When accounting goes unaccounted for
Ed. note: trying out a little something new for this week’s Footnotes. We’re adding accounting firm mergers & acquisitions to the weekly news as they’re happening with such frequency and regular Footnotes readers will notice the news is now sorted by topic. Neat! Don’t forget to sign up for our newsletter for more headlines, or just to receive emails from someone who purports to care about you (us) with regularity. Happy weekend, people!
EY partners meet at luxury hotel as uncertainty continues over firm split [Financial News] EY UK partners gathered last month at the five-star Royal Lancaster hotel near Hyde Park in west London for a sales pitch from their senior leaders on the firm’s multi-billion dollar break-up. Security guards were on hand to prevent interlopers attending the top-secret briefing, which EY’s global chair and chief executive Carmine Di Sibio addressed via video link, according to a partner who attended.
U.S. Audit Watchdog Fines KPMG Korea for Quality Control Failures [Wall Street Journal] The Public Company Accounting Oversight Board on Tuesday fined KPMG LLP’s Korea unit $350,000 for failing to set up adequate quality controls to prevent improper changes to work papers. The fine was the U.S. audit watchdog’s latest enforcement action against a non-U.S. member of a Big Four firm. The targeted unit, KPMG Samjong Accounting Corp., was also ordered to improve its quality-control systems.
PwC Raises UK Partner Pay to £1 Million for First Time [Bloomberg] PricewaterhouseCoopers partners in the UK were paid an average of £1 million ($1.2 million) for the first time thanks to a rebound in consulting activity and the sale of part of the business. The professional services company said on Thursday that its revenue in the UK and Middle East grew 12% to £5 billion in the year through June. This was helped by a 33% jump in revenue from consulting, which overtook audit to become the group’s biggest business area.
Biggest Stablecoin Issuer, Tether, Switches Accounting Firm to BDO Italia [Wall Street Journal] Tether Holdings the issuer of the world’s largest stablecoin, said on Thursday it switched the accounting firm that signs off on its attestation reports to BDO Italia, the Italian member firm of BDO.
Documentation issues nix Secret Service award to Deloitte [Washington Technology] GAO has told the Secret Service it did not adequately document its best-value tradeoff analysis in the award of a $24 million chief financial officer support contract to Deloitte. The Secret Service also focused on the wrong aspects in its investigation of a possible organizational conflict-of-interest involving Deloitte, GAO says.
Layoffs Are In The Works At Half Of Companies, PwC Survey Shows [Financial Advisor] If your organization isn’t letting people go, the one next door probably is. That’s a key finding from a survey released Thursday by consultant PwC, which last month polled more than 700 US executives and board members across a range of industries. Half of respondents said they’re reducing headcount or plan to, and 52% have implemented hiring freezes. More than four in ten are rescinding job offers, and a similar amount are reducing or eliminating the sign-on bonuses that had become common to attract talent in a tight job market.
Eisner adds Minn.-based accounting firm, names 2 partners in Iselin [ROINJ] EisnerAmper, the global business advisory firm with a major presence in New Jersey, has added the 200-plus employees of Minneapolis-based accounting and advisory firm Lurie LLP, it announced this week. The transaction is expected to close in September.
NoVa accounting firm absorbs second Richmond peer in 5 years [Richmond BizSense] Driven in part by a tight market for talent and a partner’s retirement, a Richmond accounting firm has merged into a larger competitor from Northern Virginia. Kimble CPAs, a 14-person firm in the West End, last month became part of Alexandria-based KWC. It’s the second such deal for KWC in Richmond in five years. In 2017 it added Biegler & Associates and its 16-person team to its ranks as part of its entrance into the local market.
Moss Adams merges with small Sonoma County firm Mengali Accountancy [North Bay Business Journal] Seattle-based Moss Adams LLP, billed as one of the largest U.S. accounting firms, has merged with Healdsburg’s Mengali Accountancy Inc., the two firms confirmed. The transaction closed on Aug. 1. Financial details of the transaction weren’t disclosed in the news release or in announcements on the Moss Adams website and in a trade publication.
U.K. Regulator Requires Audit Firms, Individual Auditors to Apply to Join New Register [Wall Street Journal] The U.K. Financial Reporting Council is set to gain greater control over auditors with a register that will determine who can audit the financial statements of large listed companies or financial institutions—so-called public-interest entities—and who cannot. The country’s audit and accounting regulator is requiring audit firms and certain key individuals currently auditing these entities to apply to be included in a newly created index. If a firm or individual is found not to be “fit and proper,” they will not be admitted to the PIE register or will be removed from it, according to the regulator. All audit firms and affected individuals who audit PIEs have to be registered by the FRC by Dec. 5, the FRC said.
Big Four Firms Test Audit Safeguards as Consultancy Booms [Bloomberg Tax] US regulators, alarmed that the outsized influence of that advisory work could undermine the job of auditors, are closely monitoring firms’ business deals. Ernst & Young has been exploring a possible split of its operations in part to fend off such ethics crackdowns, including a record $100 million settlement with the Securities and Exchange Commission for ethics violations. “What happens when we essentially have a consulting firm who also does audit work—what does that do to say the firm culture?” said Stephen Rowe, associate accounting professor at the University of Arkansas and a former Big Four auditor. “It is problematic and the culture itself could deteriorate to the point where we could see large scale frauds again.”
Letter to the Editor: Shedding Light on Audit Deficiencies [The CPA Journal] Writes Yigal Rechtman, CPA, CFE, CITP, CISM: I read with interest “Article on the New Working World of the COVID-19 Pandemic” (Hila Fogel-Yaari and Kelly Gebhart, March/April 2022) of The CPA Journal. The article is interesting and insightful vis-à-vis COVID-19; however, I believe the authors “buried the lede.”
Financial services execs see talent acquisition as serious business risk [ABA Banking Journal] C-suite executives in the financial services sector are more likely to view talent acquisition and retention as a major business risk than their counterparts in other sectors, according to a recent survey of 722 U.S. executives by accounting firm PricewaterhouseCoopers. Forty-four percent of financial service executives surveyed cited staffing as a “serious” risk versus 38% across all sectors. Cybersecurity was the top business risk that worried executives in all sectors, with 40% of respondents listing it as a serious threat—a higher percentage than any other category.
Promotion doesn’t add up to gender equity at leading accounting firms [Phys.org] Often instead of making partner, women in public accounting firms appear to be sidelined into less prestigious, less powerful director positions, a study has found. Examining public audits from the seven largest firms, including Deloitte and KPMG, researchers found that directors signing audit reports for nonprofit entities were twice as likely to be women than men, despite the fact that there are fewer female directors. The analysis of this data, which is accessible because the audit clients are public institutions like nonprofits or universities, provides a window into promotion practices, said Kathleen Harris, an accounting assistant professor with Washington State University’s Carson College of Business. “Women and men are hired into these public accounting firms at a very equal ratio, but at the partner level, it’s disproportionate,” said Harris, the corresponding author on the study published in the Journal of Accounting and Public Policy. “If we want equity in accounting, then both men and women need to be at the table making decisions.”
Oh, Reddit. Please never change.
Former CFO of Trump Organization pleads guilty for his role in tax fraud scheme and agrees to testify against company [CNN] Weisselberg pleaded guilty to 15 felonies and admitted he failed to pay taxes on $1.7 million in income, including luxury perks, such as rent and utilities for a Manhattan apartment, leases for a pair of Mercedes-Benz cars and private school tuition for his grandchildren.
He admitted to concealing those benefits from his accountant to under-report his income and knowingly omitting the income from his personal tax returns.
The Story Of How Billionaire Rihanna Once Sued Her Ex-Accountants For $9M After Mismanaging Funds [Yahoo! News] According to court documents, Rihanna learned that her former accountants had mismanaged her funds, including but not limited to her 2009 Last Girl on Earth tour, which was netting losses. The lawsuit suggested that the accountants charged excessive commissions and took nearly 23 percent of revenue while Rihanna only received six percent.
Balancing the Books: GAO Finds New Flaws with Federal Financial Accounting [MeriTalk] In a Management Report released on Aug. 16, GAO said it uncovered four new “internal control deficiencies” in the process that the Department of the Treasury, in coordination with the Office of Management and Budget (OMB), used to prepare the government’s fiscal year 2021 financial statements.
IFAC offers online resource center for accountants [Accounting Today] IFAC’s online collection, Professional Accountants as Business Leaders and Value Partners, explains how accountants can help drive sustainability at their organizations. The materials aim to help accountants understand and navigate challenges and opportunities as finance and business leaders, risk managers and analysts, and in wider commercial roles including in procurement and supply chain management.
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Australian Financial Review has published slides shown to EY staff in a July global webcast led by Carmine Di Sibio and in them we learn more about EY’s plan — code-named Project Everest — to split off consulting and audit. First up, the why. “The transformative forces reshaping professional services are evolving at unprecedented speed and […]
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When accounting goes unaccounted for