PCAOB, SEC Enforcement
Here's a story about a former EY partner, Mark Laccetti, who is challenging the findings by the PCAOB and SEC in federal appeals court. Laccetti's case stems from work that he performed on the 2004 audit of a subsidiary of an Israel-based issuer, Taro Pharmaceuticals USA.
The board said Laccetti violated PCAOB rules and auditing standards, with respect to audit work for which he was responsible on the U.S. subsidiary’s total, year-end 2004 accounts receivable reserves. The board punished Laccetti for “failing to exercise due professional care, failing to obtain sufficient audit evidence, failing to adequately perform procedures to evaluate the reasonableness of a significant accounting estimate, and improperly relying on management representations.”
The parent company, according to the PCAOB order, “later restated its financial statements for 2004 and other periods, principally due to the subsidiary’s erroneously low chargebacks estimates, which had caused multimillion-dollar overstatements of net sales and related receivables.”
It all sounds straight-forward except that Laccetti isn't challenging the findings of the PCAOB or SEC. Rather, he's saying that "the accounting board’s structure violated separation-of-powers principles" and "lacked the necessary executive oversight when it investigated and initiated proceedings against him." I kinda thought this this was all settled when the Supreme Court ruled in Free Enterprise v. PCAOB since "the court did not strike down any earlier action the board had taken" but Laccetti's been trying anyway. The SEC agreed with SCOTUS, rejecting Laccetti's argument to dismiss the whole thing. He also didn't want the proceedings to become public, but that ended when the case went before the SEC. Laccetti argued that no one (i.e. investors) really benefited from the proceedings being public because he "undisputedly does not perform audits for public companies anymore, and has no intention to do so in the future."
That's sorta strange isn't it? You can't really knock on the PCAOB's door and say, "Hey, guys. You got me. I'll quit auditing and we can keep this between us, cool?" But that's what Laccetti is asking for here…I think? I might be wrong, but the takeaway here is that we wouldn't even have to talk about this is if PCAOB proceedings were public. Someone should get on that.
Accountants behaving badly
Accounting Today runs an impressive tax blotter every week and yesterday's featured a small time Ponzi scheme:
Preparer Clarence Counterman, 59, is one of two men convicted of carrying out an estimated $2 million Ponzi scheme.
Counterman, owner of the tax prep business Taxrite, and 52-year-old Robert Loya, were convicted of one count of conspiracy to commit wire fraud. Jurors also convicted Counterman and Loya of 14 and 13 substantive counts, respectively, of wire fraud. Counterman was also acquitted of one substantive wire fraud charge and Loya of two substantive wire fraud charges.
Evidence revealed that from December 2008 to October 2013, the two conspired to convince others, including Counterman’s clients, into investing into their solar energy-related companies – including Renewable Energy Consultant, EP Solar Technologies, LITTCE Inc. and Eco Global Corp. – by promising high returns.
Hang on. The guy's name is "Counterman" his firm is called "Taxrite" and, oh, he just so happens to have a few solar energy companies on the side? I sympathize with the victims, but honestly, how many more red flags do you need?
Correction: Go Cubs Go
Yesterday I said that the Cubs didn't make the playoffs after the 1989 season until 2003. I was wrong. They actually qualified in 1998 after winning a one-game playoff against the Giants only to be unceremoniously swept by the Braves in the divisional series. There was so much disappointment for so long, I think you can understand how I could overlook that. Anyway, I'm still humming "Go Cubs Go." Oh, and here's a fun remix from Chance the Rapper.
Has Donald Trump released his tax returns?
Nope! And it seems to have caught on, as two Republican governors — New Jersey's Chris Christie and Illinois's Bruce Rauner — won't be releasing theirs before Election Day.
Previously, on Going Concern…
Lots of action in Open Items, including: someone auditing cash, someone else wanting to hear about small firm experiences and another person asking about independence and roboadvisors.
In other news:
- Wells Fargo Faces Scrutiny for Black Marks on Ex-Employee Files
- Sad: Three employees of RitzHolman, a Milwaukee firm, were killed in a car accident on Wednesday night and a fourth was seriously injured.
- Gwen Jorgensen is running marathons now.
- The Real Reason Why Daylight Saving Time Is a Thing
- 'I was just waiting for an OK from God': Buffalo woman sues to stop presidential election
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