Audit Watchdog Fines Ernst & Young $2 Million [WSJ, PCAOB]
Ernst & Young LLP agreed to pay $2 million to settle allegations by the government's auditing regulator that the firm wasn't skeptical enough in assessing how a client, Medicis Pharmaceutical Corp., accounted for a reserve covering product returns. The Public Company Accounting Oversight Board also sanctioned four current or former partners of the Big Four accounting firm, including two whom it barred from the public-accounting field. Ernst & Young and the four partners settled the allegations without admitting or denying the board's findings. The $2 million fine is the largest monetary penalty imposed to date by the board, which inspects accounting firms and writes and enforces the rules governing the auditing of public companies.
Accounting Firms Are Hiring [FINS]
Amid the detritus of layoffs and slashed bonuses in banking and finance, there's one profession still actively looking for talent: the more placid vocation of accountancy. Public accounting firms, such as the Big Four (KPMG, PricewaterhouseCoopers, Deloitte and Ernst & Young) and regional firms such as RSM McGladrey and Grant Thornton, need staff to help advise companies on their tax, audit or business needs. On the corporate side, companies need in-house accountants to focus specifically on their business. The Bureau of Labor Statistics estimates that the profession will grow by 22% between 2008 and 2018, with as many as 500,000 jobs opening up. In a recent survey of finance professionals conducted by Accounting Principals, a global staffing firm and a division of New York-based Adeccoo USA, half of all respondents said they expect their company to hire in 2012. Of the accountants surveyed, 74% said they are confident their firms will win new business this year, which would lead to more work and jobs.
When Facebook goes public later this year, Mark Zuckerberg plans to exercise stock options worth $5 billion of the $28 billion that his ownership stake will be worth. The $5 billion he will receive upon exercising those options will be treated as salary, and Mr. Zuckerberg will have a tax bill of more than $2 billion, quite possibly making him the largest taxpayer in history. He is expected to sell enough stock to pay his tax. But how much income tax will Mr. Zuckerberg pay on the rest of his stock that he won’t immediately sell? He need not pay any. Instead, he can simply use his stock as collateral to borrow against his tremendous wealth and avoid all tax. That’s what Lawrence J. Ellison, the chief executive of Oracle, did. He reportedly borrowed more than a billion dollars against his Oracle shares and bought one of the most expensive yachts in the world. If Mr. Zuckerberg never sells his shares, he can avoid all income tax and then, on his death, pass on his shares to his heirs. When they sell them, they will be taxed only on any appreciation in value since his death.
A multi-billion settlement moved closer to completion on Wednesday as two holdout states agreed to sign a proposed $37 billion settlement with the nation's largest banks over questionable foreclosure practices. New York and California will join the agreement worked out between states' attorneys general and Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial, according to news reports on Wednesday night. A final agreement, expected Thursday or Friday, would cover costs of reducing homeowners mortgage principal, refinancing and payments to homeowners affected by foreclosure abuses.