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ANR: ‘We also think there’s a problem with [Ernst & Young]’; The Envelope’s Journey; Don’t Blow the Tax Refund at the Strip Club | 02.26.13

Posted on by Caleb Newquist

HP Investor Adviser Group Seeks Board, Accountant Changes [BBW]
After a two-hour meeting with Hewlett-Packard Chairman Ray Lane and other directors (HPQ) yesterday in Washington, CtW is recommending that investors vote against the election of John Hammergren and G. Kennedy Thompson, who have been on the board since 2005 and 2006, respectively, Michael Pryce-Jones, a senior analyst at CtW, said in an interview. […] CtW is advising shareholders to vote against the appointment of Ernst & Young, citing the auditor’s failure to unearth accounting irregularities at Autonomy Corp. that later resulted in Hewlett-Packard writing down most of the acquisition, Pryce-Jones said. “We also think there’s a problem with the auditors,” he said.

Can an auditor’s Chinese affiliate get its US arm in trouble? Deloitte is about to find out [Quartz]
What is unusual, though, is the plaintiffs’ move to hold not just Deloitte’s China office liable, but also its American one. The Securities Exchange Commission initiated administrative proceedings against the Chinese offices of Deloitte and other accounting firms for their failure to turn in audit work papers for Chinese companies facing fraud investigations. And other investor lawsuits also target the Chinese accounting units. But the ChinaCast lawsuit maintains that Deloitte’s US office shares blame, because it deemed ChinaCast compliant with US accounting standards even though it was not, according to the complaint seen by Quartz.

PwC chief Moritz shares Oscar night spotlight with First Lady [Reuters, Earlier]
PwC has been counting the Oscar ballots for 79 years. Moritz said Obama – who rivaled the Hollywood actors in her custom-made silver gown and dangling earrings – had “amazing presence.” “She was a real pro,” he said. Moritz had earlier spent a nervous 30 hours starting on Saturday as one of three people in the world who knew it would be Argo’s big night. The other two were PwC’s Los Angeles partners who oversee the tallying of the ballots and hold them in their black briefcases backstage during the broadcast. Moritz went to the White House on the big night sporting a tuxedo and carrying his own briefcase bearing a single envelope. He said as soon as he appeared on-screen handing Obama the envelope, his cellphone began to buzz. Only his wife and two children even knew he was in Washington for the day.

Oscar envelope made cross-country journey to D.C. [WE]
"He placed the card in the envelope, he sealed it, and then he kept it in his custody until he delivered it to Michelle Obama on live TV," [Brad] Oltmanns told Yeas & Nays.
 
A Costly and Unjust Perk for Financiers [NYT]
OF the many injustices that permeate America’s byzantine tax code, few are as outrageous as the tax rate on “carried interest” — the profits made by private equity and hedge fund managers, as well as venture capitalists and partners in real estate investment trusts. This huge tax benefit enriches an already privileged sliver of financiers and violates basic standards of fairness and common sense.
 
A Revolving Door in Washington With Spin, but Less Visibility [DealBook via TaxProf]
So on Jan. 25, Mr. Reid’s office announced that he had appointed Cathy Koch as chief adviser to the majority leader for tax and economic policy. The news release lists Ms. Koch’s admirable and formidable experience in the public sector. “Prior to joining Senator Reid’s office,” the release says, “Koch served as tax chief at the Senate Finance Committee.” It’s funny, though. The notice left something out. Because immediately before joining Mr. Reid’s office, Ms. Koch wasn’t in government. She was working for a large corporation. Not just any corporation, but quite possibly the most influential company in America, and one that arguably stands to lose the most if there were any serious tax reform that closed corporate loopholes. Ms. Koch arrives at the senator’s office by way of General Electric.
 
Audit Firms Get Mixed Report Card from PCAOB [AT, Report]
A new report from the Public Company Accounting Oversight Board found that firms that audit 100 or fewer public companies and are inspected every three years showed a reduced rate of reported “significant audit performance deficiencies” in their 2007 through 2010 inspections, compared to when they were inspected from 2004 through 2006, but in 2011, the rate of deficiencies showed little sign of declining. In addition, the report found that 20 firms with significant deficiencies never responded to the PCAOB with a remediation plan.
 
Accountant bringing Crundwell into suit [SaukValley]

Rita Crundwell is now a third-party defendant in the city’s lawsuit against its former auditors, according to court documents filed Monday. A third-party defendant is one whose guilt is tied to that of an original defendant. The idea is that two cases may be decided in combination and justice may be done more efficiently than having two suits. Janis Card Co., LLC, Samuel S. Card, CPA, P.C., and Samuel Card, which are being sued by the city for not detecting Crundwell’s theft of nearly $54 million from city funds, made a motion to bring the former Dixon comptroller into the suit. The Sterling-based offices served as the city’s contracted auditor after 2005. Also, Fifth Third Bank filed a motion to name itself as a defendant in the case, a legal move that will, among other things, allow it access to evidence. The lawsuit, asking in excess of $53 million in damages, also names CliftonLarsonAllen, LLP, Clifton Gunderson LLP, Todd Etheridge and Ron Blaine as defendants.

Deloitte LLP weighing Tysons Corner reshuffling [WBJ]
Shopping for a new home in NoVa.

Texas Man Who Claimed He Was Robbed Spent The Cash At Topless Bar [KWTX]
A South Texas man admitted that he concocted a story about being robbed of $1,000 because he didn't want his wife to learn he spent the money at a topless bar, police said. The man received a tax refund recently and decided to spend the money Wednesday at the bar in La Feria. Later he called police and reported that men armed with assault weapons had taken the cash. Officers searched for the robbers and then questioned the man a second time, discovering inconsistencies in his story. Jesus Mata, 21, of San Benito was arrested Thursday and charged with filing a false report.

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Accounting News Roundup: America’s Fiscal Conundrum; FASB Attempting to Price Convergence; Rent and Healthcare Are Both Too Damn High | 10.20.10

Pledging Our Way to Fiscal Disaster [Tax Vox]
Three-quarters of Americans believe that entitlement programs such as Medicare and Social Security “will create major economic problems” over the next 25 years. But two-thirds are opposed to addressing these challenges by reducing benefits, and 56 percent are against raising taxes.

And congressional candidates, who read the polls, are scrambling to pander to the free-lunch beliefs of their respective bases. As a result, they are locking themselves into opposing both reductions in future benefits and tax increases.

NFIB calls for action on Bush tax cuts [On the Money]
“Increasing the individual rates will mean that business owners have less money for business investment and job creation,” the NFIB stated. “One study found that a 5 percent increase in individual tax rates decreases business investment by 10 percent.”

Democratic leaders have repeatedly promised that rate cuts for all but the top two brackets will be extended into next year, allowing most businesses to avoid a tax increase. The NFIB states their plan will still hit small businesses.

FASB Seeking Input on the Costs of Convergence [JofA]
FASB issued a discussion paper to gather input from stakeholders about the time and effort that will be involved in adapting to several anticipated new accounting and reporting standards and when those standards, which are part of the FASB and International Accounting Standards Board (IASB) convergence projects, should be effective. The board said it will use the input it receives to develop an implementation plan that helps companies and other stakeholders manage both the pace and cost of change.

“We issued this discussion paper to gather the information we need to create a realistic, cost-effective plan for transitioning to the new standards,” Acting FASB Chairman Leslie F. Seidman said in a press release.

Paul V. Stahlin Elected Chairman of the AICPA [PR Newswire]
Stahlin said the United States is emerging from a period of economic turmoil that has “driven demand for new business practices, new regulations, new oversight and new solutions,” in his inaugural speech, titled “Seize the Future.” He said CPAs have been finding solutions for more than 100 years.

“We as CPAs have the unique ability to make sense of a constantly changing complex world,” Stahlin said. “Employers, our clients and our country turn to us to make sense of the most complex developments in business and regulation. We best understand how a business ticks.”

Bob Evans Financial Chief To Depart At Year’s End [Dow Jones]
Tod Spornhauer wants to do something different.


Yahoo 3Q profit doubles, revenue still lackluster [AP]
Bartz and CFO Tim Morse are still in process of turning this thing around.

J&J CFO: Healthcare Spending Growth Is Decelerating [Dow Jones]
Certain medical expenses are simply too damn high.

Jimmy McMillan: Rent is Too Damn High! [CBS]
Speaking of, in case you missed it yesterday (or Monday night):

Accounting News Roundup: BP in Talks to Sell Assets, Including Alaska Ops; Koss Lawsuit Details Embezzlement ‘Spurts’; The Estate Planing Debacle | 07.12.10

BP Mulls Selling Off Billions in Assets [WSJ]
“BP PLC is in talks with U.S. independent oil and gas pron a deal worth as much as $10 billion that could include stakes in BP’s vast Alaska operations, according to people familiar with the matter.

A deal, which would go a long way to helping BP cope with the financial stress of paying for the clean-up of the Gulf oil spill, could be reached in the coming weeks, though there is no guarantee it will succeed, one of these people said.”

Bank Profits Depend on Debt-Writedown `Abomination’ [Bloomberg]
This abomination has an official name, SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities

“Bank of America Corp. and Wall Street firms that notched perfect trading records in the first quarter are now depending on an accounting benefit last used in the depths of the credit crisis to prop up their results.

Bank of America, the biggest U.S. bank by assets, may record a $1 billion second-quarter gain from writing down its debts to their market value, Citigroup Inc. analyst Keith Horowitz estimated in a June 23 report. The boost to earnings, stemming from an accounting rule that allows banks to book profits when the value of their own bonds falls, probably represented a fifth of pretax income, Horowitz wrote.”

Koss embezzlement ran in spurts, lawsuit says [Milwaukee Journal-Sentinel]
The most impressive “spurt?” $478,375 over three days in 2006. According to Koss’ lawsuit against S-squared and Grant Thornton, $145,000 also disappeared from the petty cash fund over the years, amongst other “unauthorized transactions.”


Bias At Work: To Sue or Not to Sue? [FINS]
Harassed? Discriminated against based on age, sexual orientation, race et al.? Of course suing your employer is an option. This is America after all, where the opportunity to slap someone with a lawsuit is your god-given right. But is it always the right move?

Bolt running from the taxman – Usain snub for British meeting [Daily Mail]
The fastest man in the world would prefer to keep a little money for himself, “Under present tax rules, if Bolt competes once in Britain and only five races elsewhere, the British taxman will demand one-sixth of everything he earns, whether in Britain or not. His taxable earnings would not only include his considerable appearance fees but also his hefty endorsement contracts.”

The Big Four’s UK Firms Pick Up Non-Executive Directors — And Then …? [Re:Balance]
Jim Peterson expands on his thoughts about the Big 4 non-executive directors in the UK, “Not only can good governance not be inflicted or imposed, in other words, because resistant leaders will find ways to disturb or subvert the purpose, but a virtuous culture will display its legitimacy without the need for pietistic overlays.”

Too Rich to Live? [WSJ]
The estate tax debate has gotten even more morbid than it would ordinarily be, ” ‘You don’t know whether to commit suicide or just go on living and working,’ says Eugene Sukup, an outspoken critic of the estate tax and the founder of Sukup Manufacturing, a maker of grain bins that employs 450 people in Sheffield, Iowa. Born in Nebraska during the Dust Bowl, the 81-year-old Mr. Sukup is a National Guard veteran and high school graduate who founded his firm, which now owns more than 70 patents, with $15,000 in 1963. He says his estate taxes, which would be zero this year, could be more that $15 million if he were to die next year.”

Accounting News Roundup: Auditors ‘Portray Worrying Lack of Skepticism’; Are Tax Strategies Patentable?; Method Man Pleads Guilty, Cuts Check for NYC Tax Evasion | 06.29.10

FSA accuse auditors of failing to question management bias [Accountancy Age]
The Financial Services Authority has decided that it was about time it called out a few people, “Auditors have become yes men who don’t adequately question management bias according to concerns raised by the UK’s chief financial regulators. The Financial Services Authority (FSA) and the Financial Reporting Council today released a scathing discussion paper into the profession following concerns raised in the wake of the financial crisis. Among its concerns is that auditors ‘portrays a worrying lack of skepticism’ when scrutinising potential management bias.”

Not onlef=”http://www.accountancyage.com/accountancyage/news/2265630/fsa-audit-report-regulator”>FSA wants new enforcement powers including the ability to ” fine, censure or disqualify audit firms.” The FSA also wants to meet with auditors several times a year, rather than just once, as well as direct access to audit committees.

Alex to Become Hurricane as Swells Reach Gulf Spill [Bloomberg]
“Tropical Storm Alex, the first named system of the Atlantic hurricane season, strengthened today, forcing the evacuation of rigs in the Gulf of Mexico and pushing swells toward the worst U.S. oil spill.

The storm, packing maximum sustained winds of 70 miles (110 kilometers) per hour, was 460 miles southeast of Brownsville, Texas, before dawn today, moving north-northwest at 8 mph, the U.S. National Hurricane Center said in an advisory. The circulating winds were near reaching hurricane status of 74 mph.”

New York state may tax out-of-state hedge fund execs [Reuters]
Desperate idea of the day from the brain trust in Albany, “Recession-hit New York could raise an extra $50 million a year by collecting income taxes from people who work for hedge funds in the state but live elsewhere, according to a legislative plan to raise revenue…A spokesman for Democratic Assembly Speaker Sheldon Silver said by telephone on Monday that it means hedge fund managers would be treated the same way as other commuters.”


Aprill: The Impact of Bilski on Tax Strategy Patents [TaxProf Blog]
In non-PCAOB SCOTUS news, the decision in Bilski v. Kappos addressing “Whether a ‘process’ must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (‘machine-or-transformation’ test), to be eligible for patenting….” was examined by Ellen P. Aprill of Loyola-L.A. regarding the impact on tax strategy patents:

“Bilski is at best a mixed bag for those who think tax strategies should be patentable. It gives little help and does allow business method patents, albeit somewhat begrudgingly. It demonstrates that for those who believe that tax strategies should not be patented, legislation is needed.”

Method Man pleads guilty to NYC tax-evasion charge [AP]
“Hip-hop star Method Man pleaded guilty to a tax-evasion charge Monday, writing a check on the spot for the final $40,000 restitution payment after owing about $106,000.” What, no cash?

U.S. Court to Hear Janus Appeal In Securities Case [Reuters]
“The lawsuit, brought on behalf of those who bought Janus stock from mid-2000 through early September 2003, alleged that the prospectuses of several of Janus funds created the misleading impression that the company would adopt measures to curb market timing, when in fact secret arrangements with several hedge funds permitted such transactions, to the detriment of long-term investors.”