June 19, 2018

ANR: Big Accounting Trouble in Big China; Audit Work Papers = State Secrets; Coburn Prefers Higher Rates to Capped Deductions | 12.05.12

SEC Probe Puts China Listings in Doubt [WSJ
The U.S. Securities and Exchange Commission's high-profile attack on the Chinese affiliates of five major accounting firms calls into question the future of China-based companies listing on the U.S. stock exchanges at a time when accounting scandals have eroded investor appetite for these companies. […] The regulatory action will put a "further damper on Chinese listings in the United States," said Rocky Lee, a Hong Kong- and Beijing-based partner at the law firm Cadwalader Wickersham & Taft, which does due diligence on Chinese assets for foreign institutional investors. It also significantly increases the chances that China-based firms whose American depositary receipts trade on the U.S. exchanges will be delisted, if regulators in the U.S. and China can't reach an agreement over the disclosure of information, according to Paul Gillis, an accounting professor at Peking University's Guanghua School of Management in Beijing. "I'm not optimistic that a solution is reachable," Mr. Gillis said. "The biggest loser if it goes down this road is the American exchanges because it makes the U.S. a much less attractive place to raise capital."

U.S., China in Cold War Over Accounting Rules [BBW]
Over the past two years, the SEC has audited scores of Chinese firms amid concerns that many are issuing financial statements that don’t reflect their real operations. The alleged violations include overstating revenue and profit. Many of them have listed on U.S. exchanges through so-called reverse mergers—when a company buys a largely inactive shell company that already has a listing and so can avoid strict disclosure requirements. To date, the SEC has deregistered almost 50 companies, including China MediaExpress Holdings, and launched fraud investigations against more than 40 issuers and company executives. The investigations, however, have faced serious obstacles to gathering evidence within China. Beijing’s attitude has been that its own accounting system is fully adequate and that there is no need for the U.S. to conduct its own probe. And China’s security regulators and finance officials have been loathe to participate in any joint investigation.

Between the SEC and a Hard Place [WSJ]
The Chinese government has long hinted that it regards audit working papers as state secrets and the hints have grown more explicit as the SEC has ramped up its investigations. The Big Four have said repeatedly that handing over such documents would violate Chinese law. Although the SEC may be correct that there is no explicit provision in the books to that effect, law in China is often what well-placed officials say it is, and in this case the signals have been clear: no handover of audit working papers to foreign regulators. In part this may be an attempt by Beijing to boost its leverage in ongoing negotiations with American regulators at the SEC and the Public Company Accounting Oversight Board for an agreement that would allow audit-related information-sharing in the future. But it's also possible that in Beijing's eyes, audit working papers really are state secrets.
Beijing baulks at audit access [Reuters]
[This] was the SEC’s widest enforcement effort yet to procure documents in connection with investigations of possible accounting fraud of US-listed Chinese companies. However, lawyers voiced doubts whether it would help them to make a breakthrough. “Simply swinging the hammer of enforcement, while effective at garnering headlines, is unlikely to achieve the SEC’s goal,” said William McGovern, a Kobre & Kim partner in Hong Kong and a former SEC attorney.
Big Lots Chief Probed by SEC [WSJ]

The Securities and Exchange Commission launched an inquiry into a $10 million sale of stock by Big Lots Inc. BIG +10.33% Chief Executive Steven Fishman before the company announced news that sank its stock, a person familiar with the inquiry said. Big Lots said Tuesday that Mr. Fishman, 61 years old, intends to retire in order to spend time with his family. The discount retailer said it hadn't been contacted by the SEC and that the timing of Mr. Fishman's departure was coincidental to any regulatory interest. The company said his trades were "properly made" at a time when they were allowed by the company.
SEC Seeks More Goodwill Disclosure [CFOJ (Subscription)]
U.S. market regulators are seeking more information from companies about the causes of big goodwill write-downs in hopes of avoiding investor surprises over the earnings charges.

How Tax Arbitrage Ended GE’s Foray Into Silicon Valley [Bloomberg]
[General Electric] seemed poised to become a computer giant in the mid- 1950s. Its small lab in Palo Alto, California, built one of the first machines able to meet the demands of modern consumer banking. Bank of America Corp., which contracted with GE, wanted the machines built outside of the progressively taxed Golden State to avoid $1.2 million in sales taxes, a large figure in the 1950s, but nonetheless small in relation to the bank’s profits. The GE executive in charge of the project, Barney Oldfield, hesitated to leave the nascent Silicon Valley, where Hewlett- Packard Co. (HPQ) already thrived. Oldfield estimated that the added cost of fulfilling the contract “if the headquarters and manufacturing facility were remote from the development engineering group” was “several million dollars. I thought this would tip the scale.”

Fired long-time Birmingham accountant invited back to City Hall after more than two years [AL, Earlier]

The protracted legal fight between Mayor William Bell's administration and a fired longtime accountant has ended with a city invitation asking her back to work. Since she was fired in 2010, Virginia Spidle has fought to clear her name over allegations of racism and incompetence and return to her job as a chief accountant. […] The city's fight with Spidle began in July 2010, when Mayor William Bell's administration fired her after accusing the 24-year employee of racial discrimination against black subordinates in the finance department. Spidle is white. She returned to work after the Jefferson County Personnel Board, after days of hearings, cleared Spidle of those charges and ordered her reinstated with back pay. But her return was short-lived when the city fired her again in January 2012 — after one week back on the job — on new charges of incompetence. A three-judge panel also ordered her back to work, clearing her of the original charges and ordered her back-pay from the time of her first termination. Still, the conflict remained unresolved as Spidle continued, to seek a return to work.

Coburn: 'I would rather see the tax rates go up' than cap deductions [The Hill]
Sen. Tom Coburn (R-Okla.) said Wednesday that he prefers simply raising the tax rates on the wealthiest taxpayers to a Republican proposal that would cap deductions for those making over $250,000 per year.  "Personally, I know we have to raise revenue; I don't really care which way we do it," Coburn said during an appearance on MSNBC. "Actually, I would rather see the rates go up than do it the other way, because it gives us greater chance to reform the tax code and broaden the base in the future." 

Zombie Apocalypse Singled Out In Tom Coburn Report On Homeland Security Waste [HP]

According to a new report by the Oklahoman, often a critic of Department of Homeland Security programs, the waste extends to a staged zombie apocalypse. In that case, the report said, DHS authorized up to $1,000 a head for law enforcers to attend a five-day security conference at a "paradise" island getaway with security industry companies. The conference featured a simulated attack — involving the undead — as the centerpiece. The zombie element was just a bit of fun added to an otherwise worthy endeavor, some observers said. Coburn, however, questioned why money from the Urban Area Security Initiative and state homeland security programs was used so law enforcers could bask in "the exotic beauty and lush grandeur of this unique island setting that creates a perfect backdrop for the Halo Counter-Terrorism Summit," as the sponsor, the Halo Corp. described it. Halo added: , "This luxury resort features over 460 guestrooms, five pools, three fantastic restaurants overlooking the bay, a world-class spa and state-of-the-art fitness center."


Related articles

Accounting News Roundup | 01.21.10

How to find the “best and brightest” [CPA Success]
This may be a better topic for the friendly HR professional but figuring out who these future accounting rock stars are before they show up on their first day is “more art than science”, as Tom Hood notes.
Popular to some old-school thought, GPA does not always indicate who’s going to dominate in the real world and “soft skills” — besides being a terrible term — are in more demand than ever.
Help The The American Red Cross of Greater Chicago Help Haiti [Re: The Auditors]
The American Red Cross of Greater Chicago is having a drive today and since Francine’s friend is the CFO, we’ll be glad pass around the news:

One of my oldest and dearest friends, Guillermo Becerra, is the CFO of the American Red Cross of Greater Chicago. I asked him how I could help him, and the Red Cross, during what must be an incredibly busy time post-Haiti earthquake.

“The Chicagoland community will come together on Thursday, January 21 to give to the American Red Cross as we help the people of Haiti recover from the catastrophic earthquake that devastated their country last week.
The Chicago Helps Haiti media relief drive begins at 5 a.m. and lasts until 11 p.m. Nearly every TV and radio station in our area will be promoting this fundraising effort throughout the day. You can help too, by giving via phone or online, and sharing your thoughts here, on Facebook or Twitter, and by asking others to give.
To give from 5 a.m. to 11 p.m. CALL 1 (877) 565-5000 or visit www.chicagoredcross.org/haiti

Plus, we’re guessing that if you give, your 2009 tax return isn’t much of a concern.
If Your Password Is 123456, Just Make It HackMe [NYT]
The Times is concerned that you have a shitty password which puts you at a huge risk of being hacked by someone sitting in their parents’ basement.

Imperva found that nearly 1 percent of the 32 million people it studied had used “123456” as a password. The second-most-popular password was “12345.” Others in the top 20 included “qwerty,” “abc123” and “princess.”

You know who you are, ye with stupid passwords. Also, don’t even think of changing it to “654321” because that drops in at #19.

Accounting News Roundup: Haiti Relief Passes Senate; Accounting Job Surge? CPAs Basically Control People’s Lives | 01.22.10

Senate votes for faster tax breaks for Haiti gifts [WaPo]
As expected, the U.S. Senate unanimously passed legislation yesterday that allows taxpayers to deduct donations made for Haiti relief efforts. You have until the end of February to donate so that it may be included on your 2009 return.

Maybe it’s bad legislation but we’ve been over that.

CPA Jobs Set for Surge. But When? [CPA Trendlines]
That’s the question, isn’t it? Rick Telberg, who has done a great job of tracking the Bureau of Labor Statistics on accountants, points out that while the latest BLS forecasts a 22% increase (279,400 jobs) by 2018, there’s no indication that it’s happening now:

[M]any tax, accounting and finance professionals are still slogging through the Great Recession. The Association for Financial Professionals, for instance, reported that about one in four respondents say their organizations will contract in 2010. At the same time, a PricewaterhouseCoopers survey of private companies found 43 percent of CEOs and CFOs still budgeting no expansion over the next 12 months to 18 months. The data just seem to reinforce economic uncertainties and a weak outlook.

The BLS is looking past the past the recession for the jump in opportunities but just when the hell will that be? Just because the economy isn’t contracting currently, doesn’t mean it won’t in the future and this “recovery” has been tepid at best.

Theismann to CPAs: You Are the Conscience of America [Web CPA]
Joe Theismann gets it. He knows that without all of you out there in CPA land, your clients don’t stand a chance. They’d be finished. Finished!

“You’re the conscience of America,” Theismann told conference-goers. “You are the survivors in tough times. With accountants, I’m not looking for someone to file taxes and do my financials. I can do that myself online. In your position you can basically control people’s lives.”

So get out there and control somebody’s life. Joe Theismann is expecting it.