Going Concern
Footnotes: E&Y Says Alleged Spy Was 'Welcomed' by Express Scripts Execs; The Carolina Panthers' Financials; The Future of UK GAAP | 03.07.13
Ernst & Young denies stealing Express Scripts data [A]ccording to Ernst & Young, Gravlin's presence at the pharmacy benefit manager's headquarters was "welcomed" by its executives. Gravlin met with Express Scripts (ESI) executives many times in 2012, the accounting firm states. He attended multiple meetings with Express Scripts executives after March 2012 — the date that Express Scripts alleges Gravlin began "sneaking into" its facilities. In its court papers, Ernst & Young specifies the dates, subject matter, and participants of these scheduled meetings that Gravlin attended. In one of these meetings, Gravlin presented a proposal for additional consulting work. "Contrary to what ESI is saying in this case, I never used ESI documents or information for any improper purpose," Gravlin said in a sworn affidavit. "I never used ESI documents or information for personal financial purposes. I did not disclose any ESI documents or their content to any third party." [STLPD]
Deadspin has obtained the audited financial statements for the Carolina Panthers. [Deadspin]
Going Concern Opinions are Rare after Top Execs Unload Stock [AT]
Tax on email suggested as way to help fund U.S. Postal Service [DMWT]
The comprehensive, fully caffeinated guide to coffee at work [Quartz]
"There were significant and substantial weaknesses in the budgeting staff, in training of the budget staff, in their accounting procedures, and their ability to do budgeting forecasting," said H.D. Palmer, the spokesman for the Department of Financing. The audit found major differences between what the CPUC was reporting to the Department of Finance, and what the agency is reporting to the State Controller's Office. "We looked at all of the 14 funds the PUC administers -- and seven of them had differences of more than a million dollars," Palmer said. The differences totaled more than $400 million. [KCRA] Grant Thornton would everyone to know that the future of UK GAAP is here. [GT] Lawyers for Deloitte Seek to Buy Time in Subpoena Spat with SEC [BLT]Hedge Funds and Deferred Management Fees: State Taxes [Tax Analysts]
Police, IRS raid tax-preparation office "It was probably the most obnoxious example of illegal signs we've had in quite a long time," Orlando Code Enforcement Director Mike Rhodes said. [OS]
Moonlight Bunny Ranch Offers 'Stimulus Program,' Where Tax Refund Goes To Sex [HP]
No, We Can't Help You Pass the Ethics Exam
I'm not sure what's worse, the fact that this was emailed to us at all or that it was emailed from the sender's work email. But here's the problem as it stands:
I took this exam more than 7 times. My highest score was an 86% I need a 90% to pass. Can you please help me with several questions that I know I got incorrectly? Please let me know if so I will forward to you
As badly as I wanted to troll this guy and say "sure, send it over! And let me know while you're at it what state you're in just so I can better serve you," I really didn't see a need to troll him any harder than he's already trolled himself.
The possibility that he is actually trolling us is also still on the table but given past experience with less-than-ethical CPA exam candidates looking for help on the ethics exam, it isn't too far out there to believe this may be legit.
So, let me help you, bro. Here's a sample question:
When you can't seem to pass the open book ethics exam, do you
a) give up
b) email a hack accounting website and ask them to answer the questions you can't figure out
c) post on Craigslist offering to pay someone to take the ethics exam for you
d) none of the above
If you chose d), congratulations, you're not completely doomed! But no, we are so not going to help you.
Sorry for your luck, bro.
PwC Loves CAKE and Other Interesting Things from the Expanded PCAOB Inspection Reports
I don't know if anyone else has noticed this, but reading about audit procedures is incredibly dull. It's nearly as dull as actually performing some of these procedures which probably explains why the PCAOB was forced to release Part II for the 2008 and 2009 inspection reports.
Luckily, reading about the failure of the most prestigious auditing firm on Earth to perform these procedures is slightly more interesting and we've dug up some of the more notable things from the two -- TWO! I still can't believe it! -- expanded reports that the PCAOB posted just a short time ago.
Before we get to the gory details, it's worth mentioning that the firm requested to issue a statement in conjunction with the PCAOB's announcement and the ever-so-gracious Board granted the request. Here's the portion that echos what Bob Moritz wrote in his memo/email that was leaked to Reuters:
The Release is based on the Board's determination that we did not address the matters contained in the Part II comments to the Board’s satisfaction during the 12 month period following issuance of the reports. We believe that our actions in response to the Part II comments were significant, but we acknowledge the Board’s determination with a view toward continued cooperation with the Board and in furtherance of our commitment to audit quality.
The Part II comments relate to some of the most complex, judgmental and evolving areas of auditing. Our actions relating to those areas, during the 12 months following issuance of the comments and thereafter, have included providing our audit professionals with enhanced audit tools, training and additional technical guidance to promote more consistent audit execution. We believe that these efforts have been important positive contributors to audit quality at our firm. We are proud of our focus on continuous improvement and of the dedication and high quality audit work performed by our partners and other professionals. In other words, "This stuff is harder than it looks, so, sorry, we're not sorry for giving it the ol' college try." Now that we've got that out of the way, shall we get to the fun stuff? Yes? Grand. We'll start with the 2008 report and it gets personal right away, noting that in certain cases, supervision in some key areas was lacking:The deficiencies identified in areas with a high degree of judgment and potential for management bias, and in areas involving the application of complex accounting literature (such as * * * * and fair value), similarly suggest that the audit personnel * * * * were not adequately supervised. In addition, the deficiencies suggest the possibility that senior members of the engagement team were not devoting sufficient attention to developing an appropriate audit strategy for these areas and that quality review partners were not devoting sufficient attention to reviewing the audit strategy for these areas.
So, not only were the supervisors not supervising, it sounds like the supervisors of the supervisors weren't supervising. That's a whole lotta, um, not supervising going on. In theory, that might sound fun -- I imagine auditors performing walkthroughs without pants -- but supervison is a pretty important part of auditing and the Board wanted to point that out. Moving on -- this particular passage probably won't surprise anyone:[D]eficiencies identified by the inspection team suggest that engagement teams may be placing too much reliance on management's responses to the teams' inquiries and not sufficiently challenging or evaluating management's assumptions, and that they may not be applying an appropriate level of professional skepticism in subjective areas susceptible to management bias.
Honestly, anyone who pays attention to the audit world knew that some auditors take one look at a client's response to their questions and say, "Good enough for me," and go on their merry way. Now it's in the written public findings of the regulator. It doesn't probably remove the feeling of dread from the stomachs of those who wish it wasn't true, but there it is. Speaking of problems that we're all aware of:The inspection team observed that the engagement partners for three of the six audits discussed in Part I.A had a significant number of issuer audit clients with year ends at or around December 31. For one of these three engagements, the hours reported by the engagement partner on the audit represented approximately 2.1 percent of the lead office audit hours. This was approximately 45 percent less than the average percentage of lead office engagement hours reported by the engagement partners on the other 49 issuer audits selected for inspection. The engagement partner for another audit described in Part I.A was responsible for four issuer audit clients with a calendar year end, an average market capitalization of approximately $2.7 billion, and average audit fees of approximately $1.1 million. These facts and the significance of the deficiencies in these engagements suggest that the Firm may not sufficiently monitor partners' workloads to ensure that they do not negatively affect partners' ability to effectively participate in the planning and execution of their audits and to appropriately supervise and review their audits.
Okay, so partners work a lot. Not news. But I guess the question some people might ask is, "Are there not enough capable partners out there to lighten the load?" How about this poor bastard with four issuer clients all with December 31 year-ends? Is (s)he just hogging all the wealth for him/herself or is there really no one else that could take one of these clients? Jesus, go find someone else at KPMG to help out if that's what has to happen. Finally, the most amusing thing from '08 gives us a little taste of PwC's creativity:In certain instances, in interactions with the inspection team or in responses to comment forms, engagement teams have asserted that cumulative audit knowledge and experience ("CAKE") represented a meaningful component of their audit assurance. The aforementioned concerns may indicate that engagement teams rely on CAKE to a greater degree than is appropriate. Although CAKE can be useful in planning and scoping the audit, using CAKE as a source of substantive assurance to address issues that arise during the execution of audit procedures may cause engagement teams to misjudge the level of audit comfort actually obtained.
Judging by this, everyone wants to have CAKE and audit too and the PCAOB is NOT comfortable with that.
Okay, that was hard and it wasn't even everything in 2008 but we have to keep going. 2009 is next.
The 2009 report is shorter which could be explained by one of two things -- 1) PwC was trying harder or 2) the PCAOB inspectors were exhausted. Just a couple of things, starting with: In four audits, the inspection team identified deficiencies in the testing of these entity-level controls. Specifically, the Firm failed to 1) test that the entity-level control would operate at a level of precision sufficient to prevent or detect a material misstatement in the financial statements, 2) test the completeness and accuracy of the data used in the performance of the control, or 3) perform procedures, beyond confirming the occurrence of a meeting or observing evidence that the issuer's management had reviewed meeting documents, to test the operation of the control. For me, #3 is the doozy here. Can't you just picture this? A young auditor approaches an assistant controller or some other person in the accounting department and asks about meetings between all the principals in the accounting/finance group. The assistant controller provides a schedule of all the meetings that occured throughout the year. The auditor looks it over and asks, "So all these meetings happened?" The assistant controller says, "Yep. They always provide a nice breakfast, so I'm sure not to miss it," and the auditor goes on his/her way. That's not good. Why? Well, relying on these procedures reduces the substantive testing (i.e. the audit procedures no one wants to do) so you better be damn sure that the entity-level stuff is top notch. That didn't happen in this case -- nay, four cases -- and that made the inspectors feeling really icky. The only other notable thing from '09 fell back into the "relying on someone else just cuz" camp: [I]n one audit, the Firm used the work of the issuer's internal audit group as a source of assurance, including for substantive audit evidence, but there was no evidence in the audit documentation, and no persuasive other evidence, that the Firm had assessed the competence and objectivity of this group or the quality and effectiveness of the internal auditors' work. In addition, in reviewing this audit, the inspection team identified deficiencies in the internal auditors' testing, which further suggests that the Firm failed to sufficiently review and evaluate the internal auditors' testing. Relying on internal auditors is great! Except when it isn't. Again, the PCAOB isn't going to be satisfied with your scan of a completed internal audit checklist and then a check mark on your own checklist. And God help you when the internal auditors turn out to be slacking on the job too. Everyone loses in that case. Whew! That's about all the fun I can handle for one day. If I overlooked anything, please share your thoughts on these or the other findings in the expanded reports. At this point, PwC probably won't mind a little more feedback, even something as simple as: "Lay off the CAKE."PCAOB Not Satisfied with PwC's Efforts to Get Better at Auditing
Deba Aubin at Reuters has a great scoop this morning, reporting that the PCAOB "will fault PwC for not promptly addressing quality control problems found during inspections of some of its 2007 and 2008 audits," according to an internal PwC memo dated today and signed by Bob Moritz. [cue]
And it doesn't sound like BoMo is crazy about these findings:
In the memo, PwC defended its efforts to improve quality controls and said it was disappointed with the watchdog's report. It said the PCAOB's criticisms "relate to some of the most complex, broad, judgmental and evolving areas of auditing."
This would be the second time such a report was issued by the PCAOB. The Board released Part II of Deloitte's 2008 inspection report back in 2011.
I guess we shouldn't be surprised. Last November, PwC's 2012 inspection report showed that the firm's results had actually gotten worse than the year prior, with an error rate of 41% of the audits inspected. That doesn't exactly illustrate progress in the area of quality control. At the time, we noted that the firm's response to that report was a little more extensive than we're used to seeing, with BoMo and audit leader Tim Ryan telling the PCAOB to up its game a little:
Meeting the challenges that must be addressed to consistently perform high-quality audits is our top priority. We look forward to continuing our dialogue with the PCAOB in support of our priority commitment to audit quality. In this regard, we hope that some of the Board's important standard-setting activities — such as proposed standards with regard to auditing fair value measurements, auditing management's estimates, and strengthening firms' systems of quality control — can be accelerated. In our view, the consistency of audit execution, not only within a single firm but across the profession, can be greatly enhanced with standards that reflect the increasingly complex accounting and auditing environment in which we operate.
We can't possibly know when the PCAOB made up its mind to issue Part II for PwC's audits, which is a shame because it would be great to know if Jim Doty & Co. were sitting around, reading this response, and when they got to that last sentence they said to each other, "They're not exactly tearing it up either, are they?. Should we issue Part II? Let's issue Part II."
Of course no one is talking, but it's interesting that the leak came from PwC. Not because you'd expect someone at the Board to be the source -- becuase they are notoriously tight-lipped with its inspection process -- but why would someone with access to this memo want it out now? My guess is the firm wants to give itself the chance to control the initial narrative because the PCAOB's story will certainly not fit with what PwC wants to say. By getting in front of this, the firm steals the Board's thunder. You clever devil, BoMo!
Still, this doesn't do much for PwC's reputation as an auditor, so even if they are in front, they still have to endure a very public rebuke.
Anyway, the folks at Deloitte are probably relieved to have some company.
U.S. audit watchdog to criticize PwC - PwC internal memo [Reuters]
ANR: HSBC Tells KPMG That It Wants to See Other Auditors; Single People Need Work-Life Balance Too; Carried Interest Is NBD | 03.07.13
KPMG at risk of losing vital HSBC audit [FT]
KPMG could lose the biggest audit contract in corporate Britain after HSBC decided to consider bringing in a fresh pair of eyes to vet its accounts. The bank said it would put its audit contract out to tender for the first time in more than two decades in the most striking sign yet that regulatory pressure is starting to break down the ties that bind many big companies to their auditor. HSBC paid KPMG $81m in 2012. The majority of this was for audit and audit-related services, the rest being tax and other consultancy work. It has held the audit contract since 1991.
“We believe the model leads to a more timely recognition of credit losses,” Hans Hoogervorst, chairman of the London- based IASB, said in the statement. “At the same time, it avoids excessive front-loading of losses, which we think would not properly reflect economic reality.” Apples and oranges [Economist] Irritatingly, the new standards are not consistent. Under FASB’s approach, firms would have to lop an amount off an asset’s carrying value on the day it is booked, to discount for the fact that some loans always go bad over their lifetime. IASB would require a smaller set-aside, discounted by the likelihood that the loans in question will go bad only in the next twelve months. If conditions suggest that the credit quality of the loans has actually deteriorated, only then would IASB require that the entire expected loss be booked. (At this point, the accounting would be like FASB’s.) This represents a failure in the two boards’ biggest ambition: to converge their standards to create a single set for most of the world. The boards have been working on this project for some years. They have achieved quite a lot of progress; global financial statements are becoming more comparable in many ways. But in perhaps the most prominent issue facing them, they now agree to disagree.
Single, childless and want work-life balance? How taboo [WaPo]
Talk about nerve.
The Ten Worst States for Taxes (Nine Are Blue States) [TaxProf]
North Carolina surprises with a very respectable 7th place.
Texas Is the New California [Forbes]
Does this mean Phil Mickelson is going to hold another press conference?
Ex-Kirkland Partner Freedman Pleads Guilty to Tax Fraud [BloombergLaw]
Former Kirkland & Ellis LP senior partner Theodore Freedman pleaded guilty to fraud in connection with the filing of false tax forms. Freedman changed his plea yesterday from not guilty to guilty of four counts of tax fraud. U.S. District Judge Deborah Batts in Manhattan accepted the plea and set sentencing for Sept. 17. Freedman’s lawyers reached a plea agreement with U.S. attorneys. Indicted in July 2011, Freedman misrepresented his income as a partner at the law firm by about $2 million, the U.S. said. He also claimed more than $500,000 in expenses for a sole proprietorship that didn’t exist, the government said. The Carried Interest Debate: Funding Government for 3.1 Hours [TF]Hey, that's something! Forget the Old College Try, Ring the Concierge [WSJ]
This is so stupid: "Twenty-year-old twins Leon and Raquel Papu, sophomores at Babson and Tufts University, respectively, have called upon their BCCG concierge to intervene in a landlord dispute, wait for a plumber and line up Boston Celtics tickets. Mr. Papu, who was born in Colombia but grew up in Miami, also contacted the company when he was pulled over for speeding on the way home from a Vermont ski trip last winter. The concierge reached out to a local lawyer, who went to the ticket clinic and paid the fee."
Footnotes: The One Where Whistleblowers Get Kicked In the Teeth | 03.06.13
Accounting Lessons From Corning [Seeking Alpha]
World Accounting Leaders Identify Priorities for 2013 [Accounting Today]
Can a New Accounting Method Improve the Prospects of Gold Mining Companies? [Minyanville]
McGinn, Smith CFO gets probation [Times Union]
IRS uses the sequester to give whistleblowers another kick in the teeth [Forbes]
Taxes a Cure-All for High Frequency Trading? [FOX Business]
Judge Re-Starts SEC Efforts to Subpoena Deloitte [WSJ China]
PwC Names New Managing Director to Risk Assurance Practice [Compliance Week]
This Guy Who Emerged From a Coma to Pass the CPA Exam AND Run a Half-Marathon Is Making Everyone Else Look Lazy
You may have never heard of Bryan Steinhauer but this 26-year-old's story is about to make you feel guilty for every single stupid excuse you ever gave for not being able to pass the CPA exam.
You see, Bryan was beaten into a coma back in 2008 when he got into a barroom brawl with former Serbian college basketball player Miladin Kovacevic. Kovacevic fled the country and blah blah blah, eventually he was brought to justice, the Serbian government paid Steinhauer's family $900,000 for cockblocking a trial and Kovacevic was sentenced to 25 months in prison. He was released late last year.
Apparently, all this started because Steinhauer groped the girlfriend of one of Kovacevic's buddies at the bar. At the time, he was a stout 130 pounds soaking wet, with Kovacevic weighing in at a whopping 260 lbs. One witness to the attack said Steinhauer “was out after two hits but they kept hitting and kicking him.”
“Out of nowhere, I wake up in a hospital. I can’t move, can’t talk. I’m like, ‘why,’” Steinhauer told WCBS 880.
He spent 3 months in a coma and had to learn how to walk and talk all over again. Undeterred, he went on to complete college AND get hopping on passing the CPA exam just two years later:
Steinhauer, 24, is about to start work at the accounting firm KPMG, capping a comeback that hospital officials call "mind-boggling."
"I'm ready to move on to the next stage of my life, doing what I was meant to do," a beaming Steinhauer told the Daily News. "It's the biggest thing for me - to reclaim my life."
Steinhauer has reason to be confident. Last week, he found out he passed the first part of the notoriously difficult CPA exam - no small feat for someone who suffered brain injuries so severe his memory was erased.
"I studied for two months straight, every single day," said Steinhauer, who majored in accounting at Binghamton. "I had no remaining knowledge from college. I had to learn everything from scratch."
I'm sure there is some easy joke about brain injuries and KPMG but this is a feel-good story and we are so not going to go there.
SO, as if all that weren't enough (he did end up passing all four parts), Steinhauer is now working on running a half-marathon five years after he was nearly beaten to death and rose from the ashes like a glorious number-crunching phoenix.
“The first step in my recovery was to get running,” Steinhauer said, adding that his next goal will be to run a full marathon. “Never give up on yourself, just keep on trying.”
You hear that, you slack asses? JUST KEEP ON TRYING.
Busy Season Problems: Approaching the Team Member Whose Hygiene Does Not Meet Expectations
Because 2013 is the year of the kuddle, it may be necessary for you to make some adjustments in your behavior at the office. For starters, it's important to remember that while kuddling may reduce stress, lower blood pressure, and improve relationships, it may not be welcomed by all of your co-workers. This could be for a number of reasons that include but are not exclusive to:
1) Overkuddling -- You can get too much of a good thing.
2) Kreepy Kuddling -- You're a little too eager to kuddle.
3) Smelly Kuddling -- There could be a personal hygiene issue.
Since it's busy season, it's understandable how all three of these situations could occur but #3 is especially dangerous because things like flossing, laundry, showering and the like can fall by the wayside.
Historically, accounting firms have not been terribly creative when it comes to training its employees on how to handle these situations. And, truth be told, we don't really have any great suggestions either but by a stroke of luck, our sister-from-another-mister website Training Zone has a video that will, at the very least, show you how NOT handle scenario #3:
It may also be worth mentioning that it is unlikely your suggestion for a team shower will be received any better. Sometimes it's just helpful to know what doesn't work.
Accountant Hopes Bankers Will Have the Integrity of Accountants One Day
Sir Michael Rake is currently the Deputy Chairman of Barclays. and, from 2002 to 2007, he was the Chairman of KPMG International. Last night, Sir Mike did quite the impressive thing -- that is, he got all Dad on accountants and bankers by telling the former how proud he was of them while telling the latter what a disappointment they are.
Sir Mike Rake, former KPMG International chairman and UK senior partner, was awarded the ICAEW's Outstanding Achievement Award at its annual dinner last night in Moorgate, London. In his acceptance speech, Sir Mike said that accountants learned the values of "integrity and commitment to client". The City now needs to look at basic ethics. "At some point [the City] stopped being a profession, for a minority," said Sir Mike. You'll never get an outstanding achievement award until you start acting more like someone at KPMG. I hope you can see that. Bankers must raise standards to that of accountants, says Rake [Accountancy Age]
Most Americans Disapprove of Cheating On Taxes; Some Want to Cheat Like Tiger Woods
A recent poll, commissioned by the IRS, found that the overwhelming majority of taxpayers think that it's never okay to cheat on their taxes. It's an interesting data point, but what does it really tell us?
More than anything, it tells us that the IRS is an insecure little bitch. Like Stacey, that girl in ninth grade who thought she was your soul mate and paid Kendra five dollars to sit at your table at lunch and say, "So what do you guys think of Stacey? She's kinda cool right?" And you said, "I think Stacey's a psycho whore" because she was kinda being a psycho whore. Turns out Stacey was psycho, and Kendra was a whore1. This poll is exactly like the Stacey/Kendra situation but with less real world applicability. The IRS hired a research company that interviewed a random sampling of 1500 taxpayers and asked them extremely personal questions about reporting and paying taxes. When asked how much, if any, is an acceptable amount to cheat on your income taxes, 87 percent of respondents said, "not at all." Only 11 percent said, "a little here and there" or "as much as possible."2 Those were the only three choices given: not at all, a little here and there, and as much as possible. That's a pretty gigantic difference between the last two. Using a similar convention, I've developed a Going Concern micro-poll for you to answer in the comments: What do you think about Belgians? A. They're great! B. They're pretty good. C. Kill all those Flemish cock suckers. If you read the report carefully, you'll find that a full 4 percent of respondents said it's acceptable to cheat as much as possible on your income taxes. Most experts agree that 2 percent of the general population are sociopaths, so the other 2 percent are just assholes. A more robust picture can be seen, however, when we drill down into the data. As we all know from Mitt Romney's leaked speech, 47 percent of Americans don't pay any taxes at all. Unfortunately, he was way off. It's only 46.4 percent of Americans who pay no federal income taxes. I would love it if all of the "as much as possible" cheaters come from this group. It's always awesome when potential malfeasance gets trumped by actual dumbassedness. "I cheated so much, I reduced my tax burden from zero all the way down to zero! Shoot, I hope I get audited! That way I can find out if I qualify for the EITC3!"4 Unfortunately, I don't believe that assumption is tenable. For the sake of argument, let's assume that the 4 percent of "as much as possible cheaters" are evenly distributed. The tax gap in 2006 (the most recent year the tax gap was calculated) was $450 million. That year 138,893,908 individual tax returns were filed. Assuming only 53.6 percent of them actually owed federal income taxes, then only 74,447,134 taxpayers could have contributed to the tax gap. And if 4 percent of those cheated as much as possible, then were only looking at 2,977,885 uber-cheaters. Finally, just for fun, let's say the entire $450 million tax gap came exclusively from the uber-cheaters (not corporations, estates, trusts, "a little here and there" cheaters, or non-cheaters). These balls-out, screw-you, 16th-amendment-hating tax cheats were able to cheat their tax bill down by a whopping $150 each. In other words, these guys suck balls at cheating on their taxes. One trip to the Salvation Army with a sack of free t-shirts that I'll never wear5, and I can cheat you down by $187.50. But let's also put this statistic in context. While 87 percent of Americans say it's never okay to cheat on their taxes, only 76.4 percent of Americans say it's never okay to cheat on their spouses. As a whole, Americans would rather screw their secretaries than screw their country. Which makes me proud in an ashamed kind of way. 1 A cheap whore. She only got five bucks. 2 Due to furloughs, revenue agents will not have capacity to follow up with the missing two percent of respondents. 3 But really, not even the IRS understands the EITC. 4 Please re-read using a redneck accent in your brain voice. 5 Thanks, Blackberry 10.
Accounting News Roundup: ObamaCare Taxes Are Sequester-proof, Phantom Factories, and Numerology on the 1040 | 03.06.13
Sequester won’t interrupt collection of taxes from 'ObamaCare' [The Hill]
The Affordable Care Act (ACA), enacted in 2010 and derided by Republicans as “ObamaCare,” contains the broadest set of tax changes enacted in some two decades — more than 40 alterations in all, including penalties on people who choose not to purchase insurance. But while IRS and Treasury officials have warned of reduced services as employees are furloughed under the sequester, neither agency has expressed any concern that the automatic spending cuts would delay the rollout of the healthcare overhaul.
India Says Cadbury Used Phantom Factory to Avoid Taxes [WSJ]
India has accused Cadbury PLC of dodging about $46 million in taxes by pretending to produce candy at a factory that didn't exist. A 103-page report by the country's tax authorities, which was reviewed by The Wall Street Journal, accuses Cadbury's Indian unit of manipulating invoices and other documents to get a tax exemption available to companies that began production in new plants in the northern Indian state of Himachal Pradesh by March 31, 2010. The Directorate General of Central Excise Intelligence, which conducted the investigation, concluded that the Mondelez International Inc. unit's plant couldn't have existed by the deadline because the company hadn't received the necessary approvals from government agencies. Company statements indicate that Cadbury likely generated at least $700 million in sales from India last year.
New challenge to VIEs [CAB]
This seems appropriate: "I have learned from some investors that there has been a major challenge against the VIE structure of a U.S. listed Chinese company. The challenge relates to whether the VIE can be consolidated into the financial statements. The SEC has been aggressively examining VIE arrangements, but I have been unable to learn whether this challenge is a result of an SEC investigation, or who the company or auditor are."
More Trouble for the Big Four in China: Pushing Prudent Analysis or Propaganda? [CPE via Paul Gillis]
The charges against the Big Four all boil down to allegations they were either negligent in fulfilling their statutory duties, or in cahoots with bad guys scheming to defraud US investors. The implication is that their willy-nilly pursuit of fees led the Big Four to cut corners, surrender objectivity, and allow their judgment to become corrupted. Similar doubts can be raised about the quality, credibility and soundness of the judgments the accountants provide in assessing China’s private equity industry. Even as the PE market began to slide into serious trouble last year, the accountants kept talking up the industry. In particular, it’s worth reading the two big and well-publicized reports on China private equity produced by Ernst & Young and PWC. Both can be downloaded by clicking here. E&Y Report. PWC Report. Both of these documents were published in late December 2012. All IPO activity for Chinese companies had come to an abrupt halt months earlier, and along with this, China’s PE firms basically went into hibernation, closing off almost all new investment in China. The situation has, if anything, worsened so far in 2013. And yet, to read these reports, you’d probably conclude everything was overall pretty rosy.
IRS doesn’t buy this numerology stuff [Tax Update]
Once in a while you prepare a return that happens to foot to a round number somewhere. It looks funny, but it will happen occasionally just by chance. But when they are all round, apparently the tax people might notice.
Men's Wearhouse Names Jon W. Kimmins as Chief Financial Officer [MW]
He likes the way this looks.
PwC Appoints Rick Moyer as Managing Partner of the Jacksonville Office [PwC]
No previous KPMG experience was necessary.
Forget raising tax money to pay for roads. Washington State lawmaker says bicycles are bad for the environment [DMWT]
Ladies and Gentlemen, Ed Orcutt: "Riding nonmotorized two-wheelers causes cyclists to have 'an increased heart rate and respiration,' according to Orcutt. And because of that exertion, 'You would be giving off more CO2 if you are riding a bike than driving in a car.' "
How your bad diet may weigh on your job review [MW]
Your company already knows whether you’ve been taking your meds, getting your teeth cleaned and going for regular medical checkups. Now some employers or their insurance companies are tracking what staffers eat, where they shop and how much weight they’re putting on — and taking action to keep them in line.
Footnotes: Big 4 Fit for a Kingdom, EITI, and PIs | 03.05.13
Even A Big Four Audit Can't Nail Down Kingdom Holdings Numbers [Forbes]
Mark Cuban May Face S.E.C. Insider Trading Trial [DealBook]
Will EITI Kill Transfer Pricing? [Robert Goulder]
Why You Should Revisit Your Five Year Plan [Lifehacker]
Pepperdine is offering an MS degree in accounting now. [Pepperdine]
Private-investigator licensing emerges as potential threat to CPAs [JofA]
Pizza Delivery Guy Gets Tipped $10 on a $1,500 Order: Fair or Unfair? [Gawker]
Apparently, Busy Season Instagrams are a Thing Now
Who knew? mnbinkley might be the Kim Kardashian of busy season if she keeps this up.
"Poor Nick is so stressed he popped his stress ball."
"So.Much.Caffeine. So.Little.Energy."
"'Ok seriously? All of your leftover dinners are disgusting.' -the client"
While recording your exhausted coworkers grabbing a quick nap in the restroom might be crossing the line, we see no harm in throwing filters on photos of donuts, artistically-placed Snickers wrappers, watered-down Starbucks and any other busy season coping mechanisms. Legal ones, anyway.
Hang in there and keep the check-ins coming so we know you are all still alive!
PCAOB Member Jay Hanson Repeats His Belief That Auditor Rotation Is Not Gonna Happen
The Brits can do whatever they want; Mr. Hanson has a story and he's sticking to it:
Having reviewed the comment letters and feedback from the round table panelists and others, it is clear to me that there is little support for mandatory audit firm rotation. As I noted in my statement when we issued the concept release, our inspection findings over the years have yielded a substantial amount of data. To date, I have not seen an analysis of this data that establishes a causal link between an audit failure and the audit firm tenure. I do not see how the Board could move forward on mandatory rotation without that causal link. I also believe mandatory rotation would be extraordinarily difficult to justify through an economic analysis of its costs and benefits.
[PCAOB]
PwC Poaches a KPMG Partner* and Issues a Press Release, Part IX
*By partner, in fact, it's technically a "national leader in Conflict Minerals Center of Excellence" which was a Director role.
At least from what I can tell on Greg Szczesny's LinkedIn profile. Anyway, Mr. Szczesny (I'm going with suh-seez-NEE) will be a Managing Director in PwC's Risk Assurance practice focusing on...yes, conflict minerals services. And it sounds like he was quite the rock star at the House of Klynveld:
Based in New York, Szczesny joins PwC after seven years with KPMG where he most recently served as a national leader in that firm's Conflict Minerals Center of Excellence. His expertise is widely recognized having been one of KPMG's national leaders in the development, validation and roll-out of the Dodd-Frank Act – Section 1502 (conflict minerals) compliance methodology and client engagement materials. His prior project experience beyond conflict minerals includes leading a multi-year audit for a global diversified industrial firm, conducting internal audits and recommending process improvements across global manufacturing facilities.
Right! Whatever that is1. Congrats, PwC; you've got one of your very own now.
[PwC]
More GC posts on the KPMG/PwC rivalry [GC]
1Actually, if you're curious you can read some background here. Szczesny is practically a spy.
A Few Hip-Hop Artists Are Claiming That They Can Deduct 'Making-it-rain' Expenses for Tax Purposes
As you might expect, TMZ has the scoop and it quotes a number of artists who are currently considering tips for strippers as a legit deduction and therefore a serious tax strategy. And who doesn't love creative tax planning? But how might they rationalize this idea?
Well, Bizzy Bone considers these young ladies to be like his family:
Bizzy Bone tells TMZ, "I'm giving charity to females who need their light bills paid. So, of course, that's a write-off. You write off your kids, don't you?" Quick, someone please get that man a CPA before he getshimself in trouble. Jim Jones and Daz Dilinger are investigating their own making-it-rain strategies and while Lil' Flip claims he's already doing this, The Game seems to be the only person quoted who's saying something that could, at least theoretically, put this idea in the ballpark: The Game tells TMZ ... making it rain "is good for business and promotion that comes with the lifestyle of a rapper. They bump our music in a strip club, so me giving the girls a little bit of change to shake their ass -- that comes with the business. Everybody wins."And if the Scores is best option you have for a conference room, then why not?
[TMZ]
It's Gotten to the Point During Busy Season Where People Are Taking Mental Health Breaks in Bathroom Stalls
It's March. Some of you are tired. Some of you are malnurished malnourished. Some of you are thisclose to crawling under your desks and curling into the fetal position until someone comes by to spur you back into action.
And for some, only a bathroom stall can provide the stillness and quiet that a frantic mind filled with spreadsheet formulas needs:
This was shared with us on our Facebook page and allegedly, it is "almost mandatory" for those on this young man's team to work until "AT LEAST 9 pm."
There's no telling if it was a personal matter, a failed CPA exam, the hours, or some combination of any of those or anything else, but this poor chap appears to have needed a mental health break.
We know the feeling. STAY STRONG.
Accounting News Roundup: SEC Gets Green Light for Deloitte Workpapers; Private Activity Bond Backlash; Tax Prep Kings in Court | 03.05.13
U.S. can pursue China documents from Deloitte - federal judge [Reuters]
The U.S. securities regulator can pursue efforts to obtain certain audit work papers from Deloitte's China unit, a federal judge said on Monday, giving some latitude for the U.S. government to investigate potential misconduct at Chinese companies listed in the United States. The U.S. Securities and Exchange Commission can move forward with its attempt to force Deloitte Touche Tohmatsu CPA Ltd to comply with a subpoena related to a fraud investigation into a Chinese technology company Longtop Financial Technologies Ltd , Magistrate Judge Deborah Robinson said.
Arguments begin in H&R Block suit against Turbo Tax ‘attack ad’ [KCBJ]
Court arguments began Monday in H&R Block Inc.’s attempt to have its main competitor’s TV commercials taken off the air. U.S. District Judge Fernando Gaitan heard testimony from a consumer behavior expert who conducted a survey for Block (NYSE: HRB) of viewers’ reactions to ads aired by Intuit Inc., the maker of Turbo Tax software. Carol Scott, a retired UCLA business professor, said the commercials contained an ineffective disclaimer that confused viewers about the relative popularity of the two companies’ products and services.
House Holds Hearing Today on The Tax-Related Provisions in the President’s Health Care Law [TaxProf]
If you're looking for some excitement.
Las Vegas Sands Fires Back at Bribery Charges [CNBC]
The casino operator is particularly upset with a New York Times headline that said "Casino Says It Likely Cheated," calling it uninformed and misleading reporting. Media outlets reported that the casino company said in a 10-K disclosure filing Friday said it "likely" violated the FCPA, which outlaws the bribery of foreign officials, according to a U.S. Securities and Exchange Commission filing on Friday. The reports stated that Las Vegas Sands, which is controlled by billionaire Sheldon Adelson, said that after it received the SEC subpoena on Feb. 9, 2011, the audit committee of the board of directors opened an investigation. But on Monday the company countered that its 10-K disclosure did not report any violations of the anti-bribery provisions of the FCPA. In a statement, Las Vegas Sands said its audit committee had only found "likely violations" of the books, records, and internal controls provisions of the FCPA. A potential violation could range anywhere from a single transaction recorded incorrectly to other errors in the accounting records.
Andrew Mason – Groupon Farewell Memo [RapGenius]
The annotated version.
Fake bishop sneaks into Vatican meeting with 100 real cardinals [NYDN, Earlier]
A man dressed as a bishop sneaked into the meeting of more than 100 cardinals at the Vatican Monday, managing to commiserate with the Catholic princes before being thrown out by Swiss Guards. Prankster Ralph Napierski donned a short cassock, “an unusual” cross necklace, and a purple sash that was actually a scarf, according to Italy’s Gazzetta del Sud. Instead of a skullcap he wore a black fedora. He told reporters his name was “Basilius,” and a member of the "Corpus Dei,” a German church described online as a “Catholic Order after episcopal law.”
Footnotes: Well the Good News Is That The IRS Is Totally On It Now, Y'all | 03.04.13
[Texas] Tech to have first School of Accounting in Texas [Daily Toreador]
Don't Let Tesla's Accounting Error Distract You From the Real Story [Motley Fool]
IRS: No More Delays in Handling Returns [Washington Wire]
California Delays Collecting ‘Surreal’ Back Taxes [BloombergBusinessweek]
Billion-dollar Danish: Microsoft owes Denmark $1 billion in unpaid taxes, treasury says [Reuters]
Angry Swiss Aren't Done Slimming the Fat Cats [Bloomberg]
Former Gilmer bank vice president indicted on fraud charges [Atlanta Journal Constitution]
Chicago investment adviser gets 6 years in fraud [Chicago Tribune]
Woman Stabs Husband to Death for Trying to Kill Her Cat This has nothing to do with accounting. I just want to make sure everyone is on point, cats are serious business. [Gawker]
Pennsylvania Is Trying to Ditch the Attest Hour Requirement for New CPAs
Should all new CPAs be required to log audit hours before applying for licensure? Most states don't seem to think so.
For prospective Pennsylvania CPAs, however, at least 400 hours are still required (which works out to 25% of candidates' total required experience), regardless of whether these candidates will ever work on an audit in their professional lives. Seems a bit silly, no?
The Pennsylvania Institute of Certified Public Accountants agrees:
The attest experience requirement in the current CPA Law is overly restrictive. It does not reflect today’s environment for CPA services. More than half of today’s accounting graduates pursue initial employment outside of traditional public accounting. Pennsylvania is one of only three states in the country that still require attest hours for licensure.
The changes proposed in HB 40 would put Pennsylvania on equal footing with most other states. Currently, Pennsylvania CPA firms are at a competitive disadvantage to retain accounting graduates when they can become more easily licensed in other states. It also makes it difficult for candidates to complete their experience requirement when working in areas outside of the auditing function.
HB 40 - which goes up for a committee vote on March 13 - is sponsored by PICPA member Rep. Gordon Denlinger, CPA and hopes to level the playing field for PA CPAs. Since hardly anyone else requires attest hours, it makes sense to give PA candidates a pass as well.
Here's the deal: 25 states plus DC have adopted the statutory language contained within the Uniform Accountancy Act (UAA) developed by NASBA and the AICPA. Both NASBA and the AICPA support a one year, broad-based experience requirement for initial licensure. One year of experience under a CPA licensed in the state is sufficient and allows the inclusion of all fields; public, industry, government, etc.
To ask much more of wanna-be licensees is just excessive, right?
The first time this change was proposed, the bill had 23 co-sponsors and passed the House unanimously but stalled in the Senate Consumer Protection & Professional Licensure committee.
If you are in Pennsylvania and think this is a good idea, the PICPA would appreciate it if you give your representative a buzz and say so.
See also: this HOO-RAH over at Another71.
