Accounting News Roundup: Firms Getting Scrutiny for Servicing Banks; The History of Taxing the Middle Class; BDO Picks Up PwC's Scraps | 02.01.13

Doubt Is Cast on Firms Hired to Help Banks [DealBook]
Federal authorities are scrutinizing private consultants hired to clean up financial misdeeds like money laundering and foreclosure abuses, taking aim at an industry that is paid billions of dollars by the same banks it is expected to police. The consultants operate with scant supervision and produce mixed results, according to government documents and interviews with prosecutors and regulators. In one case, the consulting firms enabled the wrongdoing. The deficiencies, officials say, can leave consumers vulnerable and allow tainted money to flow through the financial system. “How can you be independent if you’re hired by the entity you’re reviewing?” Senator Jack Reed, Democrat of Rhode Island, who sits on the Senate Banking Committee, said. 

Accountancy's Big Four are laughing all the way to the tax office [Guardian]
Westminster is rarely a palace of pleasure, but Thursday brought the magnificent spectacle of Margaret Hodge walloping the big four accountancy firms for their role in helping companies deprive the Treasury of taxes everyone else has to pay. Four heads of tax – at PWC, Ernst & Young, Deloitte and KPMG – wriggled and obfuscated, hiding behind the polite euphemisms of their trade. Never say avoidance or, God forbid, evasion – but call it "tax planning" and "tax efficiency".
 
When taxes first hit the middle class [Joe Thorndike/CNN]
In the first six months of the year [1940], as German armies swept across northern Europe, President Franklin D. Roosevelt sent Congress a series of military spending requests, each bigger than the last. On May 16, the president asked for $1.2 billion; on May 30, he asked for another $1.3 billion. Congress began debating a variety of ways to pay for the country's military buildup, and the individual income tax quickly emerged as the most likely source of new money. Support for exempting less income, and thus imposing higher taxes, cut across the political spectrum; even many liberals, led by FDR, embraced the idea. The enormous funding needs of World War II would soon transform the income tax from a "class tax" to a "mass tax." Throughout the New Deal, tax burdens had been very light or even non-existent on lower- and middle-income Americans, and Roosevelt emphasized income taxes on the very rich. Now he would push to raise taxes on a much broader swath of workers.
 
Beef price spike makes $1 McDouble harder to stomach [Reuters]
 McDonald's popular $1 McDouble cheeseburger, which has lured customers to the Golden Arches since 2008, is getting hard to sustain as rising beef prices threaten the company's profit margin. The world's biggest restaurant chain launched a competing $1 Grilled Onion Cheddar Burger in December. It also made the new sandwich - with one beef patty rather than the McDouble's two - a star of current television commercials, a status it shares with the McDouble. The dilemma for McDonald's Corp restaurant operators is that the McDouble has the highest ingredient costs on the Dollar Menu, making it a bad financial proposition unless customers add high-margin sides such as french fries or soda. "If the McDouble is all the customer buys, you lose money," said Richard Adams, a former franchisee who now advises the chain's restaurant operators. "Depending on what happens to beef prices, McDonald's management should be open to taking the McDouble off the Dollar Menu."
 
Deloitte shares its strategy for pro bono work [DBJ]
Don’t take any money?
 
Grant Thornton has an opportunity to grow rapidly in India: Edward Nusbaum [TEI]
Edward Nusbaum, the CEO of Grant Thornton (GT) International thinks that being smaller in size isn't a problem but actually an opportunity to position his firm as an alternative to the Big Four in the world of accounting. And the bet seems to be paying off -- GT is the fastest growing accounting firm not only in India, but globally too. Growing at 25%, the Indian arm of the firm now has 1,200 people, of which 90 are partners. Nusbaum took over as a global CEO in 2010 after having a spectacular innings as head of GT US, where he tripled the revenues under his watch.
 
BDO replaces PwC as RSM Tenon auditor [Accountancy Age]
BDO has been hired, "following a competitive tender process", to serve as RSM Tenon's auditor. The appointment is the latest chapter in what has been a turbulent time for the RSM Tenon audit. PwC stepped down as auditor after it was voted out by RSM Tenon shareholders last year. Its departure followed a wrangle between the two parties over the quality of PwC's audit work leading up to RSM Tenon entering into financial and operational difficulties.
 
Edward Koch, Former Mayor of New York, Dies [NYT]
Edward I. Koch, the master showman of City Hall, who parlayed shrewd political instincts and plenty of chutzpah into three tumultuous terms as mayor of New York with all the tenacity, zest and combativeness that personified his city of golden dreams, died Friday morning at age 88. Mr. Koch’s spokesman, George Arzt, said the former mayor died at 2 a.m. from congestive heart failure. He was being treated at New York-Presbyterian Columbia Hospital. Mr. Koch had experienced coronary and other medical problems since leaving office in 1989. But he had been in relatively good health despite — or perhaps because of — his whirlwind life as a television judge, radio talk-show host, author, law partner, newspaper columnist, movie reviewer, professor, commercial pitchman and political gadfly.

 

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