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Accounting News Roundup: The Big 4 Cartel and New Jersey Puts the IRS on Notice | 05.29.18

Posted on by Caleb Newquist

The financial scandal no one is talking about [The Guardian]
This is a nice long read to ease you back from the holiday weekend. “The financial scandal” is, of course, the Big 4, and their dominance as auditors of the world’s largest companies, among other things:

They are the only players large enough to check the numbers for these multinational organisations, and thus enjoy effective cartel status. Not that anything as improper as price-fixing would go on – with so few major players, there’s no need. “Everyone knows what everyone else’s rates are,” one of their recent former accountants told me with a smile. There are no serious rivals to undercut them. What’s more, since audits are a legal requirement almost everywhere, this is a state-guaranteed cartel.

N.J. warns IRS against banning property taxes as charitable gift [Bloomberg]
New Jersey Attorney General Gurbir Grewal said that the IRS should “think twice before going down that misguided road,” that road being a ban on states allowing SALT deductions. He promised a showdown “Should the IRS and Treasury Department continue down this path.”

As Tennessee’s Adult Entertainment Tax Starts July 1, Three Lessons From a Decade of the Texas ‘Pole Tax’ [BNA]
While an adult entertainment tax would seem like an odd wrinkle to focus on, some SALT professionals in Tennessee might find themselves studying the subtler points of a similar law in Texas, including what constitutes as “nude.”

Previously, on Going Concern…

Jason Bramwell interviewed controllers about having good relationships with audit committees.

I suggested that anyone who got a crappy raise last year should get a new job.

In Open Items: Larger Mid-Size Firm with potential to blow up!

In other news:

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See something we missed? Have a tip, correction, comment, or complaint? Email us at editor@goingconcern.com.

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Bin Laden Is Dead, President Obama Says [NYT]
Osama bin Laden, the mastermind of the most devastating attack on American soil in modern times and the most hunted man in the world, was killed in a firefight with United States forces in Pakistan on Sunday, President Obama announced. In a dramatic late-night appearance in the East Room of the White House, Mr. Obama declared that “justice has been done” as he disclosed that American military and C.I.A. operatives had finally cornered Mr. bin Laden, the Al Qaeda leader who had eluded them for nearly a decade, and shot him to death at a compound in Pakistan.

Satyam Investors’ U.S. Lawsuit OvPwC for $25.5 Million [Bloomberg]
Investors in Satyam Computer Services Ltd. (SCS) settled a lawsuit against PricewaterhouseCoopers LLP for $25.5 million related to its audit of the Indian firm that included a $1 billion overstatement of assets. Satyam, the software exporter embroiled in India’s biggest corporate fraud probe, reached a $125 million settlement in February in the class action in New York. Satyam agreed last month to pay $10 million to settle a U.S. Securities and Exchange Commission lawsuit.

The Osbournes — 357,000 More Tax Problems [TMZ]
Clearly the moral of the story is, don’t cancel meetings with your accountants.

Ohio accounting students meet fraud expert [AW]
The old cliché, “If you want to build a better hen house, ask a fox,” rang loud and clear today at The Ohio State University Fisher College of Business. You’re probably familiar with Enron, WorldCom, and Madoff scandals, but do you remember the ZZZZ Best Carpet Cleaning fraud from the 1980s and the man behind it, Mark Morze? Morze was found guilty of stealing $100 million and creating more than 10,000 phony documents and several fake tax returns. None of the auditors, lawyers, and bankers who were charged with examining the books detected the fraud. This legendary tale of deception is now must-read material for accounting and business students, helping them prepare to be able to make decisions that will shape their own careers and lives.

Is Going Public Going Out of Style? [CFO]
No matter how you slice it, the number of publicly traded companies in the United States continues to fall. On the major exchanges, there were 5,091 companies, including foreign-based ones, listed at the end of February, a 2% drop from 2009 and a 42% decline from the peak of 8,823 in 1997, according to new data from Grant Thornton. Looking across all U.S. exchanges, including the over-the-counter (OTC) market, the number of U.S.-based companies has fallen more than 30% since 2000, according to Audit Analytics.

Some Closer than Others: Inside The Berkshire Hathaway Annual Meeting [Forbes]
Aka: Francine goes to Omaha.


Deloitte’s leader makes her case for diversity in the executive suite [Boston Globe]
With less than a month to go as chairman of Deloitte, Sharon Allen continues making the rounds.

E&Y awaits ruling on challenge to ICAI [FT]
Ernst & Young is due to learn this month if it can proceed with a legal challenge that could derail an investigation into its auditing of Anglo Irish Bank, the property lender that had to be rescued by the Irish government in 2009. The Irish arm of the global accountancy network has objected to the way that the Institute of Chartered Accountants in Ireland has probed its work at Anglo Irish before its nationalisation.

New H&R Block CEO Cobb gets $900,000 sign-on bonus [KCBJ]
H&R Block Inc. will pay new CEO William Cobb a base annual salary of $950,000 on top of a $900,000 cash sign-on bonus, plus the potential for millions of dollars in additional compensation. Former CEO Alan Bennett will stay with H&R Block full time until July 31, then get a monthly fee of $15,000 under a one-year consulting contract, according to a Friday filing with the Securities and Exchange Commission. After that, he’s eligible for a one-time cash bonus to be determined by the board.