ve decided to let you take a stab at it instead.
The line has been modified slightly to allow your much more creative suggestions to be submitted in the comments:
“At E&Y, we do not give feedback. We give ___________.”
The PCAOB has issued its annual report on Ernst & Young having given the firm the third degree at its national office and 30 of its 80 U.S. offices. It inspected 58 audits performed by the firm but exactly who is, of course, a big secret (unless you tell us).
There were five “Issuers” that were listed in the report and some form of the word “fail” was used 25 times (that includes the footnotes).
[Issuer A] The Firm failed to adequately test the issuer’s loan loss reserves related to certain loans held for investment. Specifically, the Firm failed to reconcile certain values used in the issuer’s models with industry data, failed to test the recovery rates used in the issuer failed to test the qualitative components of the reserves.
Damn those loan loss reserves!
[Issuer C] The Firm failed to perform sufficient procedures to test the issuer’s allowance for loan losses (“ALL”). The issuer determined the general portion of its ALL estimate, which represented a significant portion of the ALL, using certain factors such as loan grades. Data for this calculation were obtained from information technology systems that reside at a third-party service organization. The Firm relied on these systems, but it failed to test the information-technology general controls (“ITGCs”) over certain of these systems, and it failed to test certain of the application controls over these systems. Further, the Firm’s testing of the controls over the assignment and monitoring of loan grades was insufficient, as the Firm failed to assess the competence of the individuals performing the control on which it relied.
This loan thing appears to be a trend…
[Issuer D] The Firm failed to sufficiently test the costing of work-in-process and finished goods inventory. Specifically, the Firm’s tests of controls over the costing of such inventory were limited to verifying that management reviewed and approved the cost allocation factors, without evaluating the review process that provided the basis for management’s approval.
Hopefully that doesn’t blow back on an A1.
Anyway, you get the picture. The whole report is below for your reading pleasure. E&Y’s got its $0.02 in, however it was short and was mostly concerned about the firm’s right to keep its response to Part II (the non-public part)…non-public:
We are enclosing our response letter to the Public Company Accounting Oversight Board regarding Part I of the draft Report on 2009 Inspection of Ernst & Young LLP (the “Report”). We also are enclosing our initial response to Part II of the draft Report.
We note that Section 104(g)(2) of the Sarbanes-Oxley Act requires that “no portions of the inspection report that deal with criticisms of or potential defects in the quality control systems of the firm under inspection shall be made public if those criticisms or defects are addressed by the firm, to the satisfaction of the Board, not later than 12 months after the date of the inspection report.” Based on this statutory provision, we understand that our comments on Part ii will be kept non-public as long as Part ii of the Report itself is non-public.
In addition, we are requesting confidential treatment of this transmittal letter.
So this doesn’t mean much other than E&Y would prefer that no one know how it managed to tell the PCAOB to fuck right off as nicely as it could.
Earlier this week, we were tipped off about a hiring freeze of Client Service Support (“CSS”) professionals at KPMG. Our tipster also indicated that a “major reorg” was happening but did not elaborate. For those not hip to the House of Klynveld vernacular, this is your HR, Marketing, Ops, IT, Admins, et al. Regardless of their overhead status, they make your lives infinitely better. But for now, it sounds like the doors to any newbies is closed.
This rumor was confirmed by another source who simply “heard there was [a freeze in place]” but had no details. If you’re in the know, please email us. Emails to KPMG’s communications team were not immediately returned, most likely because they were immediately deleted (that is speculation on my part).
SO! Since we don’t have much to go on, we’ll take this opportunity to present some theories:
1. The response to the Early Career Investment Bonus program has been better than anticipated and there is concern that there won’t be enough money to pay these all-of-a-sudden loyal employees. Accordingly, “the help” won’t be getting any additional resources.
2. Settlement negotiations have begun in the sex discrimination lawsuit and things are not looking good.
3. John Veihmeyer is just toying with everyone because “This is Notre Dame’s year,” and plans to lift the freeze after the Irish win their first game.
Today, in how your firm spent your bonus news, we present you with Zitor, an alien who somehow ended up in Uncle Ernie’s shop. Zitor then ended up being assigned a counselee for year-end reviews which is fairly realistic considering his lack of expertise and work experience.