News

Got Thoughts on Dodd-Frank?

No, Dodd’s hair and Barney’s thriftiness are not at issue here.

Mary Schapiro needs constructive comments from the peanut gallery because this thing is a week old and since some people at the Commission have the attention of Tom Petters, they can’t afford to lose focus.

Just jump over the Public Comments page and let ‘er rip. Any section you want get down with your wonky financial reform knowledge is welcome.

It has not even been a week since the President signed the regulatory reform legislation into law, but at the SEC we are already working to fully implement the dozens of studies and rulemakings required of our agency,” said Chairman Schapiro. “We recognize that the process of establishing regulations works best when all stakeholders are engaged and contribute their combined talents and experiences. We look forward to preliminary public comments in these areas.

Not only that! The SEC needs more people. This 2,000-some odd page behemoth is putting asses in cubes and more of the kicking ass and taking names will be had. Just two ways you can join the good times going on at the SEC.

SEC Chairman Schapiro Announces Open Process for Regulatory Reform Rulemaking [SEC]

Dennis Kozlowski Would Like to Know Why More People Aren’t Outraged About These Epic Tyco Parties

A couple of weeks ago we told you about fired Tyco accountant Jeff Weist who wasn’t really into, among other things, mermaid greeters and costumed wenches. Whether or not he’s not a fan of starfish bikinis wasn’t the issue, it was the principle of the matter.

You see, some Tyco executives got into a bit of trouble back in the day for some accounting fraud but the kicker was the footage of a four-day “Roman orgy” rager in Sardinia. The jury didn’t have much problem throwing the book at former CEO Dennis Kozlowski and former CFO Mark Swartz after concluding that awesome party = crooked execs. Weist figured the company didn’t really need more trouble so he raised a fuss over the expenses for another epic bash that was being planned for execs in the Bahamas.


FOX Business Network’s Neil Cavuto got wind of this and had Weist on his program only to do most of the talking. When Weist was able to squeeze a word in, he didn’t exactly come across as a fun-loving guy but more like your typical accountant that would probably frown on these types of shenanigans. Nevertheless, Weist was given the boot and that has caused a bit of stir – specifically, Weist filing suit against Tyco.

Anyway, a guy that knows a little something about awesome parties – Dennis Kozlowski – caught Cavuto’s little program and felt obligated to write a letter (a copy follows in the following pages) expressing his disappointment.

Koz writes, “As I write this letter in my 6′ x 9′ cell jail cell, all I can muster in response to your show is ‘My, how things have changed.’ ”

Right! Like, how on Earth can you justify stingray feedings? COME ON. You want sexy men and women running around in togas, that’s understandable. You just raid your linen closet and you’re good to go. But can you believe someone would throw a corporate bash in the Western Hemisphere? Shameful.

He goes on to hem and haw that if it wasn’t for some idiot deciding to tape his little bash in Sardinia, which was later shown to 12 Manhattan jurors, he wouldn’t even be in this predicament. Further, DK would like to know where the outrage is re: the mermaids, wenches, tattoo artists, bonuses and so forth, “With the Tyco extravaganza where employees were paid ‘bonuses’ to attend, you have to ask where is the outrage?”

Well? Outrage? Anyone? The man is in a prison upstate and he can’t hear you!



Talking Social Media With the New Jersey Society of CPAs

From the very first day we swapped our totally unprofessional Twitter account for one with less F-words and started finding accountants to follow, we have been constantly impressed with the concentration of accounting folks in social media. But in the constantly-evolving world of Internet communication, there are always a few bright spots that stand out as ahead of the curve, and the New Jersey Society of CPAs’ communications strategy sets itself apart as one such bright spot.

We were able to get a few moments with NJSCPA’s Don Meyer to discuss their strategy, successes and the drive behind their major social media push of the last three years. Operating with three goals in mind – driving member retention through a greater level of engagement for current meorking and learning opportunities for current members; supporting existing membership acquisition programs – the NJSCPA has learned to use the power of blogs and social networking to reach potential, new and long-time Society members as well as CPA exam candidates across the country. Turns out that we got way more insight into the NJSCPA social media brain than we can share here and were terribly impressed by their varying campaigns, daring strategy and dedication to delivering information.


AG: First things first: let’s talk about your social media campaigns. What sort of things are you heavily involved in and why?

DM: We launched our first blog, NJSCPA Exam Cram, about three years ago to help guide student members and exam candidates through the exam process. We’ve been on Facebook for almost two years and have attracted more than 1,800 fans. We developed our page to maintain contact with student members who sometimes change mailing addresses and emails following graduation, but we now find that the page is a valuable source of professional and Society information for members in all age groups. Our LinkedIn group, launched almost two years ago, serves much the same purpose, providing information for our members and a place for them to connect. We jumped into Twitter about a year ago. We currently have more than 700 people following us. Our Twitter page is linked to our news blog, CPA Observation Post. We use those tools to provide daily professional and Society updates, but we also use Twitter and the blog to help NJ accounting firms promote themselves.

AG: Is there anything you’ve tried that hasn’t worked out as well as you’d hoped?

DM: We tried a financial literacy blog, but we couldn’t generate much interest. I think there may be too much competition out there and we couldn’t find the right niche. Our financial literacy Facebook and Twitter pages have not taken off as quickly as we had hoped.

AG: Anything that really surprised you when it comes to social media?

DM: I was not a believer in Twitter before we started using it extensively last year. Now I think it’s my favorite social media site. I think it’s a great tool for disseminating news and information quickly and easily. I’m also surprised how successful our Facebook advertising has been. I was skeptical that anyone on Facebook would click on ads promoting our page, but it’s played a key role in helping us promote our presence.

AG: The NJSCPA Exam Cram blog has been around for awhile (we noticed it quite some time ago) and seems to get a great response. Can you tell us more about how this came about and how you select exam candidates to participate? Do you follow them after they’ve successfully completed the exam?

DM: Many of us involved in the Society’s student outreach programs have never taken the exam, so we felt we needed to get the perspective from aspiring CPAs who had experienced the ups and downs. This way if a student or candidate asked us a non-technical exam question (e.g. in what order should I take each section, how should I study, how do you feel when you fail one part of the exam, etc.) we could refer them to the blog. We started out with one blogger but soon discovered that work and personal commitments would preclude any blogger from posting as often as we would like. So we gradually added more bloggers. At the moment, we have five CPA Exam candidate bloggers and one staff person blogger, Janice Amatucci. We don’t have a set procedure for how we pick our bloggers. We ask student members who have been involved with the Society through one of our various student programs or simply ask for volunteers via email or at events. The first five bloggers all passed the CPA Exam and continue to contribute to the NJSCPA by writing articles, serving as team leaders at student events or attending other Society events. To date, we’ve attracted more than 72,000 pageviews.

You can find the NJSCPA all over the place online here.

NASBA Gives Its Accounting License Library a Makeover

For those of you that aren’t already aware, we implore you to check out NASBA’s incredibly useful Accounting Licensing Library – a comprehensive, continually-updated database that can help future CPAs find a state in which to be licensed and offers accounting firms access to important state data to assist in their efforts across state lines. In other words, the tool’s main goal is to facilitate mobility by bringing all 55 jurisdictions together in one easy-to-use area while offering a one-stop shop for those considering CPA licensure.

We recently got a chance to chat with NASBA General Counsel and Director of Business Development Maria Caldwell about the new ALL.


The new ALL tool features a new section for accounting students, an enhanced state requirement comparison research tool and expanded product information. The refreshed ALL website offers the same features and benefits as the previous site in a more user-friendly format. Users can find detailed licensing information and even use their research tool to determine if their educational requirements meet any state’s licensure requirements without having to click through each state board’s website individually. This is huge for candidates and for NASBA, as it allows them to spend more time dealing with candidate issues and less time pointing candidates in the right direction.

The birth of the ALL actually began within NASBA four years ago as they wanted a single resource for internal use that would take each state board’s requirements and aggregate them into one place. “There really wasn’t one source to go to and look up all these different rules, so that was the impetus for putting the tool together,” Caldwell told us. “We wanted to offer it to firms at first but once it was out there we realized there were several different audiences using it. Students use it as a licensing tool and international candidates use it as well.”

With over 700 candidates accessing the tool per year (before the makeover) and a significant leap in CPA exam applications since the first whispers of an economic downturn in 2008, interest in the tool and CPA licensure does not appear to be waning any time soon.

Beyond the licensure aspect of the tool, the ALL gives both individuals and firms a way to improve their own economic outlooks by reaching across state lines to find clients. “In this kind of environment, the firms are looking to neighboring states if their state is suffering from a lack of business,” Caldwell said. The tool allows for mobility without firms wasting countless hours combing through state requirements and allows CPAs in a specialty practice to meet the needs of clients who may be in areas that lack qualified accountants who offer their specialized services.

As the CPA exam prepares to go international, NASBA is counting on increased interest in not only the ALL but the all-important CPA designation. Let’s face it, not every industry can say it has weathered the economic downturn as well as CPAs have and passing the exam is still considered a prestigious accomplishment across the globe.

Great job, NASBA, we definitely approve!

What Would the Nonprofit Sector and Community Solutions Act Accomplish?

Representative Betty McCollum is upset that small businesses have the Small Business Administration but nonprofits don’t get a Nonprofit Administration to evaluate, build and monitor the capacity of America’s vital nonprofits. She believes nonprofits are an invisible but vital part to the economy and overlooked by Washington, DC except when it comes to tax issues.

She writes in the Hill:

This legislation represents a significant step toward creating a more effective partnership between the federal government and the nonprofit sector. H.R. 5533 establishes a new United States Council on the Nonprofit Sector. The Council will be a forum for leaders of nonprofits, foundations, businesses and government to discuss strategies for strengthening the nonprofit sector. The bill also creates an Inter-agency Working Group on the Nonprofit Sector. This group will ensure that high-level representatives from cabinet agencies and other key agencies coordinate and improve federal policies pertaining to nonprofit organizations. Finally, the legislation directs Federal agencies to collect and publish better data on nonprofits AND to support research that will lead to smarter Federal policy.

The goals of the Nonprofit Sector and Community Solutions Act are to build a stronger nonprofit sector, craft smarter federal policy, and create more vibrant communities in every state across the country.

Listen, we love working groups as much as the next cube-dweller but haven’t yet seen a copy of the Bill so can’t say either way at this point. What we do know is that the nonprofit sector is large enough to be in need of some help beyond whatever pestering they get from our friends at the IRS.

According to a 2009 Congressional Research Service report, nonprofits (mostly charities) make up over 5% of U.S. GDP. Charitable organizations are estimated to employ more than 7% of the U.S. workforce, while the broader nonprofit sector is estimated to employ 10% of the U.S. workforce. In 2009, nonprofits filing form 990s with the IRS reported approximately $1.4 billion in revenue and nearly $2.6 billion in assets.

Those numbers do not include the estimated 215,000 charities who have neglected (or completely blown off) their 990 responsibilities.

Update: Ms McCollum’s office was kind enough to get in touch and provide us with more information and a direct link to the Bill. We look forward to seeing how this works out.

More Than a Few People Didn’t Heed the ABA’s Advice re: “Fair Value Sucks” Letters to the FASB

Just last week we mentioned the American Bankers Association and its efforts to undermine the FASB’s latest fair value proposal that, in the ABA’s mind, could bring down civilization as we know it.

Because of this danger, the ABA encouraged “investors” through email and on its website to write individual letters to the FASB, expressing their displeasure with the worst idea in the modern history of double-entry accounting. We say “investors” because the ABA not-so-subtly asked everyone (i.e. who felt the overwhelming urge to write Bob Herz & Co.) to refer to themselves as such.

Further, the ABA provided a template of a letter to send to the Board for the “investors,” however, it did warn to resist using the example as their own because A) this is far too important and telling the FASB that fair value pains you in the deepness of your soul and takes food out of your children’s mouths will be a far more effective narrative; and B) the FASB hates form letters. HATES. So much so that Bob Herz rips up all his gold stars that he gives for the constructive letters he receives and then your unoriginal ass gets negative points.

The group urges investors to “write your own letter — the FASB does not appreciate ‘form’ letters, and often discounts them in their analyses.”

Simple enough, right? Well, maybe. But In his column today, Jonathan Weil gives an example of one ABA soldier that wasn’t very good at following instructions:

Among the letter writers was Terry L. Stevens of Francesville, Indiana, who identified himself as a bank investor, as the ABA had suggested. He didn’t mention that he also is chief financial officer and executive vice president of Alliance Bank, a closely held lender in Francesville with $270 million of assets.

“As a bank investor, of utmost importance to me regarding the banks in which I own stock is their financial position, and transparent financial reporting is key in order for me to make investment decisions,” Stevens’ letter said. “With this in mind, I am writing to express my deep concerns and opposition to the portion of the proposal that requires all financial instruments to be marked to market.”

Stevens didn’t write those words himself. He copied them verbatim from a sample letter the ABA posted on its Web page. So, too, did a bunch of other bankers who submitted comment letters to the FASB opposing its proposal, notwithstanding the ABA’s warning that they shouldn’t do cut-and-paste jobs.

This had to be a mistake, right? This is far too important of an issue to the banks of this country that a mishap like this could just happen. Bankers are responsible people that take this stuff very seriously and would never risk going through the motions just to serve at the whims of their lobby’s voice…would they?

Stevens told me he didn’t have time to write his own letter from scratch. “The points that I grabbed out of their paragraphs did a good job of explaining how I felt about the situation,” he said.

Oh.

Stealth Bankers Bomb as Anti-Reform Crusaders [Jonathan Weil/Bloomberg]

Job of the Day: AllianceBernstein Needs a Senior Auditor

AllianceBernstein is looking for an experienced auditor to join its internal department in New York.

Ideal candidates have a minimum of five years experience with exposure to alternative investment products. Advanced degree or certifications are preferred.


Company: AllianceBernstein

Title: Senior Audit Associate

Location: New York

Description: We are seeking a seeking a Senior Audit Associate with strong business and/or audit experience in Alternative Investments to join our Internal Audit Department. This position is an opportunity for experienced professionals to join a dynamic team to deliver value added audit services.

Responsibilities: Assist Audit Management in carrying out the annual audit plan; Assess the accuracy and adequacy of financial information and the Company’s internal control structure; Assist Audit Management in accomplishing certain administrative tasks; Supervise and work with junior auditors; Through continuous monitoring, keep current as to the development of relevant industry, regulatory and corporate matters that may affect the Internal Audit Department’s audit scope.

Skills: Our ideal candidate will have 5 to 10 years of broad capital markets experience with an emphasis in alternative investment products and services. College degree required. Advanced degree and/or certification preferred. Candidates should have demonstrated leadership capability, strong team work capabilities, solid written and oral communication skills and excellent, analytical skills. Candidates must have the ability to interact with all levels of management; Knowledge of the buy-side investment management business is a plus. Prior audit experience is preferred, but not required. Candidates should demonstrate a firm grasp and good working knowledge of the suite of Alternative Investment products and services including: Hedge Funds – direct investments and Fund of Hedge Funds.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

Accountant Claims That She Has Trouble Controlling the Volume of Her Voice

This is understandable. We know a few people that have been accused of being “angry” when, in fact, they are just being “loud.”

Negros Occidental Provincial Accountant Merly Fortu denied on Sunday that she acted with arrogance and hostility when she met with the elected provincial government officials on July 1.

Fortu, who faced administrative charges for grave misconduct and gross insubordination for allegedly shouting at elected provincial government officials during the meeting, explained that her normal speaking voice was “a little bit louder” than others.

It is similar (albeit the opposite) to having shy/asshole confusion.

Job of the Day: J.P. Morgan Needs a Fund Accounting Analyst

J.P. Morgan is looking for an experienced accounting to fill a fund accounting analyst position in its Dallas location.

Qualifications include a bachelors degree and five years experience


Company: J.P. Morgan

Title: Fund Accounting Analyst

Location: Dallas, TX

Qualifications: Bachelor degree required, degree preference is Finance, Accounting or Economics; 5 years experience in the banking industry, preferably in financial accounting operations 3 yrs securities industry knowledge including dividends, principal & interest, corporate actions and trading activity; Proven managerial experience – 1 – 3 years; Advanced knowledge of account reconciliation processes; Strong analytical, prioritization, organizational and time management skills; Strong multi-tasking and negotiation skills; Strong communication skills, both oral and written; Excellent customer service skills with attention to detail; PC literacy with proficiency in MS Word, Excel and MS AccessCapable of assisting others in research and reconciliation tasks; Team player with the ability to work productively within a group and maintain a high degree of independence.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

One McGladrey Office Opts to Celebrate the Rebranding with a Cult-like Ritual

Leftovers of the freakishly repulsive cake that McGladrey rolled out for its rebranding was apparently not shared with other offices because the crew in Phoenix/Las Vegas took it upon themselves to come up with another method of celebration.

“After we returned from brand champion training in Orlando, the three of us met to brainstorm for ideas to make our local brand launch fun and memorable. We wanted to focus on more than just the launch. We wanted employees to know that a brand launch is only successful if the brand becomes part of everything they do.”

What exactly was the idea? Another cake? A surprise appearance by Natalie Gulbis? Keeping your jobs?


No, the creative minds in Phoenix/Vegas decided that gathering everyone together and asking them to drink blue Kool-Aid™ was the best way to show everyone that they are in this together. DO OR DIE.

“Asking employees to ‘drink the McGladrey Kool-aid’ sends the message that we all need to be in this together,” says ——. “And there’s no opting out if we’re going to make this effort a success.”

Pardon what is about to follow but…WHAT. THE. FUCK? Forget about the literal manifestation of a corporate metaphor, which is all sorts of lame (no on is schlepping an 800 lb. gorilla into HQ, are they?). Ever heard of Jonestown? Aren’t we all just a little too trusting with this “drink this” attitude? “Hey, just drink this Dixie cup that’s full of what we say is blue Kool-Aid™ because it will bring us all together.”

And you know how they got a lot of people to get on board with this? FREE T-SHIRTS!

“As an added incentive, employees who drank McGladrey Kool-aid from a Dixie cup received their very ownMcGladrey t-shirt.”

All we can say is, don’t walk but run away.

7-9-10 Drinking the Koolaid Article-2

Fired Tyco Accountant Claims That the Company Is Still Throwing Ridiculously Awesome Parties

[caption id="attachment_13953" align="alignright" width="260" caption="Not a legitimate business expense?"][/caption]

Remeber Tyco? Dennis Kozlowski. Mark Swartz. Roman orgy parties. It sounded like a hoot. Too bad the law got in the way.

Koz and Swartz may be locked up but that doesn’t mean the good times at Tyco had to end!

An accounting manager at Tyco Electronics claims that he was ‘coercively’ fired for taking issue with “Tyco’s exorbitant bashes for its CEO Thomas Lynch and other top executives ‘were almost identical to parties for which Tyco’s former CEO [Dennis Kozlowski] was criminally charged and convicted.’ ”

What kind of party expenses you ask? Run-of-the-mill stuff like ‘mermaid greeters’ and ‘costumed pirates/wenches.’

It doesn’t hurt to have a little eye candy at a company bash, amiright? And maybe Jeffrey Weist was okay with the scantily clad roaming hotties and really just took exception with the $2,350 for the tattoo artist (tatts included!) and limbo and fire dancers, $2,500 for chair covers and sashes and the $1,000 hotel rooms.


Whatever lavish (read: kick-ass) expense it was that turned out to be the straw that broke the stuffy accountant’s back, Jeff Wiest not letting this happen:

The complaint adds: “This requested payment seemed particularly inappropriate from a morale aspect, coming in the midst of continued downsizing pressure, and seemed contradictory in that this one party equated to approximately seven positions for one year in the accounts payable function managed by Wiest,” according to the complaint.

Wiest says that despite his objections, “it was decided to go ahead with the event, to treat the proportionate share of the party as income, and to ‘gross-up’ the bonuses to the employees involved. In other words, the company would pay each highly paid employee an additional amount of cash beyond the value of the trip in order to cover his/her tax liability.”

This approach brought “the total cost of the event to approximately a half million dollars,” according to the complaint.

He claims that each high-ranking Tyco employee was awarded up to $7,500 per person, or $15,000 per couple, as additional “income,” for attending the party. All of the 30 employees who attended were receiving salaries of more than $102,000, Wiest says. He adds that 23 of them took their wives.

And they got paid to go! What is going on at Tyco? Other than it’s the best place to work EVER.

Back to Wiest. For taking high road, Weist alleges that Tyco turned the screws back on him:

In response to his repeated questioning of these extravaganzas, Wiest says, Tyco began an “investigation” of him. This led to bogus accusations that he had made sexually oriented comments, Wiest says.

“Examples given included a comment to an employee going on a honeymoon cruise to not stay on the ship the whole time; a comment about his wife’s hormone issues during her pregnancy being difficult for him, and a comment regarding the uses of improved flexibility from working out. It is noteworthy that the hormone comment would have been several years old, as Wiest’s child was born in 2006,” the complaint states.

He claims Tyco also raised questions about a decade-old brief relationship he had had with a California-based Tyco employee, and baseball tickets that Wiest had been given by a superior.

Jesus. If they would have just invited him to the party, we probably wouldn’t have to go through all this.

Same Old Tricks at Tyco, Accountant Says [Courthouse News Service]

McGladrey to Give Money to Another non-Natalie Gulbis Golfer

Hell, they did even go with another woman. They figured making Davis Love III the third dude golfer to be sponsored by McGladrey was the best route.

Although no terms were disclosed on DL-cubed’s deal, we’re guessing it’s a decent deal, not Phil Mickelson money mind you, but he won’t be starving either.


And DL3 is pretty flippin’ pleased to be the third amigos, “Following the great work McGladrey has done with the Davis Love Foundation, it was a natural progression for me to join Team McGladrey and proudly support their brand in the way they’ve supported my Foundation. It was great to kick off my new sponsorship with McGladrey in style with a good showing at the U.S. Open, and I look forward to continued success on and off the course as a member of Team McGladrey.”

Likewise, C.E Andrews is pumped to have a 3rd join the team “Davis and the rest of our Team McGladrey Foursome demonstrate the values of integrity, excellence, understanding and teamwork – values that mirror our company’s approach to serving and understanding our clients.”

[caption id="attachment_13910" align="alignright" width="260" caption="All alone in the boys club."][/caption]

Unfortch for all of us, D Love stayed on script and didn’t mention Natalie Gulbis specifically which just reeks of a “bros before hoes” mentality. If McGladrey wants to sponsor a boys club, that’s their business but you can’t tell us that adding another lady on the team wouldn’t have worked just as well, if not better. Oh well. We’re sure Natalie will enjoy watching the three dudes ice each other at the joint appearances.

McGladrey Inks Deal with PGA TOUR Veteran Davis Love III, Makes Team McGladrey a Foursome [McGladrey]

The ABA Is Encouraging Everyone to Be Original in Their “Fair Value Sucks” Emails to the FASB

Banks hate the FASB. This is understood. They’re especially bent out of shape these days because the Board recently put out its latest fair value proposal that requires them to carry their loans at fair value. Bob Herz knew that this was going to cause hella-belly aching although he may not have predicted the virtual assault that was coming.

Banking lobbyists have launched an e- mail and Web campaign to mobilize investors against a proposed expansion of fair-value accounting rules that may force banks such as Citigroup Inc. and Wells Fargo & Co. to write down billions of dollars of assets.

The American Bankers Association opposes the Financial Accounting Standards Board’s plan to apply fair-value rules to all financial instruments, including loans, rather than just to securities. The group says the rule could make strong banks appear undercapitalized.

The association’s website, noting that FASB’s stated mission is to serve investors, provides a sample letter for people writing to the board and suggests they focus on why the proposal isn’t “useful for investors.”

As you can see, the banks are bringing out the big guns, although this not unfamiliar territory for the FASB. Lynn Turner, a Senior Advisor and Managing Director at LECG and former Chief Accountant SEC wrote in an email to GC, “This campaign is very similar to the efforts of the technology companies campaign against the FASB in 1993-95 to prevent rules that would have required those companies to expense the value of their stock options, something that ultimately led to investor losses and problems in the markets.”

The FASB prevailed in that particular battle but the ABA is wise to their ways, encouraging everyone to resist going through the motions on this one:

The association’s Web page, titled “Guidance for Investors Regarding FASB’s Mark-to-Market Proposal,” includes a sample letter to the board “for educational purposes only.” The group urges investors to “write your own letter — the FASB does not appreciate ‘form’ letters, and often discounts them in their analyses.” Those who comment should “let FASB know that you are an investor,” the ABA says.

So resist the urge to copy and paste anti-FASBites. They won’t really know how deep your loathing is for MTM if you go with the standard letter.

U.S. Banks Recruit Investors to Kill FASB Fair-Value Proposal [Bloomberg BusinessWeek]

Russian Spy Who Attended CFO Conference Was That Annoying Person You Can’t Shake at Such Events

Donald Howard Heathfield is “Defendant #4” of the eleven alleged Russian spies and it turns out that he was playing pretty true to the part of a go-getter executive looking to network his ass off.

CFO reports that “prodigious networker” Heathfield attended the CFO Rising Conference that was held in Orlando in March and he was well remembered by some of the other attendees. Not only for his persistence (we’re imagining really aggressive handshakes, name tag prominently placed, business cards in a holster) but for his just plain weirdness and his ginormous business card:

“I met him early on in the conference, and he was very persistent in trying to reengage,” recalls John Kahn, CFO of a private-equity-backed portfolio company. “I didn’t reengage with him. He just seemed slightly strange.” Kahn still has Heathfield’s business card, which folds out to twice the size of a normal business card and contains a somewhat inscrutable description of the company’s mission: “Future Map gives leaders a synthetic ‘big picture’ of anticipated future. Future Map helps building proactive collaborative leadership cultures.”

Frankly, the “inscrutable description” doesn’t sound that much different from all the other hustlers out there but whatever. Supposedly this was extra, extra inscrutable, even by business conference standards. Anyhoo, another attendee just found DHH to be flat out annoying:

He started talking to me, and I couldn’t shake him,” says Frank Quigley, CEO of CFO Publishing, who remembers Heathfield approaching him in a hallway outside the meeting rooms and seeking introductions to specific conference speakers and attendees. “There was no doubt in my mind when I saw his photo that I recalled the encounter and the persistence of it, and the vagueness of who he was.”

Obviously Mr Quigley did not have any pre-arranged signals to get him out of bad convos. HUGE MISTAKE.

Back to our Russian friend – if you visit his LinkedIn page you’ll see that he keeps it similarly inscrutable with a past position being, “Partner at Global Partners, Inc.” and specializing in “Comprehensive management of Risks and Uncertainties, Anticipatory Leadership, Building of Future Scenarios, Development and Execution of Future Strategies, Capture of Strategic Opportunities, Global Account Management.”

Considering his use of buzzwords, we’re not surprised at all that he was able to blend in so well. No word on the prevalence of acronyms but despite what people are saying, he was more like them then they could possibly even realized.

Spies Like…Us? [CFO]

Compensation and Promotion Watch ’10: Discussions at McGladrey Starting Soon; Forced Ranking in Effect?

[caption id="attachment_13722" align="alignright" width="260" caption="Has she gotten her updated gear yet?"][/caption]

It sounds like the capital market servants at the firms formerly known as RSM McGladrey/McGladrey & Pullen will finding out their good/bad/tremendously underwhelming news about comp and promotions in the coming week(s).

That and it sounds as though Mickey G’s is warming up to the forced ranking system that has been plaguing the Big 4:

Just wanted to pass a bit of info across to you about McGladrey comp discussions. They communicated to us in an email last week that all ratings and promotion decisions are now final and will be communicated to us no later than July 23rd.

Also, I’m based out of the the southeast and they told us that about 25% of people were initially rated 5s (our highest rating) and that they had to downgrade peoples ratings to in line with the 10% to 15% bell curve range. I have this from a direct source of a director inside the “roundtable” meetings or whatever they’re calling them now. Not sure if this is a nationwide occurrence.

We don’t know if the downgrades are standard operating procedure at the firm but one would think that the layoffs at McGladrey that we reported on last month are over. The problem is that if this is following standard forced ranking procedure, it could be setting up experienced professionals for competitive year ahead.

Keep us updated as you learn merit and promotion news and discuss your thoughts on this year’s prospects and the possibility of downgrades.

Why Aren’t We Discussing Financial Reform’s GASB Effect?

If we still care about financial reform, we should especially care about proposed changes to the Government Accounting Standards Board because, let’s face it, government accounting could really use a helping hand. Were government pensions forced to use the same reporting rules as every other pension, a $3 trillion hole would open up and we would see immediately that rules in desperate need of repair have remained broken because the current system allows the truth to be buried in the footnotes.

As is, GASB is funded by voluntary contributions given by state and local governments out of the goodness of their hearts (yeah right) and through sales of its publications.

The concern is that should GASB be unable to pay the bills, the federal government may be forced to swoop in and babysit. The potential for conflicts of interest should not escape dear reader as this would be akin to investors owning the SEC or Fed-regulated banks owning the Federal Reserve (oh wait, they already do). Is that any worse than what we’ve got now?

How bad is their financial situation? GASB reported a $3.83 million budget shortfall in 2009 and projected a $4.46 million shortfall for 2010.

So why, if we’re still talking about financial reform, are we not talking about its potential impact on GASB?

Under new financial reform rules, the GAO would be forced to evaluate GASB’s role (read: usefulness) in standards setting within 180 days of the proposal’s passage. How likely would it be for the GAO to call an issuer-funded agency that’s allowed government pensions to conceal $3 trillion in liabilities a blaring and obvious failure? The SEC could then direct FINRA to collect assessments from dealers that would go towards funding GASB. Obviously this piece of legislation has been written by Congressmen who don’t know how to do anything without making it as complicated as possible.

Financial reform has already cleared the House while the Senate is expected to vote within the next two weeks after returning from recess.

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor. You can see more of her posts here and all posts on the CPA Exam here.

An Accountant’s 4th of July Weekend Reading | 07.02.10

Happy 4th of July capital market servants, tax wonks and accountants of all stripes. Get out there and make some bad decisions (responsibly of course!) this weekend. We’ll see you on Tuesday unless we get word of another good time gone wrong.

CIT Names Former Cerberus Exec CFO [FBN]
And your winner is Scott T. Parker.

IRS agent: Blagojeviches spent $400,000 on clothes [AP]
Is anyone surprised by this? “Next to their mortgage payments — $392,000 — their second-biggest payment from 2002 to nearly the end of 2008 was $205,000 on Tom James/Oxxford custom clothes, revenue agent Shari Schindler said.”

France Calls Google a Monopoly [Floyd Norris/NYT]
They would.

Couple Accused of Stealing $2M From Veterans [FN]
A couple of septuagenarians no less!


Researchers: Regions’ religiosity cuts down on accounting scandals [Nashville Business Journal]
Bible belt = less accounting scandals? Texas A&M says Hallelujah!

How Bad is the Budget Outlook? [TaxVox]
In a word: prettyfuckingbad.

Governor puts 200,000 state workers on minimum wage [Sacramento Bee]
In the battle between Sacramento and Albany for the most incompetent/corrupt/helpless state government, it appears that Arnie has kicked the efforts up a notch.

Some NY hedge fund execs may escape new tax [Reuters]
Speaking of Albany, the hedge fund manager tax that David Paterson & Co. were kicking around is as good as dead now that Hizzoner got a word in on the matter. Back to the drawing board.

Apple Acknowledges Flaw in iPhone Signal Meter [NYT]
How they got Steve Jobs to cave on this is anyone’s guess.

Koss Files Restated Financial Statements, Just in the Nick of Time

As you may recall, restated financial statements for headphonesmith company Koss were due yesterday and they used all the time they were allowed.

According to our friends aty filed its restated 10-K for June 30, 2009, and 10-Qs for September 30, 2009, December 31, 2009 and March 31, 2010 5 pm, 5:06, 5:11, 5:16 and 5:17 respectively.

Oh and they topped everything off with an 8-K at 5:27 that explains the barrage (not that we need it but, you know, securities law and stuff):

On June 30, 2010, Koss Corporation (“Koss”) released restated consolidated financial statements for the fiscal years ended June 30, 2009 and 2008, and the quarter ended September 30, 2009. Koss filed amendments to its Annual Report on Form 10-K for the fiscal year ended June 30, 2009 and its Quarterly Report for the three months ended September 30, 2009 containing the restated consolidated financial statements for the applicable periods. The restatements were required as a result of previously disclosed unauthorized transactions by Sujata Sachdeva, Koss’s former Vice President of Finance and Principal Accounting Officer.

Koss also amended its Quarterly Reports on Form 10-Q for the three months ended December 31, 2009 and March 31, 2010 to include financial statements, which were omitted from the Company’s reports when previously filed. The release of these financial statements was delayed due to the restatement of Koss’s financials statements required by the unauthorized transactions. With the filings of these amended Quarterly Reports on Form 10-Q, Koss understands that it will regain compliance with Nasdaq Listing Rule 5250(c)(1), which requires the timely filing of periodic financial statements.

That about covers it, doesn’t it? Oh right, the actual numbers. We checked in with forensic sleuth and GC friend Tracy Coenen on these and she gave us some perspective on the restated numbers:

So I’ve taken a run through the restated numbers for 6/30/09 and 6/30/08. Very interesting.

2009 – Revenue was understated by $3.5 million to conceal the fraud, while COGS was overstated by $1.7 million. Overall there is now a loss for 2009, thanks to $8.5 million of theft, but without that, the company would have had profits of $8.2 million, or 19.6% on net sales. Wow!

2008 – Revenue was understated by $2.1 million to conceal the fraud, while COGS was overstated by $1 million. Overall there is now a loss of 2008 of $1.3 million thanks to $5.1 million of theft, but without that, the company would have had profits of $10.7 million or 21.9% of sales.

Pretty impressive stuff. Maybe the company was right when they said everything would be hunky-dory once they got this little mishap out of the way. Chief headphone inheritor Michael Koss explains in the company’s press release, “Given that certain unauthorized transactions were concealed in the Company’s sales and cost of sales accounts, our sales were higher and our cost of sales was lower than previously reported in both 2009 and 2008. This correction has revealed an increase in gross margins for our Company. From this perspective, the Company’s performance was actually stronger than originally reported.”

Tracy continues:

What you see is that 65%-75% of the theft on an annual basis was concealed on the P&L, and the remainder was dumped into the balance sheet, via inflated A/R, Inventory, and fixed assets, and understated liabilities. The adjustments on the balance sheet are large by 2009 because those irregularities were cumulative.

So the bottom line is that the company is very profitable, if shareholders could actually count on them to watch over the money and see to it that the profits aren’t all being stolen. My original theory was that Sachdeva was expensing her theft, and that’s true to some extent, but failure to record sales was presented to me later as part of her her scheme, and she also involved the balance sheet which created a cumulative (and messy) problem.

Oh right! Watching the money. Should probably write that one down. Hopefully we’ve all learned a valuable lesson.

That Orangey Glow Will Be a Little More Expensive Today as Tanning Tax Takes Effect

Everyone in the melanoma-for-sale business is perplexed about the tanning tax that goes into effect today and the Journal reports that the hella confusion is mostly about why some businesses are able to dodge the tax while others are not.

Case in point, health clubs get to offer their George Hamilton specials tax free while video stores (?) that offer tanning do not.

When Jeanne Chamberlain turns up at work Thursday, she’s going to have to grapple with America’s first federal tax on tanning services, a 10% levy designed to help pay for Congress’s health-care overhaul.

Ms. Chamberlain runs a video-rental store.

These would normally be unrelated facts, but 20 years ago, Ms. Chamberlain followed a number of her peers in adding tanning services to smooth out the bumps in her Rice Lake, Wis., business. Today, she wants to offer one free tan for every three rentals. Should that freebie be taxed? Ms. Chamberlain doesn’t know, and even if she did, she doesn’t yet have the software in place to help with the calculations.

For starters, video stores still exist? We had just assumed that they had gone out with powdered wigs. Netflix, Hulu, etc. etc. And since when do they offer tanning services? “Oh I see you’ve got Gigli there, great choice. Would like to hop in one of our tanning beds while I rewind the tape?”

Anyway, back to the tax:

Among the new details: “qualified physical fitness facilities” that include access to tanning beds as part of their membership fee won’t be subject to the tax.

That means customers at Sun Tan City in Owensboro, Ky., will pay 10% more for a dose of ultraviolet rays. But if they go to Anytime Fitness 100 yards away, and tan inside one of its two beds, they’ll escape.

“My jaw dropped,” said Rick Kueber, founder and chief executive of Sun Tan City, a 124-outlet chain based in Elizabethtown, Ky. Then he got to thinking. “If I had six treadmills in each of my stores, can I call myself a health club?”

Can anyone explain this? Our best guess is that since health clubs force you to get you off your ass, while video stores put you back on them, they’re getting a break. That seems to be pretty advanced for Congress logic but we’ll assume that it’s in the ballpark.

But It’s really NBD for the committed to skin cancer crowd however, “[Fifteen-year-old Grace] McCleary and others who lounged last week in the notorious Land of the Tanned – see MTV’s Jersey Shore – said a few dollars tacked on wouldn’t deter them.”

Fortunately, the IRS has advice (as it always does) for those affected and our resident tax sage, Joe Kristan has the details. So, there’s no risk to the industry as a whole – thank god – just a little extra bureaucracy in the pot in the form of Form 720. Enjoy!

Federal Tan Tax Burns Some Badly but Keeps Everybody in the Dark [WSJ]
Tanning-bed enthusiasts say tax won’t deter them [Philadelphia Inquirer]

Toys R Us Accountant Will Probably Not Have Much Success Asking Hookers to Return Stolen Money

Back in fall we mentioned a run-of-the-mill whore-supporting accountant that pleaded guilty to ripping off Toys R Us to the tune £3.7 million. Paul Hopes is described as a ‘Walter Mitty character’ by the Telegraph who can now fantasize about what Oz character he is, now that he’s spending 7 years in prison.

Hopes got more bad news recently as he learned that he has to repay £3.36 million of the £3.68 million from Geoffrey.

If he fails to repay the money, he see his sentence more than doubled with an extra 10 years in prison.

The court heard that Hopes, an “accounts payable manager” at the retailer, diverted regular instalments of £300,000 to an account of a fictitious toy manufacturer which he controlled.

He named the fund Dunbar Associates after a prostitute with whom he had become besotted and to whom he eventually handed a total of more than £1.5 million pounds.

He spent at least £2.4 million of the money he stole on five female escorts in all.

That’s a bitch about the additional 10 years if doesn’t repay. But we’re sure that he placed the remaining £900k into a safe, no-load mutual fund so he’ll be able to at start paying at least part of it back ASAP. The sensible accountant in him had to have made one decision with stolen money.

As for the rest of it, we don’t know how successful Johns are at getting refunds in circumstances such as these but if those girls were 100% satisfaction guaranteed, he’ll have to explore other options.

Toys R Us accountant ordered to pay back £3.4m after escort girl fraud [Telegraph]

Turns Out the Guy that Joe Biden Called a Smartass Is Just an Ass

Yesterday we learned about Joe Biden not taking too kindly to a custard shop manager’s suggestion that he can eat all the free custard he wants as long as JB & the rest of the crew “lower our taxes.”

The Veep retorted that maybe the dude in the funny paper hat should try saying nice for change instead of being a smartass. It was the typical Joe Biden charm that you would expect. Perhaps he should have suggested visiting the White House’s tax savings tool instead of name-calling but the past is the past and we’ll just chalk up another Joe Biden moment of hilarity/political liability.

But wait! What if the VP was right about this portly custard slinger? We read over a little mini memoir over at Daily Intel that indicates that the guy probably had it coming:

First of all, as anyone who has ever lived in Milwaukee knows: Kopp’s Frozen Custard is the most delicious dessert on the planet. It’s basically ice cream with twice the fat. So when Smilin’ Joe Biden showed up at Kopp’s in Glendale, Wisconsin, last week, you can only imagine his annoyance at being interrupted in the middle of his first taste — from the looks of things, Friday’s special flavor, chocolate chip cookie dough — by a store manager cracking that the cone was free, as long as the vice-president would agree to “lower our taxes.” Biden being Biden, he called the manager “a smartass.” And who was that smartass? None other than my nemesis of twenty years ago — the first boss I ever hated and feared.

Said smartass is Scott Borkin and the author of this piece, Dan Kois, proceeds to tell a tale of a lunatic boss from hell (thanks, Richard Lewis):

Once, very late on a long, hot night of customers piling in and the custard machines jamming and the store’s owner, Carl Kopp, walking around in his apron and hat terrifying everyone, Scott Borkin came over to collect a shake for order number 87. “What the hell is this?” he asked me.

Inside, I panicked. What had I done wrong this time? But I had the ticket right in my hand — malt with chocolate — and was positive that’s what I had made. “It’s a chocolate malt.”

“No, this,” he said, pointing at my Sharpied “7” on the lid. I’d written it with a line through the center because once someone had mistaken my non-lined 7 for a 2.

“Uh, it’s a seven,” I replied.

“This is a seven,” he said, taking the ticket from my hand and drawing a non-lined numeral. “Do it right or you’re outta here.” He plucked the malt off the counter and stalked away. “This isn’t Germany!” he called over his shoulder.

Christ. Threatening termination because of lined 7 and anti-Germany? PLUS he likes bitching about taxes? This guy could be the next Joe the Plumber. Oh wait, he’s already been on Fox & Friends. Mission accomplished.

Today in Auditor Musical Chairs: KPMG and Deloitte Both Get the Boot

Evergreen Energy of Denver dismissed Deloitte effective June 23rd according to the company’s 8-K filing. Hein & Associates, a local Denver firm, will take it from here.

It stands to reason that Evergreen didn’t appreciate the going concern opinions that Deloitte gave the company for its December 31, 2009 and December 31, 2008 financial statements but in cordial SEC filing fashion, there are no parting shots from the company.


Evergreen’s press release indicates that this was simply an opportunity to throw some action to another firm (most likely with lower fees), “With the sale of certain Buckeye assets and our exit from the coal mining industry, Evergreen Energy has transitioned into a green technology company. This is an ideal time to switch to a Denver-based regional accounting firm with substantial public company expertise in the clean technology and software industries that can more cost effectively meet our needs.”

Deloitte’s letter to the SEC is abruptly admits that everything is cool rather than flat out saying, “you’ll be sorry you ever ditched us, you losers.”

Similarly, Measurement Specialties, Inc. showed KPMG the door for Ernst & Young. The company says everything was hunky-dory between the two although there was a small matter of the internal controls around a significant joint venture of which the company had no control. Oh, and the effectiveness of internal controls of some recent acquisitions also couldn’t be determined. But it was cool and the company said, “it was in the best interests of the Company to change its independent registered public accounting firm.”

KPMG has NFI what that means saying in their letter, “we are not in a position to agree or disagree with Measurement Specialties, Inc.’s statements relating to the reason for changing principal accountants.”

We wish everyone nothing but happiness.

What Are People Saying About the PCAOB Decision?

In case you’re just joining us on this MOANday, the SCOTUS ruled this morning that “the structure of the accounting board violated constitutional separation-of-powers principles because it was too difficult for the president to remove board members.”

So, pretty wonky legal stuff. The good news is that auditors will get to keep their jobs (mixed feelings, we’re sure) but what’s the reaction at large?


PCAOB – The PCAOB, for one, is just excited that the SCOTUS is still letting them play. Sayeth interm Chairman for life Dan Goelzer, “We are pleased that the decision allows the PCAOB to continue without interruption to carry out its important mission of overseeing public company audits in order to protect investors and promote the public interest.”

SEC – Likewise, SEC Chair Mary Schapiro is fine with the decsion too, “I am pleased that the Court has determined that the Board’s operations may continue and the Sarbanes-Oxley Act, with the Board’s tenure restrictions excised, remains fully in effect. The PCAOB is a cornerstone of the Sarbanes-Oxley Act and serves a critical role in promoting investor protection and audit quality. We look forward to continuing to work with the Board in connection with its mission to oversee auditors in order to protect the interests of investors and further the public interest in the preparation of informative, accurate and independent audit reports.”

Wall St. Journal – Suzanne Barlyn over at Financial Adviser writes that the small broker dealers won’t get the much coveted relief on their audit fees, “Historic financial regulatory reform legislation, which may be enacted as soon as July 4, would empower the PCAOB to regulate auditors of privately held broker dealers, who would then be subject to the organization’s inspections and possible enforcement actions. The potential change could mean auditing fees as high as $50,000 to $100,000 per year for certain broker dealers, instead of the $5,000 to $10,000 they typically shell out now.”

And Michael Corkery at Deal Journal writes that there is disappointment out there for the über-haters, “Dashed are the hopes of some corporations who believed the Court would use this case to question the broader issues of Sarbanes-Oxley, which critics say has buried publicly traded companies in onerous regulation and paperwork.”

Former SEC Chairman Harvey Pitt – Former Chairman Pitt is less thrilled, telling Bloomberg that the decision was “an unfortunate and serious blow” and that even if Congress could squeeze there regulatory fix into the current reform bill, “in the two thousand pages of the legislation…there’s not a word dealing with the PCAOB That is something that will have to be fixed.”

DealBookPeter Henning of White Collar Watch is fairly unmoved, “[T]he decision in the Free Enterprise Fund case has no real impact on the operations of the Public Company Accounting Oversight Board beyond removing a cloud as to its continued viability. The likelihood one of its members would be removed by the S.E.C. is virtually nonexistent, and its oversight and enforcement powers continue undisturbed. Similarly, the Sarbanes-Oxley Act remains fully in force beyond the narrow constraint on removal of a board member that is no longer operative.”

The EconomistSchumpeter’s Notebook is thankful that the entire law doesn’t have to be rewritten in the current legislative environment, “[I]t is probably a good verdict from business’s point of view. Companies have spent millions on SOX compliance, and had just about got used to the legislation. Moreover, there is no guarantee that a broad reconsideration of SOX, in the current business climate, would produce better legislation. Far from it.”

Ernst & Young – Directly from Jim Turley, “Independent regulation of the profession post-Sarbanes Oxley (SOX) has strengthened audit quality and confidence in financial reporting. We are pleased that the Court’s decision provides that the PCAOB’s independent oversight can continue without interruption. Although today’s ruling found a flaw in a provision within SOX regarding the removal of Board members, the Court held that Sarbanes Oxley remains the law.”

AICPABarry Melancon is as excited as everyone else, “The court’s ruling is a victory for investors and for the accounting profession. The decision effectively fixes the constitutionality of the PCAOB by making board members subject to `at will’ removal by the SEC and therefore the president. It sustains the continued function of both the PCAOB and Sarbanes-Oxley. As such, the court rejected a transparent attempt to undermine the post-Enron reforms that have served our financial markets well.”

Center for Audit Quality – The CAQ filed an amicus brief with court and Executive Director Cindy Fornelli was happy with the result, “The CAQ is pleased that the U.S. Supreme Court’s decision will allow the continued operation of the Public Company Accounting Oversight Board (PCAOB) without any changes or legislative action. This narrow decision clearly severs the PCAOB board member removal process from the rest of the Sarbanes-Oxley Act (SOX) and reaffirms all provisions of the law except for the power to remove the board members. The PCAOB was put in place to achieve the goals Congress embodied in SOX. As we observed in our friend-of-the-court brief, evidence demonstrates that audit quality and investor confidence have improved since the Board’s creation. The decision will prevent any disruption to the key activities of the PCAOB including setting auditing standards and the public company audit oversight process, critical factors in the continued strength and stability of our capital markets.”

Paul Sarbanes and Michael Oxley – The architects, if you will. “The PCAOB provides essential protections to the more than half of American households that invest savings in securities. It ensures the integrity of public company audits and, thereby, the accuracy of financial reporting. The PCAOB enjoys widespread support from investors as well as from the accounting profession. The decision from the Supreme Court adjusts the law in a way that allows the PCAOB to continue to ensure the integrity of public company audits. The Board’s essential protections of American investors will continue.”

SCOTUS Rules PCAOB Unconstitutional; Auditors’ Lives Will Continue to Suck

What does this mean (besides the fact that more than a few partners are eating their hats, shaving their heads, coming to work naked, etc.)?

The Board itself is not unconstitutional and thus will continue operating (sorry E&Y) so it’s not going anywhere. The problem is, Congress will have to get involved in order to and who knows what the brain trust will cook up.


Francine McKenna has some suggestions (including making the part 2 of the inspections public) and Matt Kelly at Compliance Week reported on May 31 that no one really knows what the hell is going to happen now:

I asked SEC Commissioner Luis Aguilar how the SEC might want to resolve the issue. He said the commissioners know the problem is out there and they have “Plans A, B and C” to respond, but declined to say what any of those plans might be. I asked [Barney] Frank as well, and he essentially said his committee would work with the Senate Banking Committee to craft some legislative response, depending on exactly what the Supreme Court’s ruling says.

The Court ruled 5-4 (Roberts, Scalia, Kennedy, Thomas, Alito Dissent: Breyer, Stevens, Ginsburg, Sotomayor)

From Chief Justice Roberts’ opinion:

The President cannot “take Care that the Laws be faithfully executed” if he cannot oversee the faithfulness of the officers who execute them. Here the President cannot remove an officer who enjoys more than one level of good-cause protection, even if the President determines that the officer is neglecting his duties or discharging them improperly. That judgment is instead committed to another officer, who may or may not agree with the President’s determination, and whom the President cannot remove simply because that officer disagrees with him.

And Justice Breyer’s dissent (citations omitted):

The Court holds unconstitutional a statute providing that the Securities and Exchange Commission can remove members of the Public Company Accounting Oversight Board from office only for cause. It argues that granting the “inferior officer[s]” on the Accounting Board “more than one level of good-cause protection . . . contravenes the President’s ‘constitutional obligation to ensure the faithful execution of the laws.’” I agree that the Accounting Board members are inferior officers. But in my view the statute does not significantly interfere with the President’s “executive Power.” It violates no separation-of-powers principle. And the Court’s contrary holding threatens to disrupt severely the fair and efficient administration of the laws.

So day-to-day auditors lives won’t change but some new wrinkles could be thrown in now that the law will have to be tweaked. So who knows what will happen! In the meantime, here’s your light reading for the day:

FreeEnterpriseFundvPCAOB

RSM McGladrey Can Explain the Disappointing Year

H&R Block announced its earnings for fiscal 2010 yesterday which included the details for the fka RSM McGladrey. The company’s press release basically says that times are tough but RSM had some good reasons for that.


For starters, the small tiff with M&P sort of put a damper on things and a nasty goodwill write-off:

RSM McGladrey reported fiscal 2010 pretax income of $58.7 million, down nearly 39 percent from $96.1 million in the prior year. Revenues declined 4.2 percent to $860.3 million, primarily due to the impact of the overall weak economic environment, which continues to pressure billable rates and hours within the industry. Profitability was negatively impacted by costs associated with previously resolved arbitration proceedings involving McGladrey & Pullen and other costs of litigation totaling $14.5 million in the aggregate, as well as a $15.0 million goodwill impairment charge at our capital markets business unit.

A 39% drop in profits could explain the nationwide layoffs at McGladrey that we reported on earlier this month. It’s a good thing they didn’t have the ginormous golf cake in this year’s numbers, otherwise the results would have been worse.

But if you ignore all that, things were essentially flat and everyone knows that flat is the new up!

Excluding these charges, pretax income would have been approximately $88 million and pretax margin for the segment would have been 10.3 percent, essentially flat with the prior year. The shortfall in revenues was partially mitigated by cost reduction efforts throughout the year. These efforts included headcount reductions to reflect lower client demand, as well as other non-client facing cost reduction initiatives.

OH! There’s the layoffs and they’re citing “lower client demand.” Thoughts on that, anyone?

H&R Block Reports Fiscal 2010 Financial Results [Market Wire]

Koss Sues Grant Thornton, Blames Firm’s Assignment of Newbie Auditors

Well! You might have thought that Koss would just handle this Sue Sachdeva situation like gentlemen headphonesmiths but you would have thought wrong!

Koss is suing S-squared and Grant Thornton for their respective roles in the alleged embezzlement of $31 million from the Brew Town company.

While it sounds like , that won’t protect her or Chipman & Co. from the wrath of Koss. But one thing is for sure, despite the lawsuits and whatnot, this is not the company’s fault. Just ask Koss’ attorney Michael Avenatti, “I’m confident the company will be exonerated.”


Why? Because
Grant Thornton threw a few young associates on the engagement, that’s why!

Koss hired one of the best accounting firms in the world, Grant Thornton, and should have been able to rely on Thornton’s audits to uncover wrongdoing, Avenatti said. The suit against the auditing firm says auditors assigned to Koss were not properly trained.

The lawsuit lists hundreds of checks that Sachdeva ordered drawn on company accounts to pay for her personal expenses. She disguised the recipients — upscale retailers such as Neiman Marcus, Saks Fifth Avenue and Marshall Fields — by using just the initials. But the suit says Grant Thornton could have ascertained the true identity of the recipients by inspecting the reverse side of the checks, which showed the full name.

Forget the fact that the CEO was also vice chairman, chief operating officer, president and chief financial officer. Oh, and he sat on the audit committee at another company. Apparently Koss wanted GT partners auditing those cash accounts rather than implement anything that even closely resembles an internal control system.

Grant Thornton, meanwhile, is still sticking to the boilerplate statement as reported in the Milwaukee Journal-Sentinel, “We remain confident that we have met all of our professional obligations and that our work complied with professional standards.”

Sigh. Of course no one wants to be responsible, so let’s decide for them. Let’s get a show of hands:

It’s worth mentioning that the lawsuit comes just a few short days before Koss’ tardy restated financials are due. If the company doesn’t cough them up, the Nasdaq will banish them like they’ve got lice.

Koss sues former executive, auditor over alleged embezzlement [Milwaukee Journal-Sentinel]

Grant Thornton Sheds Another Office – Albuquerque Sold to Moss Adams

GT follows up with the news of its disposal of its Honolulu office last month, the closure of its Madison, WI location in April and Greensboro, NC earlier this year with this latest sale of its Albuquerque, New Mexico digs.

According to the Moss Adams press release Chipman & Co. wanted out of the Land of Enchantment after “evaluating its strategic direction”:

ALBUQUERQUE, N. Mex. (June 24, 2010)—Moss Adams LLP and Grant Thornton LLP announce the planned acquisition of Grant Thornton’s Albuquerque practice by Moss Adams on July 31, 2010. In evaluating its strategic direction, Grant Thornton senior leadership determined it will exit the New Mexico market.

Kim Nunley, the Grant Thornton office managing partner, will join Moss Adams as a partner along with many of the client service staff and employees. Wayne Brown, Moss Adams Albuquerque office managing partner, will continue to provide local leadership. He said, “I have known and respected Kim for many years and look forward to working closely with her. She is highly regarded within the profession and the Albuquerque community.”

This acquisition demonstrates Moss Adams commitment to the Southwest and overall firm growth. According to Chris Schmidt, Moss Adams president, “Moss Adams is focused on growth and the Grant Thornton practice blends well with our Albuquerque industry group specialization in areas such as financial institutions, credit unions, employee benefit plans, technology/life sciences, and manufacturing companies.”

Moss Adams is the largest accounting and consulting firm in New Mexico and the 11th largest firm in the United States. With more than 1,700 employees and 230 partners, the firm serves its clients from 21 offices in Washington, Oregon, California, Arizona, and New Mexico.

Our email to a Grant Thornton spokeswoman was not immediately returned.

A Few Senators Would Like Billionaires to Pitch in with the Deficit Problem

The latest act in the ongoing circus known as the estate tax debate has three “liberal” senators – Bernard Sanders (I-VT), Tom Harkin (D-IA), and Sheldon Whitehouse (D-RI) – calling for billionaires to help close the $13 trillion some-odd federal deficit that these über-rich people ate.

Forbes reports that the Messrs. Sanders, Harkin and Whitehouse sent a letter to their fellow Senators laying out their case, “According to Forbes Magazine, there are only 403 billionaires in the U.S. with a collective net worth of $1.3 trillion. Clearly, the heirs to these multibillion fortunes should be paying a higher estate tax rate than others.”

The champs of the bill also go to the trouble of singling out Dan L. Duncan whose family stands to inherit his $9 billion fortune tax free. It’s a good thing those staffers pointed out that article in the Times to their respective Senators!


Anyhoo, TaxProf summarizes the details of the “Responsible Estate Estate Tax Act”:

Exempts the first $3.5 million of an estate from federal taxation ($7 million for couples), the same exemption that existed in 2009. Doing this would mean that 99.75% of all estates would be exempted from the federal estate tax in 2011 alone.

Includes a progressive rate structure so that the super wealthy pay more. Under our bill, the rate for the value of the estate above $3.5 million and below $10 million would be 45%, the same as the 2009 level. The rate on the value of estates above $10 million and below $50 million would be 50%, and the rate on the value of estates above $50 million would be 55%.

Includes a billionaire’s surtax of 10%. Our bill also imposes a 10% surtax on the value of an estate above $500 million ($1 billion for couples). According to Forbes Magazine, there are only 403 billionaires in the United States with a collective net worth of $1.3 trillion. Clearly, the heirs to these multi-billion fortunes should be paying a higher estate tax rate than others.

Closes all of the Estate and Gift Tax Loopholes requested in President Obama’s Fiscal Year 2011 budget. These loophole closers include requiring consistent valuation for transfer and income tax purposes; a modification of rules on valuation discounts; and a required 10-year minimum term for Grantor Retained Annuity Trusts (GRATS). OMB has estimated that closing these loopholes that benefit the super-wealthy, would raise at least $23.7 billion in revenue over 10 years.

Protects family farmers by allowing them to lower the value of their farmland by up to $3 million for estate tax purposes. Under current law, the value of farmland can be reduced up to $1 million for estate tax purposes under § 2032(a) (Special Use Valuation). Our bill increases this level to $3 million and indexes it to inflation.

Benefits farmers and other landowners by providing estate tax relief for conservation easements. Our bill provides tax relief to farmers and other landowners by amending estate tax rules for conservation easements through an increase in the maximum exclusion amount to $2 million and increasing the base percentage to 60%.

Nice work on those last two Senator Harkin; you couldn’t be more obvious.

In case you didn’t catch it in there, the estate tax on the billionaires will be 55% PLUS! an additional 10% surtax. Sounds crazy right? Congress royally fucks things up by letting the estate tax expire in the first place and then has the stones to throw the double whammy on the rich because of it. Had they simply extended the estate tax (which seems to be a popular solution, btw) this political pigskin wouldn’t even be an issue.

But guess what? There are people behind this thing lock, stock and barrel. For one, the United for a Fair Economy (“UFE”) more or less says that this legislation is the catalyst to fixing everything, “The Sanders-Harkin-Whitehouse Responsible Estate Tax Act is an important step on the road to an economic recovery that benefits all Americans.”

Well, not all Americans.

California Accountant Had Some Ambitious Career Goals

Many of you probably consider yourself to be ambitious. You have aspirations of riches and success in the field of accounting that the likes of Arthur Andersen dared not dream of. You’re a game changer. The profession won’t be the same after you’re done with it.

But Yasith Chhun of Long Beach, CA could not be satisfied with simple pleasures like titles such as Partner or CFO and fabulous wealth simply would not be enough. His life goals were far more lofty than a simple title, salary or home with a three-car garage on a golf course. This was about a revolution!

A California accountant was sentenced to life in prison Tuesday in Los Angeles for orchestrating a failed attempt to overthrow the Cambodian government in 2000.

Yasith Chhun, of Long Beach, was found guilty in 2008 of three counts of conspiracy and one count of engaging in a military expedition against a nation with which the United States is at peace.

Chhun is a U.S. citizen of Cambodian descent who helped lead a handful of rebel fighters in an attack of government buildings in the country’s capital of Phnom Penh. Three of the fighters were killed, and several police and military officers were injured.

Prosecutors said Chhun planned the coup over two years, traveled to the region to assemble a rebel force and held fundraisers for the operation.

So unless you’re willing to engage in guerrilla tactics in order to topple an entire nation that’s friendly with the U.S., we don’t ever want to hear about your career path.

Calif. man in attempted Cambodian coup gets prison [AP]

Gulf Coast Workers Not Really Down with Taxes on Their BP Payments

Wait! You mean we have to pay taxes if we receive cash? When the hell did this happen? What if you’re part of the “self-reliant nonconformists who don’t pay much heed to everyday rules and regulations” community? Does that earn you a pass?

The AP reported on some workers on the Gulf Coast who are simply not aware of the notion of income taxes and would very much like to keep it that way:

Out-of-work Gulf Coast shrimper Todd Pellegal spent his first $2,500 check from BP quickly, paying off bills and buying groceries for his family.

He never even considered putting some of it away for taxes.

Now he’s among the people up and down the Gulf Coast reeling from the oil spill disaster who are surprised — and frustrated — to find out the Internal Revenue Service may take a chunk of the payments BP PLC is providing to help them stay afloat.

Many were already angry about how long the oil giant took to cut the checks. So when they got the money — generally about a few thousand dollars each so far — they spent it fast.

“If they’re going to pay you a lump sum, like for a year, then bam, take the taxes out of the check,” said Pellegal, of Boothville, La. “But a little bit at a time, they shouldn’t.”

Right, because withholding taxes from a paycheck isn’t how it works for every other person in the country who pays income taxes. Whoever heard of “net pay”?? But don’t bother suggesting planning for such a phenomenon as being paid by check:

“They should do a projection of their taxable income and determine if there is going to be a tax liability and have enough to cover that,” said Crystal Faulkner, a partner in the Cincinnati-based accounting firm of Cooney Faulkner & Stevens LLC.

That doesn’t sit well with Cherie Edwards, who is now only working one day a week at her job booking charter fishing trips at Zeke’s Landing in Orange Beach, Ala. The lost hours due to the oil spill are costing her about $270 week.

She said she got her claim number from BP on Thursday and plans to file an application in the coming day. So far, she said, no one has mentioned to her about a potential tax liability.

“I haven’t even thought about taxes. Wow. That makes me mad,” said Edwards, who has one child in college and another in high school. “I’m already losing money, and now I’ve got to figure out how to hold back money to pay taxes?”

Jesus lady, you’re right. Getting used to the $0 tax liability and then all of a sudden learning that you are required by law to pay them would piss off just about anyone.

IRS May Tax Payments to Gulf Coast Victims [AP via Tax Lawyer’s Blog]

Some Crooked Accountants Need to Try Harder

Regardless of how easy it is for accountants to steal money (access, signatory responsibilities and such) one would think that if you intended on getting away with it that you might go to a wee bit of trouble to cover your tracks. Shamelessly making photocopies for personal matters is one thing, cutting checks to yourself are entirely another:

Between October 2, 2003 and September 20, 2007, [Todd Newman], a Certified Public Accountant with offices in Yonkers and New York City, was the Secretary/Treasurer and a signatory on the payroll of B. Schoenberg and Company, a recycler of plastics and engineering resins located in Yorktown Heights, N.Y.

He stole in excess of $1,900,000.00 (1.9 million dollars) from his employer by writing checks to himself.

Newman also failed to file Personal Income Tax returns with the State of New York for the years 2005, 2006 and 2007, for a total tax liability of $133,158.

Christ man! Set up a phony LLC, open some bank accounts, get a P.O. Box. Something.

Bonus and Compensation Watch ’10: Grant Thornton Delivers the Goods

Grant Thornton has been on strict radio silence lately which makes us wonder if Stephen Chipman had given up on blogging or if they had simply given everyone the summer off.

The blog remains a mystery but we do have some news on GT bonuses (the jury was out for awhile) and merit increases and it seems to be good news but extremely short on details and extremely long on Chipman prose:

Leadership announcement
Additional guidance on bonuses and compensation

On our last all-employee call, I told you that I was optimistic that the firm would award bonuses this year. I am pleased to share with you that we are now in a position to say with certainty that we will be paying bonuses for 2010.

As you know, the overall level of bonuses is dependent on our financial results at year end. We are currently working on this modeling based on our economic forecasts and will have the final numbers next month. However, I can let you know that we plan to pay the bonuses in the mid-September timeframe.

Similar to our merit increases, our bonus payments are based on our pay-for-performance philosophy, where we strive to recognize and reward individuals commensurate with performance. We’ve held this philosophy for a number of years, but could have done better executing on it. You reminded us of this in our Voice Your Experience pulse survey, and we are striving to do better. This year — and even more so going forward — we will be giving larger merit increases and bonuses to our top-rated performers to ensure greater differentiation.

Merit increases should be finalized in the next couple of weeks and your local office will begin communicating with you in early July. New compensation is effective on August 1. The increases are based on extensive market information for each of our practices and your individual contributions.

As we work to differentiate our firm through providing consistently distinctive client service, we will continue to move towards a model that rewards each of our people relative to their contributions to the success of the firm.

I’m excited about our direction as a world-class firm that truly makes a difference, and hope you are too. Thank you for all that you have done, and continue to do, for Grant Thornton.

Stephen

So whether or not this puts your anxiety to rest is another matter. Discuss and keep us updated in the coming weeks.

“Faceless” Tax Worker Turns Out to Be a Hottie…Oh and She Saved a Man’s Life

Tax workers of any stripe – federal or state – get hated on. Given. Buzzwords of disdain like “faceless bureaucrats,” “lazy government employees,” “good-for-nothing-except-for-sucking-up-government-resources freedom haters” and so on and so forth get thrown around with reckless abandon.

However, if you knew that your state department of revenue public servants looked like Natalie Brown (right) and just so happened to be responsible for saving a taxpayer’s life, then maybe Tea Partiers and their derivatives would exercise a little more restraint.

Unless of course they’re also against hotties and random acts of kindness.

When [Earl] Phillips called the state Department of Revenue last month to get answers about his state income tax bill, the faceless Frankfort bureaucrat who called him back saved his life.

Now Phillips thinks Department of Revenue employee Natalie Brown — who dialed 911 when Phillips had a heart attack during that May 26th phone call — should receive more than a simple thank you.
[…]
Phillips, an Adair County construction worker, received a tax notice in late May with Brown’s name and phone number

When Brown returned the call he’d placed, she noticed that Phillips, 60, seemed out of sorts.

“I noticed he was breathing really heavily,” Brown said Friday. “I could tell something was wrong.”

At this point, you might expect to read that the government employee placed the phone down to ask their supervisor to get permission to call the on-site nurse (in accordance with the proper protocols). At which point, another co-worker would pop in, suggest they take a break for coffee and a bun and dying taxpayer would be left on the hook.

But nothing of the sort happened! Natalie Brown was on this, knowing that any delay could mean life or death and certainly less future revenue for the state of Kentucky.

Brown verified she had the correct address for Phillips — which was on his tax forms — and called Adair County 911.

Shortly after that, emergency crews arrived and took Phillips, who was home alone, to a local hospital. He was later transferred to a Louisville hospital, where doctors put a stent, or tube, in his heart. He had a 90 percent blockage in one of his arteries, Phillips said.

Hot, lifesaving, tax worker This has reality TV written all over it.

Tax worker helps save taxpayer’s life [Kentucky Herald-Leader via TaxProf]

Pennsylvania Lawmakers Invite Citizens to Get on This Fiscal Crisis Thing

Either some Pennsylvania lawmakers are out of ideas for closing the state’s budget gap or they’re sick of the belly aching from the Keystone citizens because they’ve decided to put out there for the ordinary Quakers to give their suggestions for fiscal improvement.

So far there has been approximately 750 suggestions that range from consolidating school districts, “El excess management positions. 15 school districts in one county equals 15 superintendents, health care plans, IT departments, administrative departments, maintenance depts and so on” to downsizing the size of the state legislature, “downsize our legislature, there has been several articles on our size compared to other states whith [sic] smaller legislatures and much larger populations.”

Of course there are less constructive ideas such as the idea of having one huge pee party from “Gary” in Mount Joy (our bolding):

URINALYSIS for everyone who receives their salary from Tax dollars. Every tax dollar that comes out of our pocket pays for every teacher in the state, every state trooper, every state university professor, every congressman. We as taxpayers need to know that our tax dollars are not being used to fund illegal/ illicit drug use. We should have a Urinalysis for Every Teacher, every Congressman, every State worker, Every Professor of the state universities. If that is implemented, you will notice a lot of retirements/resignations. Saving the tax payers loads of money as well as stimulating the workforce because of the jobs that will need to be filled. This Is not an invasion of privacy.

EVERYONE IS ON DOPE!

And then there’s “frank” from York, PA who isn’t buying this pollution nonsense:

get rid of state car inspections & emissions testting [sic] – all the garbage about the air is all made up. And if we are the only country doing so, it proves that the goverment are liars! Yea every knows thats true

“Joe Wehner” from Pittsburgh just feels like hating on the whole process, thankyouverymuch:

Like our government, this site is a joke! They only publish dumb democrat liberal views. GOD Forbid any views that work… They won’t publish views outside of their agenda to ruin America.

But we like we said, there are some decent suggestions.

Pennsylvania website takes taxpayers’ ideas to save money [Philadelphia Inquirer]

URINALYSIS for everyone who receives their salary from Tax dollars. Every tax dollar that comes out of our pocket pays for every teacher in the state, every state trooper, every state university professor, every congressman. We as taxpayers need to know that our tax dollars are not being used to fund illegal/ illicit drug use. We should have a Urinalysis for Every Teacher, every Congressman, every State worker, Every Professor of the state universities. If that is implemented, you will notice a lot of retirements/resignations. Saving the tax payers loads of money as well as stimulating the workforce because of the jobs that will need to be filled. This Is not an invasion of privacy.

EVERYONE IS ON DOPE!

And then there’s “frank” from York, PA who isn’t buying this pollution nonsense:

get rid of state car inspections & emissions testting [sic] – all the garbage about the air is all made up. And if we are the only country doing so, it proves that the goverment are liars! Yea every knows thats true

“Joe Wehner” from Pittsburgh just feels like hating on the whole process, thankyouverymuch:

Like our government, this site is a joke! They only publish dumb democrat liberal views. GOD Forbid any views that work… They won’t publish views outside of their agenda to ruin America.

But we like we said, there are some decent suggestions.

Pennsylvania website takes taxpayers’ ideas to save money [Philadelphia Inquirer]

Grant Thornton Survey: More Bank Execs Think the Economy Will Suck Less Eventually, Maybe

No! It’s true! Forty-five percent think things are going to be WAYYYY better in the next months, just in time for Christmaskuh!

That’s up from 24% in December ’09.

John Ziegelbauer, national managing partner of Grant Thornton’s Financial Institutions practice, testifies:

Bankers across the country are starting to become more optimistic about both the U.S. economy and their own local economy…Their optimism about the economy is spilling over into their own banks, with bankers reporting that they are also cautiously optimistic about the number of people they expect to hire in the coming months. Overall, it appears that bankers believe that the economy has finally turned a corner.

Except that 55% of those surveyed expect to be the same (i.e. sucks) or get worse and don’t forget, no one is hiring.

On with the jobless recovery!

Big jump in number of bank execs that expect the economy to improve in next six months [GT]

Spending $1.25 Million on Bridges for Squirrels Isn’t the Worst Idea Arizona Has Ever Had

Okay, so Arizona is spending $1.25 million to build bridges for the endangered Mount Graham red squirrel and of course a bunch of people are in a big huff.

ABC News reports that without the bridges, approximately five squirrels would be killed a year and there are only 250 are known to be in existence.


Yes, that works out to $5,000 a squirrel but considering the fact that animals are far more responsible and respectful inhabitants of the planet than humans, we’ve got no beef with this.

Especially considering the fact that Arizona has had far worse ideas in its history including opposing Martin Luther King Day until 1992, its asinine immigration policy and the Phoenix Coyotes.

Arizona Spends $1.25M to Save 250 Squirrels [ABC News via Tax Policy Blog]

BKD Partner Found Dead at His Office

[caption id="attachment_12673" align="alignright" width="120" caption="Source: Springfield Business Journal"][/caption]

Fifty-one year old Daniel Hayworth was found dead at the BKD offices in Joplin, Missouri on Sunday afternoon.

The Springfield Journal Reports that Mr Hayworth had several leadership positions with the firm including the firm’s national construction and real estate group, national manufacturing and distribution group and chair of the manufacturing and distribution committee.


According to Newton County Coroner Mark Bridges told us that Mr Hayworth had a history of hypertension and high blood pressure, accordingly his office ruled that the cause of death was a massive heart attack.

Our email to a BKD spokesperson was not immediately returned.

John Wanamaker, the managing partner of BKD’s Souther Missouri unit was quoted by the SBJ, saying, “Dan was such a great guy, and this is such an unexpected and untimely event. He was clearly a great man, a great husband to his wife, Lynn, a great BKD partner, and a great friend, and he will be unbelievably missed.”

Accountant’s ‘Ridiculous Amount of Time’ Surfing the Web Not Ridiculous Enough to Warrant Firing

We realize that hardly any of you will be able to relate to this story but we’ll present it as a point of reference in case you know of anyone that gets jammed up in the future.

David Innes, 42, was fired from his job at Scottish and Southern Energy after TPTB decided that he was spending a little too much time surfing the web. In their words, a ‘ridiculous amount of time.’ And to get an idea of ridiculous, 27,500 website hits was the magic number.


This is quite a jump over the 16,000 hits that an SEC accountant spent looking at porn. This randy ne’er do well managed to keep his/her job as well as the other porn junkies. If you make the assumption that Innes had a SEC-esque porn habit, that still leaves a lot of surfing to be done.

Regardless, it’s safe to assume that somewhere in between 16,000 and 27,500 hits (presumably in a month) lies the threshold of you being thrown out on your ass.

However, a Glasgow tribunal found that Scottish and Southern didn’t really have a frame of reference for “a ridiculous amount of time” since David Pratt, the man who fired Innes, “made no attempt to obtain advice from the respondent’s IT department. His view was essentially that he was faced with this enormous report and this therefore showed an extraordinary amount of internet usage.”

In other words, a “ridiculous amount of time” is subjective, as is “a lot of time,” “quite a bit of time,” or “a metric ass-ton of time.” And even if you do reach your own perceived level of unacceptable web surfing volume, you still better check with the IT boys to see what their opinion on hella-web surfing is before you go firing people like Steinbrenner.

Meanwhile, for you do-nothings out there, it appears that your time wasted at work surfing the web can easily be defended, although you can safely assume that if you wade into the NSFW waters, your chances of survival are slim.

If You Were Expecting a Nice Breezy Internship with Plante & Moran, You’re Going to Be Disappointed

This is serious P&M interns. You probably thought this little summer jaunt at P&M would be just an easy way to get some overtime hours and blow all your money on booze. Well. Actually, it might be you’ll also be expected to walk in on Monday and pull your weight.

Coffee jockeys? No. Xerox duty? Of course but it will be only the important documents. But scavenger hunts? Forget it. The only scavenger hunt you’ll be going is for material misstatements.

Annually, more than 100 students experience a three to four month paid internship. The latest round of students will begin their internships on June 14 in Michigan, Ohio and Illinois firm offices. On the agenda? An Intern Summit, which is a two-day, off-site meeting focused mainly on team-building and community service projects. At the end, interns give a formal presentation on their reflections and lessons learned from the experience.
[…]
“As an assurance intern, I was given the opportunity to go into the field and perform real audit work, not just sit behind a desk or get people their coffee,” said Staci Tobe, a former Plante & Moran intern and Michigan University student. “I also appreciated the firm’s open door policy. I never expected to be able to walk into a partner’s office and seek advice, but Plante & Moran encouraged it.”

Presentations on team building! Real audit work! Getting a partner’s advice! Oh, and no short sleeves because you’ll be expected to roll them up and bare arms aren’t acceptable.

The Nasdaq Would Like to Know When Koss Is Going to Get Around to Submitting Some Financial Statements

Remember last month when Koss decided to file their 10-Q without financial statements? At the time the company said it was “due to delays relating to certain previously disclosed unauthorized transactions.”

In other words, we got ripped off so bad that we’re restating financial statements for half a decade and it isn’t exactly something you can whip up like a batch of maui wowie brownies.


The Nasdaq has taken note of the slight delay and has said if you don’t get us numbers by June 30, you’ll be on the pink sheets with the likes of Lehman Brothers.

CEO Michael Koss has assured everyone that it won’t come to this but obviously we’ll have to wait until the SEC posts the filing. If that doesn’t happen, you’ll be able to add “Koss Delisted by Nasdaq” to Suz’s list of destructive accomplishments.

Koss gets warning from Nasdaq [Milwaukee Business Journal]

Job of the Day: BlackRock Needs a Senior Manager of Financial Reporting

BlackRock is looking an experienced professional to join its iShares Fund Administration group as a Senior Manager of Financial Reporting in its San Francisco office.

Qualifications include 10 years experience in the investment industry with a CPA and management experienced preferred.


Company: BlackRock

Title: Senior Manager, Financial Reporting

Location: San Francisco, CA

Description: This financial reporting role will include project management, contribution to technical accounting interpretation and review responsibility in managing the development, production and distribution of the annual and semi-annual reports to shareholders for iShares products. The candidate will be responsible for the review and timely filing of various SEC regulatory filings, including Form N-SAR, Form N-CSR and Form N-Q.

Responsibilities: Manage development, production and timely distribution of fund regulatory/shareholder materials relating to financial reporting under the Investment Company Act of 1940, including annual and semi-annual reports, Form N-SAR, Form N-CSR and Form N-Q; Ensure that content and disclosure for regulatory filings related to financial reporting, are complete and current in accordance with generally accepted accounting principles (GAAP) and relevant SEC rules; Manage audits for multiple fiscal year ends, including relationships with auditors, administrators and internal stakeholders; Proofread and serve as quality control for regulatory filings; Manage development and implementation of new SEC requirements as they relate to financial reporting; Seek continuous process improvement and maintain the financial reporting policies and procedures; Contribute to identifying, researching, and communicating recent authoritative pronouncements.

Qualifications/Skills: BS/BA degree in business administration or accounting, CPA preferred; 10+ years of investment industry and management experience preferred; In-depth knowledge of funds reporting under the Investment Company Act of 1940.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

It’s Ridiculous to Think That Enterprise Financial Dismissed KPMG Because of the Restatements

KPMG has been kicked to the curb by Enterprise Financial according to an 8-K that was filed on Friday by the company. The ubiquitous claim of “no disagreements with [insert firm]” was there along with a mention of a material weakness that was related to the restatements issued for both 2008 and 2007 but that couldn’t possibly have anything to do with the dismissal of the auditors:

In connection with the identification of the loan participation accounting error described in Item 7, Management Discussion & Analysis and in Item 8, Note 2 of the consolidated financial statements and elsewhere in the Form 10K dated March 16, 2010, the Company also determined that a material weakness in its internal controls over financial reporting existed during the periods affected by the error, including as of December 31, 2008. The Company’s management concluded that the material weakness was the Company’s lack of a formal process to periodically review existing contracts and agreements with continuing accounting significance. To remediate this material weakness, during the fourth quarter of 2009 the Company implemented a formal process to review all contracts and agreements with continuing accounting significance on an annual basis. As a result of the review conducted in the fourth quarter, management did not identify any other errors in its previous accounting for such contracts or agreements. Management believes that this new process has remediated the material weakness in the Company’s internal control over financial reporting.

So in other words, “Yeah, maybe we should have been looking at these contracts but we weren’t and so some material misstatements slid through. We’ve slapped some duct tape on it and it’ll be fine from here on it. End of story.”

The esteemed pleasure of auditing Enterprise now belongs to Deloitte who has now snagged three clients from KPMG this year (by our count) – picking up Jefferies and Select Comfort back in March.

Enterprise Bank parent dismisses KPMG [St. Louis Business Journal]

GAO Audit Uncovers Fraud at Head Start Programs

The Head Start Program, under the Department of Health and Human Services, provides child development services to mostly low-income families and their children. Up to 10% of Head Start-enrolled families can be over-income, with an income 130% above the poverty line.

Of course, things don’t always work out as they are supposed to and the GAO has discovered problems with about half of the centers it examined through the investigation, just a small sample of the 1,600 nonprofit centers running 3,000 Head Start programs.


From the GAO:

GAO received allegations of fraud and abuse involving two Head Start nonprofit grantees in the Midwest and Texas. Allegations include manipulating recorded income to make over-income applicants appear under-income, encouraging families to report that they were homeless when they were not, enrolling more than 10 percent of over-income children, and counting children as enrolled in more than one center at a time. GAO confirmed that one grantee operated several centers with more than 10 percent over-income students, and the other grantee manipulated enrollment data to over-report the number of children enrolled. GAO is still investigating the other allegations reported. Realizing that these fraud schemes could be perpetrated at other Head Start programs, GAO attempted to register fictitious children as part of 15 undercover test scenarios at centers in six states and the District of Columbia. In 8 instances staff at these centers fraudulently misrepresented information, including disregarding part of the families’ income to register over-income children into under-income slots. The undercover tests revealed that 7 Head Start employees lied about applicants’ employment status or misrepresented their earnings.

GAO managing director for special investigations Gregory Kutz told a House education committee last month that “the system is vulnerable to fraud.” No kidding.

While unable to determine the motivation of Head Start employees to commit fraud by adjusting income levels on applications, Kutz theorized that management of nonprofit agencies receiving Head Start funds pressured staff to fudge, fiddle with, or straight up fake figures on applications in order to keep federal funds coming in.

Head Start has served over 25 million children since 1965 and there are currently over 1 million children enrolled in Head Start programs.

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor . You can see more of her posts here.

FASB Chair: Yeah, We’re Not Meeting That June 2011 Convergence Deadline

Yes, that’s your shocking headline of the day. Despite the retripling of efforts via videoconferencing and other fancy-schmancy technology, some Frenchman losing patience, and having a Knight spearheading 50% of the efforts, they will utlimately fall short of the June ’11 goal.

We know. Catch your breath or place yourself back in your chair, and then you can read Emily Chasan’s account from Reuters:

The Norwalk, Connecticut-based FASB and the London-based International Accounting Standards Board expect to announce changes to their convergence work plan in the next week or so that would delay the completion date by about six months and allow for greater public comment on the boards’ proposals, FASB Chairman Robert Herz said in an interview with Reuters.

“We’ve been working on a revised work plan with the IASB,” Herz said.

“We’d all like to see the work done as expeditiously as possible, but we don’t want to sacrifice proper due process.”

Herz said that to issue final standards by June 2011, the boards would have to release about 10 proposals in the next two months and rush through the public comment process.

It was nice of the FASB and IASB to say, “June? No problemo,” to the G20 BSDs but many organizations, including Financial Executives International, and even Chief Accountant Kroeker said that the overachieving might lead to some shoddy accounting standards.

Mr Herz is still optimistic about finishing up before 2012 telling Reuters that the two Boards will “get most if not all of [the accounting standard proposals] done by the end of 2011,” which is probably enough time for IFRS to be adopted by everyone. But then the world is on a strict deadline to end in 2012, so why are we bothering with this again?

FASB says will not meet 2011 convergence deadline [Reuters]

The Guy From Reading Rainbow Has a Small Tax Problem

A refresher:


If that doesn’t mean anything to you, he’s also the dude with the bizarro shades from Star Trek, The Next Generation.

But back to the RR for a sec – many of you would be an illiterate waste of space if it wasn’t for LeVar Burton, so the least you could do is pitch in so the man can pay the $34,000 he owes California. Or at least ask your parents to help out. It’s the least they can do since LB probably bought them some much-needed private time back in the day while you were zoning out on the shower in the toilet.

Tax resistance futile for Star Trek actor [Tax Watchdog]
See also (if you want the RR theme song stuck in your head):
LeVar Burton Owes $34,000 in State Taxes… “But Don’t Take My Word For It” [Tax Docket]

Barry Minkow Isn’t Buying Anthony Weiner’s Report That Says Goldline International Is More or Less a Fraud

Last time we saw Congressman Anthony Weiner, he was attempting to discuss the IRS’ role in the enforcement of healthcare with spin-hater Bill O’Reilly. While that particular encounter was quite fun (especially Weiner’s huffing and O’Reilly’s eye-rolling) the video of the Congressman’s recent appearance on Fox Business News is quite good.

But what we’d really like to see him have a conversation with Barry Minkow about how that Barry thinks the Congressman’s report on Goldline International is unmitigated bullshit:


Friend of GC, Tracy Coenen participated in the Minkow’s investigation and she presents the findings over at Fraud Files Blog. Here’s a sample:

Allegation: Weiner criticizes Goldline because of complaints on the website Ripoff Report lodged by consumers who say Goldline representatives improperly hold themselves out as investment advisors.

What Weiner didn’t tell you: Ripoff Report says (in response to the consumer complaints) that you can feel completely confident doing business with Goldline. Weiner gave us only half of the story in his report.

Allegation: Goldline grossly overcharges for its products

What Weiner didn’t tell you: Our sampling of coins listed in the Weiner report showed that Goldline’s prices were very comparable to those of six competitors. He also forgot to mention that companies are free to set whatever prices they like for their products.

Allegation: Goldline says they’ll buy back your gold and silver, but doesn’t “guarantee” that

What Weiner didn’t tell you: It is against the law for Goldline to offer a buyback guarantee. If they offered such a guarantee, they would be in violation of securities laws because their salespeople are not licensed broker dealers.

Regardless of how you feel about Glenn Beck, gold coins, or Anthony Weiner’s Fox News-esque ability for interrupting, it kinda sorta sounds like the Congressman’s investigators don’t know a non-fraud when they see one. Besides, we’ll take the word of a convicted-felon-turned-fraud-buster over any report that comes out of Congress. Especially in an election year.

A message left with Congressman Weiner’s spokesperson was not immediately returned.

Goldline International: An In-Depth Look at Congressman Weiner’s Allegations, And How He Got It Wrong [FDI]
Barry Minkow debunks the Glenn Beck and Goldline International fraud connection [Fraud Files Blog]
Weiner Takes on Goldline and Fox Business — At The Same Time [Weiner.house.gov]

People Need to Calm Down About the FASB’s New Fair Value Proposal

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

The accounting change for reporting the value of banks’ loans, which got the New York Times all hot and bothered yesterday morning, really amounts to a hill of beans, once you take a closer look at it.

In fact, the description in the article left me scratching my head on a couple of counts. How, for example, do banks write down the value of non-performing loans, as accounting rules require them to do, if they don’t mark them to market?


And what’s up with the tortuous explanation of how the Financial Accounting Standards Board decided to have banks mark to market the loans for purposes of the balance sheet but not for earnings? While I’m as big a fan as anyone of Jack T. Ciesielski, the accounting expert who publishes the investment newsletter, the Analyst’s Accounting Observer, his quote calling the decision a “smorgasboard” doesn’t really mean anything without some sort of context.

That context is pretty easy to provide, at least in the eyes of Charles Mulford, a Georgia Tech accounting professor and advisor to CFOZone.

As Mulford sees it, FASB simply is bringing information that’s already contained in the footnotes onto the balance sheet, specifically into the line item on that statement known as “other comprehensive income.” And this quite naturally has no impact on the earnings bank report on their income statements.

Currently, banks’ balance sheets carry loans at historical cost, less an estimate of the portion that is uncollectible, with fair value information in the notes, the accounting professor explains. The proposal would move the fair value information to the balance sheet by reconciling the cost of the loan with its fair value, he continues. But Mulford adds that there would be no change in the income statement, since that already includes any loan impairments. Instead, adjustments to fair value would be accounted for as a component of other comprehensive income, which is reported on the balance sheet.

“I view it more of a change in presentation than a change in accounting,” says Mulford.

In other words, investors who pay attention already understand this, so any complaints on the parts of banks should be seen as just an attempt to continue to fool those that don’t.

At Least One Accountant Thinks “Legally Cooking the Books” Is A-Okay

That accountant is Ren Carlton, CPA, CSMC and “native Michigander.” Although Ren is hesitant to broach the subject because, “this information can be abused to defraud investors and cheat on taxes.” Who knew?!?

Despite that caveat, Ren has decided that sharing this information is too critical to be kept to himself, “I have decided that legas is a critical skill for attracting investors and lenders, as well as satisfying the occasional customer or vendor requests.”

Okay then! So if we understand correctly, the rationale here is that cooking the books is sort of like drinking alcohol. In moderation, it’s fine and sometimes even the right thing to do but if you abuse it, you start making an ass out of yourself and probably some bad decisions that could lead to, ya know, jail.


But wait, do you really even know what “cook the books” means? You may be under the cockamamie notion that it’s a bad thing. Well, it’s not and Ren explains it for us:

Cooking the books (also known as creative accounting and earnings management) are euphemisms referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules. They are characterized by excessive complication and the use of novel ways of characterizing income, assets, or liabilities and the intent to influence readers toward the interpretations desired by the authors. The terms “innovative” or “aggressive” are also sometimes used.

See? Cooking the books just doesn’t follow the “spirit of those rules,” it’s not breaking the rules. Strangely enough, Ren’s definition is strangely similar to this Wikipedia entry for creative accounting:

Creative accounting and earnings management are euphemisms referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules. They are characterized by excessive complication and the use of novel ways of characterizing income, assets, or liabilities and the intent to influence readers towards the interpretations desired by the authors. The terms “innovative” or “aggressive” are also sometimes used.

Cooking the books, creative accounting – they’re the same right? Close enough, anyway. Now that the semantics are out of the way, what other words of wisdom can we get from Ren? How about an example of acceptable book cooking? Say, revenue recognition:

One example of cooking the books is acceleration of revenue recognition. This tactic is used to recognize revenue before it is considered earned by GAAP (Generally Accepted Accounting Principles). Methods for accelerating revenue include recognizing sales that are not yet earned or complete. Another method is to book sales that are actually earned in another period (e.g., recognizing January 2011 sales on your 2010 income statement). Flagrant abuse of the Revenue Recognition Principle includes backdating sales and fabricating fictitious sales.

How are you going to impress that bank with your revenue numbers if you ram in some revenue from a future period? What if you need another investor to help you reach the next stage of your business? It’s your God-given right to present them with phony numbers in order to get them on board. This is America, people. Don’t let the spirit of GAAP hold you back!

In Other Words, The Estate Tax Debate Will Continue to Drag On

“The debate becomes what rate to apply, and there’s the Republican view and the Democratic view, and what level of transfer exemption should be there. There are two different camps on that. I think historically that would be ripe for sort of compromising down the middle, but unfortunately, that’s not the political environment that exists right now.”

~ AICPA President and CEO Barry Melancon remains optimistic that something will get done.

New York Assembly Kicking Around the Idea of Raising the Millionaire Tax

It’s bad enough that Wealth Squads are going to be kicking down doors left and right but now this?


Still doesn’t quite top California’s budget misfire but keep trying Albany!

N.Y. Assembly Looks at Millionaire’s Tax [FOX via Tax Policy Blog]

Accenture, Looking for Fresh Ad Campaign, Makes the Right Choice to Launch Review

As CEO of Avidan Strategies, an agency search firm, we constantly conduct reviews for clients who wish to switch ad agencies. The reasons for conducting a search cover the span of the good, the bad, and the ugly. Sometimes clients resort to spurious explanations for a review. Sometimes, the arrival of a new chief marketing officer is enough to precipitate a review, as its ties to the CMO’s predecessor taint the incumbent agency.

Yet, the Accenture agency search, as reported in this story by Advertising Age, is appropriate and well timed. Until the wee hours of last Thanksgiving, when Tiger woods slammed his SUV into a tree, Accenture had a solid ad campaign. Using Tiger as spokesman and symbol of the consultancy dedication to excellence was effective. Although not exactly relevant to Accenture’s offerings, Tiger was magic. He was the ultimate professional, an athlete that not only transcended his sport, but one that transcended all sports. Tiger was a rock star.


To its credit, Accenture reacted fast to the unfolding scandal. Within weeks it dropped Tiger as a spokesman and launched a new campaign, featuring animals in unusual situations to illustrate aspects of its service. For example, a surfing elephant to depict nimbleness. The marketer is trying to downplay speculation that the animal campaign was a “hail Mary” pass, and suggests that it’s agency, Y&R, had pulled it out of a drawer. I doubt it. When you sign up Tiger Woods to be your spokesperson, you don’t need a Plan B. You know that this is the horse that you are going to ride.

That said, Accenture is smart to call a review. The animal campaign was a good stop gap measure, but now it is time to look beyond the horizon and come up with the next big campaign idea that can last 7,8,9 years. Y&R has been Accenture’s agency since Accenture was formed in the mid-90s. While longevity is not necessarily a bad thing, relationships can get stale. So it’s smart of Accenture to cast a wider net. As a matter of fact, more and more companies now conduct mandatory periodic reviews, previously conducted only by governmental agencies, to insure that services provided are best in class.

I hope that the winning idea will not be apologetic. Tiger’s mess has nothing to do with Accenture, and unlike Nike, they acted ethically and wisely by dumping him swiftly. The new agency should focus on Accenture leadership equity, it’s commitment to research and it’s ability to manage complicated systems. As we are coming out of the recession, glitz is being replaced by authenticity. Businessmen, Accenture’s target, are under tremendous pressure in a tough bottom-line environment. The animals campaign is funny and warm, but perhaps too cartoonish for our time. A more straightforward campaign, with Accenture traditional warmth and humanity, is more appropriate.

Avi Dan is President & CEO of Avidan Strategies, a New York based consultancy specialized in advising professional service companies on marketing and business development. Mr. Dan was previously a board member with two leading advertising agencies and managed another.

Why Did Patrick Byrne Sell $3 million in Overstock.com Shares?

So Patrick Byrne (via his 100% wholly owned entity High Plains Investments, LLC) sold 140,000 OSTK shares in the past five days and that has a few people talking/wondering aloud about what the hell is going on.

Barry Ritholtz, who is long OSTK (quantitative drivers) despite, “I…think it is a steaming pile of shit, that the CEO is an asshole, and that the entire company is probably corrupt,” is really curious:

Is Byrne in possession of material insider information? Would he be so stupid as to sell the shares? (I doubt anyone could be that dumb).

Perhaps he sees a favorable outcome to the SEC investigation? Maybe he is raising money to pay a fine?

These are all excellent jumping off points (although we disagree with the notion “I doubt anyone could be that dumb”) but let’s explore other possibilities:

A) Segways for the KPMG audit team.

B) Reverse Psychology – he’s done fighting the short selling crowd (or is he?)

C) He’s going to apologize to Sam Antar monetarily (how generous he will be, is another matter entirely).

D) He needs some cash for a Father’s Day gift.

E) Needs to feed the Farmville addiciton.

These are merely some ideas. And there’s always the possibility that PB has gone right out of his mind. Share your own, should you feel inclined.

Long OSTK, Short Byrne [The Big Picture]
Proxy Statement/Schedule 14A [SEC.gov]
Patrick Byrne Pockets $3.1 Million from Dumping Overstock.com Shares [White Collar Fraud]
Patrick Byrne Dumps His Overstocked Overstock Shares [Gary Weiss]

Integrated Reporting Will Gain Momentum as Banks, Private Equity Increase Their Focus on ESG Issues

In the first part of our conversation with Michael Krzus, co-author of One Report, Integrated Reporting for a Sustainable Strategy, we discussed the nature of integrated reporting, how it will change corporate reporting as it is commonly known and some of the benefits to both stakeholders and companies.

The second part of our discussion looks at how small and midsize entities will benefit from integrated reporting, the feedback received from clients, and what the future holds.


Going Concern: Do you see a point in time when companiessults for sustainability issues on a reoccurring basis similar to quarterly earnings reporting?

Michael Krzus: I know enough about this to be dangerous, so I’ll give you that caveat, but I am aware of the somewhat recent EPA rule making that is going to require companies to report emissions and things of that nature. There are some limitations, but there will be more frequent reporting for U.S. domiciled companies. I think some of it will depend on the technology available. I don’t know what it takes for a coal-fired electric plant to account for CO2 emissions. So I’m not really in a good position to tell you that in five years whether that will evolve into more regular reporting or not.

GC: What kind of companies will be able to utilize integrate reporting? Can any size company embrace it or will it start with the largest players and work its way down?

MK: As a practical matter, it will have to be large, public traded companies, particularly the global players. On the other hand, I think small and mid-cap companies, especially private ones, have as much or more skin in the game and a lot more upside than the big guys. And that’s because of the complexity of information and the complexity of accounting standards. If you’re Microsoft, you’ve got a lot of issues that can be addressed by your large accounting department but if you’re a $400 million manufacturer of widgets, you don’t have those kind of resources. But you do want to tell stakeholders your story clearly and succinctly. I think the idea of the integrated report gives them the opportunity to do that.

Additionally, in the last couple of years, I’ve developed a good working relationship with the Society of Investment Professionals in Germany and one of the things that group has done is build example reports of what an integrated report could look like for a small or mid-cap sized company. If you think about it from the German perspective, much of their market base is small and medium sized companies and analysts there are very interested in the benefits that an integrated reporting can provide. So, there’s a lot upside for companies that fall outside the Fortune 500.

GC: Do you see a point in time where banks start requesting more non-financial information (i.e. ESG information) in order to qualify for lending?

MK: The short answer is “Yes.” To me, sustainability really has to do with long term viability of an entity. I don’t think a company can be viable for the long term without understanding and managing their environmental, social and governance risks because those three risk types specifically translate to reputation.

To some degree a lender will have to start considering non-financial factors. The price of admission is opening your heart and soul, as a company, to the banker. A banker can ask all kinds of question whether its about CO2 emissions or manufacturing location in Thailand that may cause child labor problems because you’re running a sweat shop.

To parallel that, I recently attended a conference of institutional investors. I found it interesting that a group of people that wanted to know more about integrated reporting were private equity folks. These private equity people are in the same boat as the bankers. If they are going to make an investment, they will open up everything. It’s not just about getting the 10-K, it’s about understanding everything from financial projections and processes to social and environmental risks in China. So, the markets in general, not just bankers, but also private equity and traditional sources of capital have become more and more interested in a broad set of non-financial information.

GC: What has been the experience with clients?

MK: Clients have assisted us by presenting challenging questions to help us think more clearly about the situation. For example, some people have argued that we don’t need integrated reporting because the markets are efficient and already have all the information they need. I would argue that, even without the events of the last couple of years, markets aren’t efficient and don’t have all the information they need because we have so many firms employing armies of analysts, all of who are looking for that shred of information that will give their company an edge. There’s always something that the analysts don’t have.

Another argument is whether or not the integrated report somehow diminishes the corporate responsibility report. My response to that is that by not integrating the two types of reports, companies avoid an audit of non-financial information. In general, the companies that have an integrated report do have some assurance over the non-financial information; it’s not necessarily subject to the same standards as auditing standards but there is some kind of assurance. So I think some kind of audit over the information – and over time perhaps controls and processes – will elevate the quality of the reporting. So good questions from very sharp people like “Have you guys thought about this?” forces us to engage in some dialogue of our own so we do have a coherent responses.

GC: How does IFRS fit into integrated reporting?

MK: I’m one of those people who think that there should be one global set of accounting standards. To speculate just a little bit, I could envision a world that might have IFRS that govern the financial statements and perhaps an international non-financial reporting standard, because at some point we’re going to have to address that. I think the larger question of IFRS is to first, how do we develop a global standard of non-financial information? And secondly, can we develop some sort of benchmark for auditors? So, I remain optimistic that U.S. will eventually adopt IFRS and would hope in the next few years there would be some kind of move to adopt international standards for non-financial information.

GC: What’s next?

MK: There are a couple of major conferences coming up this year where integrated reporting will be a topic in several sessions. We use various conferences to spread the word and build some momentum behind the idea. The Harvard Business School and the Harvard University Center of the Environment are co-sponsoring an event on integrated reporting later this year. Two newspapers in Japan are hosting an event in November and the Prince of Wales Accounting for Sustainability has an annual event in December that hosts roundtables on various topics.

On the Accounting for Sustainability website, there are a number of press releases including a PDF on a governmental collaboration that calls for the establishing an international integrated reporting committee. I can tell you that the Accounting for Sustainability Group has the resources and, frankly, the brand name that could call for the IASB or some other group to undertake the idea of a global framework for reporting non-financial information. I could see us having this conversation a year from now and I’d be very disappointed if there was not some kind of formal announcement from an international integrated reporting committee.

So I’m cautiously optimistic about the future. The timing for this is right and integrated reporting is important when you believe in the concept of inter-generational responsibility. This is the only planet we’ve got and we should every intent to leave it in as good as condition as we found it.

But as a hard-headed capitalist I also think integrated reporting makes sense because you don’t want to invest in company that will go bust. A company simply cannot be viable for the long-term unless they are considering ESG issues.

Accounting Going Green? The Move to Integrated Reporting

Transparency is fast becoming the most important tool corporations can use. Not long ago, management determined what was relevant and stakeholders were notified on a need-to-know basis. Now the tables have turned and stakeholders have the ability to demand information of all types and if companies are not willing to provide it, those stakeholders now have the resources to discover (or in some cases, uncover) it for themselves.

Adding transparency to corporate reporting still seems to be a work in progress. As the SEC s ruminates over IFRS and its impact on financial reporting, corporate sustainability and responsibility reporting is fast becoming one of the popular ways for companies to give stakeholders a snapshot of its social, environmental, risk, and ce.


The problem from a practical perspective is that it’s difficult to consume all information in an efficient manner. That’s where the idea of integrated reporting comes in. Simply, it combines the the traditional financial report along with the non-financial information presented in the corporate responsibility, social responsibilty or ESG report.

One Report, Integrated Reporting for a Sustainable Strategy is a book written by Robert G. Eccles, senior lecturer of Business Administration at Harvard University and Michael P. Krzus, a public policy and external affairs partner with Grant Thornton.

We had the pleasure of speaking with Mr Krzus recently about One Report, covering topics like what kind of data it consists of, how it will change corporate reporting, and what the future holds. This is part one of a two part interview. Check back for part two tomorrow.

Going Concern: How can you best summarize what integrated reporting is, how it will be different and how it will improve corporate reporting.

Michael Krzus: On it’s face it’s a very simple idea – the notion of an integrated report really involves the combination of the traditional financial or corporate report and combining it with corporate sustainability, responsibility or ESG report and combing them into a single package. However, that doesn’t mean that companies will staple together two reports, each one about 150 pages long, that results in one report that’s 300 pages long.

If you look at one of the companies we talk about in the book, United Technologies here in the U.S. and Danish company Novo Nordisk, each of their integrated reports perhaps have 115-120 pages and what both have a very robust website. Just because something may not be deemed material for the integrated report, there is still a lot of information that both of those companies, as well as others, present in very easy-to-navigate websites. So one of the things that we’re seeing is that integrated reporting is really helping develop very advanced websites.

Similarly, I was working on a couple of presentations on the German chemical company BASF has a page on their website that will allow you to link to 200 different global social media outlets including the likes of Facebook and Twitter. So we’re really starting to see that kind of engagement develop from companies that are embracing integrated reporting as well.

Companies are using the idea of an integrated report to better understand their own internal concepts of materiality and by engaging with their stakeholders and understanding what they think is material or what their material risk exposures are. It’s a disservice to the broad stakeholder community that some mainstream analysts don’t give consideration to some of the environmental or social risks that exist.

From the perspective of the socially responsible investor or perhaps a non-governmental organization that follows a very narrow or very critical mission, they may not understand the trade-offs that these company have made. We think that the idea of a single integrated report will help broaden the perspective and help them make an informed decision.

GC: Considering a traditional corporate responsibility report, how the data change? Similarly, will the data change from the two separate reports combining into a single report?

MK: There are relationships between financial and non-financial performers and vice versa. Companies need to better explain what those relationships are.

One example is BMW. On one hand, water is a relatively small cost that goes into an automobile but in terms of water as a resource, it is an increasingly scarce resource in certain parts of the world. BMW has decided to make huge investments in reusing water and they actually have a plant in Austria that doesn’t bring fresh water to the plant, they just continually reuse it. The benefit, as it turns out, is because of their focus and because they’re a few steps ahead of other automobile manufacturers, they’ve got a cost advantage. Making that kind of discussion clear, it’s not just about cutting CO2 emissions, but also process improvements that enable companies to produce more at a lesser cost.

I think the other difference that you’ll see in the new reports is that the mainstream analysis will be giving more consideration to ESG issues. The traditional analyst has several companies that they’re following and these companies have different sectors in an annual report, corporate responsibility report, and many others. It’s extremely difficult to consume that many reports. My co-author and I interviewed an analyst once who brought in a stack of about 60 reports because some of the companies that she followed were issuing financial, environmental, and responsibility reports all separately, and she said “there’s no way.” So I think the integrated report will help that.

A couple more examples: last September Bloomberg launched a product that involves making global reporting initiatives that available on their Bloomberg terminals and CalPers’ board has undertaken a project to integrate ESG factors into their analysis better and in turn, push that down that to their asset managers. So we are starting to see some movement. That relationship between financial and non-financial performance and making things easier for the analysts to consider non-financial information will be the two biggest changes that will come about as result of wider adoption of integrated reporting.

GC: And CalPers is not a lightweight. If you see someone like someone like that setting an example, there are other companies or large holders of assets that will follow their lead.

MK: CalPers is not a lightweight at all. We’ve developed a good working relationship with a couple of people at CalPers and they are taking the idea of integrated reporting very, very seriously.

When you think about it, if CalPers goes to their asset managers and says we want you to integrate ESG into your traditional analysis and here’s the way we want you to come up with it. I think that’s going to have a ripple effect across other pension fund managers and assets managers other than those at CalPers.

GC: What would you say are the biggest benefits that stakeholders will get out of integrated reporting?

MK: I think the biggest benefit is actually going to be better engagement with companies they want information about. In my opinion, a company cannot undertake an integrated reporting project without really listening to the stakeholders. For a company to understand the perspectives, not that they’ll all be material, but that they’ll be willing to engage in that dialogue.

And it may not be in ways that companies are not comfortable with whether it’s Twitter or Facebook or something else, I think that process of stakeholder engagement is going to be mutually beneficial. The companies will better understand who’s out there and what they’re expectations are. And from the user perspective, it they will have a better understanding about what some of the tradeoffs are, as well as what some of the reporting implications might be. Overall, I think it will create a better overall understanding for both groups.

And by having more robust information, it’s going to allow for better decision making. I see that as a benefit on both sides. From the investor side, they’re going to have a much better understanding of the some the risks a company faces. An investor has to consider a lot of intangibles when making a decision. Whether its the business risks to climate change or the innovation process. If that kind of information is made available, it’s going to allow investors to make better decisions and who the winners and the losers are.

GC: Is there any risk that stakeholders might have too much information?

MK: Frankly, yes but I think in some ways it’s an overblown risk because when Bob and I looked at some of the oldest integrated reporters, you clearly see an evolution. A great example is BASF. Because of the diversity of their operations and the nature of the chemical business, there’s a lot of relevant information, especially about risk and materiality of certain exposures. About a year ago I spent half a day with their reporting team looking at both the financial and sustainability side. They do a very good job of looking in the mirror. One of the first comments was that the integrated report was still too long; that they needed to do a better job of getting their arms around materiality and again, the dialogue with the stakeholders helped them do that.

Over time as companies engage their stakeholder through various technologies, they will reduce the report down to a very information rich package. So yes, there’s a risk for too much information but I don’t think that will stop anyone.

Don’t forget to check back here tomorrow for part 2!

Koss Files 10-Q Sans Financial Statements, Declares Dividend

Somehow this got overlooked earlier in the week but we can’t literally be all-knowing, all-seeing, all the time. Plus, haven’t you missed this mug?

Headphone cobbler Koss filed it’s first quarter 10-Q earlier this week, which ordinarily would be a non-event except for a small matter of missing financial statements.

The Milwaukee Business Journal reports that the company cited the missing financial statements “due to delays relating to certain previously disclosed unauthorized transactions.”


Yes, that’s PR-speak for ueSay achdevaSay.

Koss executives intend to amend the Form 10-Q to include the quarterly unaudited financial statements as soon as possible after Koss Corp. completes restating statements from previous quarters in fiscal 2008, fiscal 2009 and the quarter ending Sept. 30, 2009, the company said. The company said it expects to file amended financial reports with the SEC no later than June 30.

But there’s nothing to be worried about because the company declared a dividend and secured an $8 million credit facility with JP Morgan. Progress!

Koss declares dividend, but yet to report results [Milwaukee Business Journal]
10-Q [SEC.gov]
8-K [SEC.gov]

You Can Forget About Landing That CFO Position at the SEC

Mary Schapiro took some time out of her fraud fighting Friday to ask Kenneth Johnson to quit acting as the Commission’s CFO and to take on the official responsibility of running the Office of Financial Management.

Mr Johnson (KenJo?) vehemently accepted the offer and threw in a shout out to the boss, “I’m honored to accept this new role at such an important time for the agency. Chairman Schapiro is deeply committed to strong financial management, and I’m proud to lead the agency’s initiatives in this area.”


Presumably, the CFO position isn’t a kicking-down-doors type job so Johnson’s first order of business should be to determine the savings on a group rate at one porn site that can appropriate service all tastes.

Washington, D.C., May 21, 2010 — Securities and Exchange Commission Chairman Mary L. Schapiro today announced that Kenneth A. Johnson has been named Chief Financial Officer for the agency.

Mr. Johnson has been serving as acting CFO for much of the past year. The agency’s CFO is responsible for leading its Office of Financial Management, which handles the budget, finance, and accounting operations for the SEC.

“I’m delighted that Ken has agreed to take on this role at the SEC,” said Chairman Schapiro. “His deep experience in the financial arena will be incredibly valuable as we grow as an agency.”

Mr. Johnson added, “I’m honored to accept this new role at such an important time for the agency. Chairman Schapiro is deeply committed to strong financial management, and I’m proud to lead the agency’s initiatives in this area.”

Mr. Johnson, 37, joined the SEC in 2003 as a Management Analyst in the Office of the Executive Director. In that role, he advised on all aspects of the budget process, developed strategy initiatives, and responded to inquiries from the Office of Management and Budget (OMB) and Congress regarding the SEC’s budget and financial operations. He became Chief Management Analyst in 2006.

Mr. Johnson has served as a valuable staff expert on legislative proposals, and he managed the development of the SEC’s long-range Strategic Plan that would guide agency policy through 2015.

Prior to joining the SEC staff, Mr. Johnson worked as a Commerce Analyst at the Congressional Budget Office. His primary responsibility in that role was to analyze and report on the budgetary effects of committee-approved legislation.

Mr. Johnson earned his Masters in Public Policy from the Kennedy School of Government at Harvard University, and earned his BA at Stanford University.

Details We’d Like to See in Stephen Chipman’s Blog: Partners with Self-assigned Nicknames

We enjoy Stephen Chipman’s blog as much as any casual reader inside of Grant Thornton but he often leaves us wanting more. He talks about New York, Chicago, Atlanta, London, China (God, he loves talking about China) but sometimes we’d like to know what some of the smaller offices have going for themselves.

We know what’s going on in Honolulu, Greensboro, and Madison but what about Grant Thornton Salt Lake City? Or Oklahoma City? What’s going there, Steve-o?


Fortunately, we stumbled upon a little blog that tells us about not one, but 25 things about GT’s Phoenix office. As you might expect, the office gets a place on a “Best Places” list and most of the information shared is about the volunteering the firm does in the local community or raising awareness about [insert major problem, e.g. Americans are fat and don’t exercise] which is really nice.

As much as we like – nay – love nice, we know that similar efforts are made in other offices so we’re craving something local, something unique, something that makes you say, that sums up Grant Thornton Phoenix.

Luckily, they did just that by way of an 80s slapstick comedy that some of you young GTers have probably never seen (and frankly, we don’t really remember either):

Grant Thornton tapped three friends and partners, who called themselves the “3 Amigos,” to start the Phoenix office. Ed O’Brien, Brad Preber and Ken Garrett were serving clients out of different Grant Thornton offices. Each had a unique specialized expertise – O’Brien in audit, Preber in consulting and Garrett in tax.

Mr Preber is also a tournament champion fly fisherman so we picture him as a hunky Brad Pitt in A River Runs Through It type but the rest of the amigos are a blank.

25 Things You Didn’t Know About…Grant Thornton LLP [HMA Time]

Getting Regular Sex in Denmark May Have Cost Søren Hansen About $2.6 Million

Back in March we told you about non-Phil/Tiger golfer Søren Hansen, who was looking at jail time for dodging about 10 million kroner in taxes.

He managed to avoid the Danish joint but a judge did order him to pay 8 million in back taxes and an additional 8 million in fines. This works out to $2.6 million which is around what Tiger Woods spends on hookers in a weekend. So in other words – a chunk.


Hansen maintained throughout the ordeal that he was not a resident of Denmark because he changed his residence to Monaco in 1999 (it’s on his Wikipedia page for crissakes! What’s it going to take?!?) and thus not subject to the tax. The judge didn’t buy it because “he used his summerhouse in Hornbæk for residential purposes, as well as stayed over in his girlfriend’s Copenhagen apartment regularly.”

Obviously Hansen could have moved his g/f to Monaco to avoid all the trips back but that would have put a serious damper on the Monaco tail situation.

Golfer hit for 16 million kroner [Copenhagen Post]

You Can Forget That Deal on the Estate Tax

Yes, the brain trust known as the U.S. Senate has managed to prolong the agony on the estate tax. There was a deal on the table as of yesterday but you can forget it! Hard to believe this could happen. Was it a fundamental disagreement on the proposal? Was it because everyone was broken up that Arlen Specter?


No, it’s mostly because some people (the R’s) don’t like that other people (the D’s) are being fraidy cats about not having enough votes:

Senate Minority Whip Jon Kyl (R-Ariz.) said the accord, which was all but forged a week ago, began to dissolve Monday night and broke down Tuesday after talks between leaders in both parties.

After talks with Senate Finance Chairman Max Baucus (D-Mont.) and Senate Minority Leader Mitch McConnell (R-Ky.), they scrapped a plan to move forward with the tax that expired at the end of 2009.

The reasoning, Kyl said, is that Senate Democrats aren’t allowing any legislation to reach the floor that doesn’t have support from the majority of its members.

“We no longer have an agreement because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they’re not going to allow it on the floor, at least not voluntarily,” he said. “So we have to find a way to get a reasonable permanent estate tax reform to the floor where members can vote on it.”

For crissakes. This is this biggest case of “I’m taking my ball and GOING HOME” we’ve seen this week.

Joe Kristan does put the whole thing in perspective however, “Congress has been botching the estate tax for almost ten years now; why should they start getting anything right now?”

Kyl: Senate deal off on estate tax [On the Money/The Hill via TaxProf]
Estate Tax Deal? Not so Fast [Tax Update Blog]

Despite Being a ‘Wreck of a Man,’ Allen Stanford Managed to Fire Another Attorney

Things are not going so well for the Stan as he awaits trial in H-town.

For starters, he managed to fire another lawyer, which is not going to go over well with Judge David Hittner. Judge Hittner warned Stan about his Steinbrenner-ish ways last month, “You’ve had 10 attorneys attempt to enter this case on your behalf. I will not entertain any further substitutions.”

And secondly, Al doesn’t seem to be very good at making friends:

When Mr. Stanford surrendered to authorities, he was a healthy 59-year-old man,” Stanford’s Houston-based lawyer, Robert Bennett, wrote in a brief on which Harvard Law Professor Alan Dershowitz consulted.

“Mr. Stanford’s pretrial incarceration has reduced him to a wreck of a man: he has suffered potentially life-impairing illnesses; he has been so savagely beaten that he has lost all feeling in the right side of his face and has lost near-field vision in his right eye,” Bennett said.

Naturally, AS’s lawyers want him out and placed on house arrest ASAP since his trial doesn’t start until January but so far no one is convinced that Al won’t bolt the second he gets outside the prison walls.

“Savagely beaten” Stanford asks to be freed [Reuters]

Just to Clear It Up: Grant Thornton Is an Accounting Firm Not a Law Firm

We stumbled upon this letter recently that appears to indicate that there was some confusion between the Grant Thornton Atlanta office and a Judge in Florida about what kind of services GT provides.

GT Atlanta


So it appears Mr Bowles has a little bit of responsibility here since he admits, “I did not submit a written request to appear as an other qualified representative in the form specified in [rule] which would have triggered a specific determination by you about my qualifications to go forward.” The lengthy explanation that follows kinda sorta indicates that maybe, he feels like this was his bad that the mistake got made. If you disagree and would like to blame the judge, fire away.

That being said, we figured that GT had enough of a reputation as an accounting firm to be recognized as such with little or no investigation. Apparently that is not the case. We left messages with both Judge Holified and Mr Bowles to get an explanation but so far neither of them have returned our calls.

In Washington State, a Kit-Kat Bar is Not Considered Candy for Sales Tax Purposes

[caption id="attachment_10643" align="alignright" width="260" caption="Not candy"][/caption]

Listen up people. Since many of you regularly get either your breakfast, mid-morning snack, lunch, pre-midafternoon snack, afternoon snack, pre-leaving work snack or – during busy season – your dinner out of a vending machine this could be cause for concern.

States are strapped for cash so t��������������������ve you joy is a logical and effective conclusion. Accordingly, sweets, sodas, booze, cigarettes, strippers are all fair game. Some of these are old hat (e.g. booze, cigs) and some are becoming more popular (e.g. candy, soda). Washington state is rolling out its candy tax on June 1, 2010 and as you might have guessed, it’s not nearly as simple as you would think. There are many questions.


First off, candy needs a definition, so Department of Revenue de Washington presents its version:

“Candy” means a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. Candy does not include any preparation containing flour. Candy does not require refrigeration.

OFTLOG. Couldn’t it just boil down to: “Anything handed out on Halloween”? But wait, the questions get better:

Are bags of trail mix containing small amounts of candy subject to sales tax?
No, trail mix is not considered to be candy if it contains only small amounts of chocolate chips or other candy.

Are sweetened breakfast cereals considered candy if they do not list flour as an ingredient?
No. Breakfast cereals are non-taxable food, even if they are sweetened and do not list flour as an ingredient.

What about prepackaged combination packs of candy? I sell bags of mixed candy bars for one, non-itemized price. Some of the bars contain flour, while others meet the definition of candy. Do I collect sales tax on the bags of candy?
The sale of the bags of candy represents a bundled transaction. See RCW 82.08.190 for more information on bundled transactions. Because one of the items in this bundled transaction is subject to sales tax, the entire bundle of products is subject to sales tax. See RCW 82.08.195 for more information.

However, you can exempt the bundled transaction from sales tax if you demonstrate that the purchase price or sales price for the taxable candy is 50% percent or less of the total purchase price or sales price of the bundled food products. See RCW 82.08.190(4) for information about how this 50% exception works.

Are nicotine gum and analgesic gum candy?
They are not candy, but they are subject to sales tax because they are over-the-counter drugs. Over-the-counter drugs refer to any drug sold with a label that identifies the product as a drug and includes either of the following:

A “drug facts” panel; or
A statement of the “active ingredient(s)” with a list of those ingredients contained in the compound, substance, or preparation.

Nicotine gum and analgesic gum (gums containing aspirin) meet the description above and should be treated as taxable over-the-counter drugs unless purchased with a prescription. See RCW 82.08.0281 for more information regarding over-the-counter drugs.

How are products in the baking aisle treated?
Below is information on selected baking aisle products [we’re skipping the table but fact that there is a table to explain the candy/non-candieness of the baking aisle is ridiculous]

Are fruit snacks such as fruit roll-ups and fruit leathers subject to sales tax as candy?
Fruit roll-ups and fruit leathers are subject to sales tax if they contain any sugar, honey, or other natural or artificial sweeteners and do not contain flour or require refrigeration. The fruit added to such item is not considered a sweetener (fruit is not intended to refer to concentrated fruit juices).

Are sweetened dried fruits candy?
Yes, dried fruits are candy when they are sweetened with natural or artificial sweeteners. This is true whether the product is sold prepackaged or in a bulk bin, by weight. Unsweetened fruits are not candy.

Is halvah candy?
Halvah is a confection usually made from crushed sesame seeds and honey, but in some instances may be made with grain based ingredients. It has been a traditional dessert in India, the Mediterranean, and the Balkans. Halvah that is based on nut butters (or seeds) and contains no flour is candy. Halvah that is flour-based is not candy. You should read the ingredient label if you are unsure.

Are energy bars and protein bars candy?
Energy bars and protein bars that contain no flour and require no refrigeration are taxable as candy. Bars that contain flour or require refrigeration are not candy.

Are cough drops subject to sales tax as candy?
Cough drops are not taxable as candy if they have either:

A “drug facts” panel; or
A statement of the “active ingredient(s)” with a list of those ingredients contained in the compound, substance, or preparation.

In such situation, the cough drops represent over-the-counter drugs. These cough drops are subject to sales tax unless purchased with a prescription. See RCW 82.08.0281 for more information regarding over-the-counter drugs.

Cough drops that do not have either of the above are candy.

Some takeaways: 1) Careful with the trail mix that has lots of M&Ms, it could possibly be taxable 2) Lucky Charms, et al. are safe 3) If anything has the word “gum” in it, it’s up for debate (e.g. Nicotine gum). Strangely enough, condom gum, edible undies, etc. is not mentioned 4) Fruit Roll-ups, energy bars, halvah and cough drops are all in the gray area.

And in case that doesn’t clear it up, there’s an entire spreadsheet that you can refer to (file below) but no, a Kit-Kat bar is not considered candy. Neither is a Milky Way. Got it?

Quick Tax Quiz: When Is a Candy Bar Not a Candy Bar? [Tax Policy Blog]
Washington State Candy List

Now That Busy Season Is Long Over, Are You Still Killing Yourself for the Sake of Productivity?

Many of you and your fellow accountants are doing more with less these days. Your company has had cutbacks, people have bolted for (presumably) greener cube farms and you’re left to do the heavy lifting. You’re miserable but dammit, you’re not happy unless you’re unhappy, amiright?!?

Besides, you’re doing an awesome job, as Tony Schwartz writes at the Harvard Business Review blog The Conversation, “Americans are working 10 percent fewer total hours than they did before the recession, due to layoffs and shortened workdays, but we’re producing nearly as many goods and services as we did back in the full employment days of 2007.”

He cites AG’s archenemies Ben Bernanke as saying these are “extraordinary” gains in productivity by you, the American worker.

Except there’s one small problem with this, Mr Schwartz notes:

[I]t’s called fear. If colleagues around us are being laid off and cut back, we can’t help worrying that our jobs may be next. Our survival instincts kick in, and we push ourselves harder, so we’re not the next one to go. We get more done, which sounds like good news and certainly explains higher productivity…

…Americans already put in more hours than workers in any country in the world – and that doesn’t include the uncounted shadow work that technology makes possible after the regular workday ends.

Here’s the bigger point. Just as you’ll eventually go broke if you make constant withdrawals from your bank account without offsetting deposits, you will also ultimately burn yourself out if you spend too much energy too continuously at work without sufficient renewal.

Sound familiar to anyone? No one really thinks that you’re working like a mad(wo)man because you love your spreadsheets that much. You know what? Try giving the shit a rest. You can ask E&Y; they’ll tell you. Mr Schwartz mentions “A comprehensive study by Ernst & Young showed that the longer the vacation their employees took, the better they performed.” There it is! One of your own has proof that you’re better employees if you took a break.

Whether E&Y has translated these findings into mandatory vacation for its employees is unclear. Regardless, there are those hopeless souls who consider their presence indispensable and simply won’t take time off to recharge or – God forbid – enjoy doing anything besides working. Sigh. Unfortch, As long as face time (i.e. the billable hour) rules then this will likely continue, unless TPTB wake up. “Stop measuring your people by the hours they put in, and focus instead on the value they produce.”

The Productivity Myth [The Conversation/HBR]

Five Questions with the Tax Prof

We’re happy that Paul Caron was able to squeeze a little time in to answer our questions this week. Between April 15th, finals and keeping a regular posting schedule at TaxProf Blog, we’re honored that he took the time to humor us.

After all, the man has been on the Accounting Today’s Most Influential People four years in a row. Not exactly a lightweight.

That being said, since AT’s list isn’t a ranking, it’s difficult to say just how influential Paul is. But we are certain that he carries more favor with the tax and accounting community than, say, Charlie Rangel.

In addition to his star power in the tax community, he is Associate Dean of Faculty and Charles Hartsock Professor of Law at the University of Cincinnati College of Law.


Why do you blog?
I often ask myself that question…Part of the answer is to help create a virtual community of tax professionals (tax lawyers, accountants, students).

How long have you been blogging?
Since (appropriately for a tax blog) April 15, 2004.

If someone had to read just one post of yours which one would it be?
My annual post analyzing presidential tax returns.

What is the biggest benefit you’ve gotten from starting your blog?
Getting to know a variety of tax folks. I’ve written 5 books; over 30 articles; Been cited over 350 times; Been downloaded over 10,000 times; had almost 10 million visitors to my blog. So I guess my blog trumps everything else I’ve done professionally. I’m pretty sure that the first sentence of my obituary will mention my blog, not any of the books or articles that I’ve written.

If you are a tax blogger you must…
Not need sleep.

The BNY Mellon CFO Isn’t Mad at Andrew Cuomo…

…just disappointed about Andy getting all sue-y over BNY Mellon’s Ivy Asset Management’s involvement with Berns Madoff, which will result in more money going to – SHOCK – lawyers.

Bank of New York Mellon Corp.’s (BK) Chief Financial Officer Todd Gibbons told investors Wednesday that the company is “a bit disappointed” about the New York Attorney General’s decision to file a law suit against the bank related to Bernard Madoff’s Ponzi-scheme.

But as a result of the suit, and the current environment more broadly, legal cost are expected to run higher, the CFO said at UBS AG’s (UBS) Global Financial Services Conference in New York.

The TIGTA’s Nagging of the IRS Delves into Phone Etiquette

In case you’re not up to speed on the federal bureaucracy org chart, the Treasury Inspector General for Tax Administration’s expressed purpose is to tell the IRS what it is they suck at doing and what they can do to quit sucking at it.

The latest bad report card for the IRS is that of protecting the identity of taxpayers who call the Service for help. The epic fail is due to customer reps not being inquisitive enough when identifying callers and not their inability to use their inside voices. The TIGTA presents its displeasure with the phone “assistors” in its latest report:

From our statistical sample of 180 contact recordings, we determined that assistors did not properly follow procedures when authenticating 29 (16 percent) callers, increasing the risk of unauthorized disclosures. Based on these results, the projected number of callers with increased risk of unauthorized disclosures is 44,067 for 1 week.

So, you figure 2.2 million unauthorized disclosures a year. Maybe that’s a legitimate concern but in the grand scheme of things, is it really that bad? If you consider the fact that 22.4 million people aren’t even getting help, that seems like a pretty good number. Regardless of our realistic standards, the TIGTA has more harping to do:

During our review of 48 (27 percent) of the 180 sampled calls, we were able to overhear other assistors discussing other callers’ Personally Identifiable Information. For 10 calls (6 percent), we were able to clearly hear parts of conversations with other callers. For 38 calls (21 percent), other assistors’ interactions with callers were overheard, but we could not clearly understand the conversations. This happened because assistors did not put callers on hold when they were researching the taxpayers’ accounts. Also, the physical layout of employee workstations at call centers allows other conversations to be easily overheard.

So in this particular case it sounds like the IRS has two choices 1) force everybody to become low talkers or 2) spring for a larger cube farm so people aren’t up in each other’s shit.

The real question her is, can we realistically expect an error rate of zero from the IRS? When did “good enough for government work” no longer apply?

Telephone Authentication Practices Need Improvements to Better Prevent Unauthorized Disclosures [TIGTA via TaxProf]

Fire at Grant Thornton Boston

May 11, 2010 – The Boston office was evacuated due to a fire in the building. All Grant Thornton employees appear to have been evacuated safely.

Sure enough, we tried calling Beantown and we were automatically re-routed to GT New York. If you’ve got details, get in touch.

Grant Thornton Saying Aloha to Honolulu Office

Over the weekend we learned that Grant Thornton was pulling up the stakes in Hawaii. According to our sources, the partners of the Honolulu office will be purchasing the business from GT and joining Pannell Kerr Forster, and international network of independently owned firms (U.S. locations).


GT Honolulu has approximately 60 professionals and according to one source familiar with the situation, all will be retained after the transaction According to our source, Doreen Griffith, the Honolulu Office Managing Partner will be moving to the San Francisco office to lead the tax practice there while Patrick Oki, an assurance partner will head up the new PKF office.

Our source told us that the reaction of the GTers was that of surprise but not upset, “I would say that employees are very happy but shocked.”

Grant Thornton’s disposal of this office follows the closure of its Madison, Wisconsin office, announced just last month and the Greensboro office that we reported on back in February. Several sources have speculated that Grant Thornton is moving out of smaller markets to focus business opportunities in larger markets.

Despite these moves, none of them had been previously mentioned on either of the the firm-wide calls held by Grant Thornton CEO Stephen Chipman held this year.

PKF North America’s President & CEO, Terry Snyder spoke with us briefly about the transaction, confirming that the partners in Honolulu were taking over the business from Grant Thornton and that Mr Oki “was the man to speak to.” He declined to comment on GT exiting the Honolulu market.

Messages left with Patrick Oki, Doreen Griffith and Grant Thronton’s national PR team were not returned. Emails to both Mr Oki and Ms Griffith were not returned.

If you have information on this transition in Honolulu, you can drop us a line at tips@goingconcern.com.

Small Business Still Not Showing Signs of Life

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

Don’t look for small businesses to lead the economic recovery.

The monthly reading from the National Federation of Independent Business Index of Small Business Optimism clearly shows little optimism among small business.


Sure, nine of the 10 components that comprise the index rose from the prior month.

However, some of the critical factors that would indicate whether small business owners plan to invest in their firms did not show encouraging results. The NFIB’s job measures barely moved and capital expenditure plans were flat.

More specifically, according to the survey average employment per firm was negative in April. What’s more, since July 2008 employment per firm has fallen steadily each quarter, logging the largest reductions in the survey’s 35-year history.

If small business is key to job growth – as some pundits think – then this does not bode well for our economy.

And the jobs small businesses create are not exactly great ones. They are more likely to come without benefits and less time off for vacation.

Meanwhile, the Index does not suggest that small businesses will be investing heavily in non-personnel. It noted that plans to make capital expenditures over the next few months were unchanged from the prior month and its reading is only slightly above the 35-year record low.

Yikes!

The survey also noted that small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stock. In fact, more owners plan to reduce stocks than plan new orders, according to the NFIB.

Meanwhile, regular borrowers continued to report difficulties in arranging credit. “Historically weak plans to make capital expenditures, to add to inventory and expand operations also make it clear that many borrowers are simply on the sidelines, waiting for a good reason to make capital outlays and order inventory that requires businesses to take out the usual loans used to support these activities,” the report notes.

Obviously, small businesses are not going to turn this economy around any time soon.

Michel Barnier: EU Is ‘Impatient’ with SEC, FASB Pussyfooting Around on Accounting Standard Convergence

Michel Barnier is certainly doing his damnedest to make a name for himself by virtue of the accounting standards convergence and scrutinizing the role of auditors.

Accountancy Age reports his latest soundbite at a speech in Washington today, telling “leaders” that while their efforts to converge international accounting standards and U.S. GAAP are admirable, that he and the entire continent of Europe are getting sick of the stalling.

“I appreciate that the US authorities have made progress towards convergence, but in the EU, we are getting impatient.”

Apparently Mr Barnier has had enough with this little dance going on between the FASB and the SEC. The FASB has been punting to the SEC fairly regularly and we’re all aware of the SEC’s tendency for inaction, so maybe Barns figured that a Frenchman calling out Americans on their own turf would help move things along.

Barnier tells US that Europe is “getting impatient” on accounting convergence [Accountancy Age]

Accounting News Roundup: In Defense of Sherrod Brown; Former H&R Block CFO Gets the Parachute; Intuit Snatches Up Medfusion for $91 Mil | 05.11.10

Sen. Sherrod Brown Prods SEC/FASB to Fix Accounting Standards [The Summa]
This is Professor Albrecht’s take on Senator Brown’s amendment SA 3853 to the S. 3217: Restoring American Financial Stability Act of 2010. The Professor is less concerned about this particular attempt at financial accounting legislation, reasoning that the SEC and the FASB have had plenty of opportunities to fix these issues (e.g. repurchase accounting) and have passed them up.

Given the severity of the problems, and the inability of today’s standard setters to gird their loins and solve the problems, is it appropriate for Congress to pass a law directing the SEC and its standard setter to produce a desired outcome? Absolutely. Accounting standard setting is an inherently political process, as I explained in my popular essay, “Economic Consequences and the Political Nature of Accounting Standard Setting.” Because the SEC has passed on its legislative charge to establish accounting standards that adjudicate between competing economic interests, and because the private standard setters follow their own political agendas when preparing accounting standards, it behooves Congress to step in when things get too far out of whack with national priorities. Such is the case here.

In other words, s— or get off the pot, FASB and SEC. The argument is a fine one, however, if legislation of accounting has to force the FASB’s into action, where does it end? When FAS 157 was being decried as the cause of all our problems, Barney Frank called in Bob Herz, scared the living bejeesus out of him, and got the result he wanted. Is that preferable to this situation? That depends. At the very least, the Sherrod Brown method susceptible to the influences of others while the B. Frank method skips the voting and signing stuff altogether (which has proven tricky in the past).

Former H&R Block CFO gets $620,000 cash in severance [KCBJ]
Becky Shulman (no relation to the Commish, as far as we can tell) is getting $620k for walking away from H&RB along with automatic vesting of 148,725 outstanding stock options. There’s no indication that she is eligible for lifetime complimentary tax prep service.

Intuit to buy Medfusion in $91M deal [SV/SJ Business Journal]
Intuit, owner of QuickBooks, Mint.com, Quicken, etc. has now added Medfusion to its stable, expanding its SaaS holdings. The deal is scheduled to close this July, the 4th Quarter of the company’s fiscal year. CEO Brad Smith, from the press release:

“This transaction expands our software-as-a-service offerings with a solution currently used by more than 30,000 healthcare providers, the vast majority of whom are essentially small businesses. The combination of Medfusion’s industry-leading patient-provider communication solutions and Intuit’s expertise in creating innovative solutions that improve the financial lives of small businesses and consumers, will help us create new solutions that make the clinical, administrative and financial side of healthcare easier for everyone.”

AICPA, Others Ask U.S. Senate to Kindly Keep Their Filthy Mitts Off Accounting Standards

After the wisdom displayed by Senators in the Goldman Sachs hearing a couple weeks ago, it must have become evident to a group of concerned organizations took it upon themselves to voice concern with regard to any elected official that might give consideration to tipping his or her toe into the accounting standard waters.


Enter Son of Ohio, Sherrod Brown (D) who has proposed amendment SA 3853 to the financial regulation reform bill. The amendment would legislate financial reporting standards by forcing companies to “submit reports to the commission under this section record all assets and liabilities of the issuer on the balance sheet of the issuer.”

But don’t worry if you can’t figure out what the value of a liability is because you can just leave it off altogether granted that you don’t mind explaining:

“(i) the nature of the liability and purpose for incurring the liability; (ii) the most likely loss and the maximum loss the issuer may incur from the liability; (iii) whether any other person has recourse against the issuer with respect to the liability and, if so, the conditions under which such recourse may occur; and (iv) whether the issuer has any continuing involvement with an asset financed by the liability or any beneficial interest in the liability.”

While this seems all very well thought out, the CAQ, CFA Institute, AICPA, FEI and a gaggle of others smelled amateur hour and wrote a letter to the old boys in the Senate letting them know, in no uncertain terms, that this pretty much the worst idea they’ve ever heard:

[W]e are concerned with any amendment that would legislate accounting standards, including Brown amendment SA 3853 regarding “Financial Reporting.”

The accounting standards underlying such financial statements derive their legitimacy from the confidence that they are established, interpreted and, when necessary, modified based on independent, objective considerations that focus on the needs and demands of investors – the primary users of financial statements.

We believe political influences that dictate one particular outcome for an accounting standard without the benefit of a public due process that considers the views of investors and other stakeholders would have adverse impacts on investor confidence and the quality of financial reporting, which are of critical importance to the successful operation of the U.S. capital markets.

So in other words, Sherrod Brown, you can suck it. The FASB might not be hottest piece of ass around but by GOD, it’s what we’ve got. And we’ll be damned if you’re going to propose your hocus pocus American people Main St. financial statement Act.

Accounting Groups Object to Brown Amendment [Web CPA]
Standard_setter_independence_letter_to_Senate

For Everyone in North Jersey, Mass and Rhode Island That Squandered the Last Four Weeks Away, Your Tax Deadline Is Tomorrow

If you were (un)lucky enough to live in one of the flood ravaged counties in North Jersey, Mass, or the entire Ocean State, hopefully you remembered that your extended period of procrastination ends tomorrow.


Yes, unfortunately the last four weeks have flown by and we’re sure that some of you have managed to piss away this time not preparing your tax return. Do yourself a favor and file the extension. You’re hopeless.

Relax, here’s the form.

Today in Accountants Making Bad Decisions: Tweeting That You’re Going to Blow Up an Airport

When an airport is closed due to inclement weather, most people just shrug and realize that there’s nothing they can do about it. Oh sure, there might be a few lunatics who will yell at the ticket agent because they’ve somehow concluded that they have the ability to ring up the Almighty and put in a rush order of clearing skies but most people have the self control to internalize this.


In the case of Paul Chambers, an accountant in the UK, it wasn’t so much a ticket agent but his Twitter followers who heard his frustration. Chamber was understandably concerned that he wasn’t going to get laid due to Robin Hood Airport being closed this past January after a snowstorm. Chambers claimed that he Tweeted the following…

“C—! Robin Hood Airport is closed. You’ve got a week and a bit to get your sh– together, otherwise I’m blowing the airport sky high!”

…out of frustration because he was scheduled to fly to Belfast to meet Crazy Colours, whom he had met on Twitter. Prior to the C U Next Tuesday message, he had Tweeted to Crazy Colours, “I was thinking that if it does I’ve decided that I’m going to resort to terrorism,” presumably referring to another snowstorm that could potentially delay is upcoming travels.

Anyhoo, the Tweet was discovered by a Robin Hood Airport employee who was compelled to report the threat to authorities. Naturally this led to seven hours of questioning, the loss of his job, and a ban from the airport for life (later rescinded).

The judge ruled that the Tweet was ”of a menacing nature in the context of the times in which we live.” Chambers was fined approximately $1,500 and naturally, took to the Twittersphere with his thoughts on the matter:

Accountant used Twitter to threaten to blow up airport [Telegraph]
Briton Convicted for ‘Menacing’ Tweet Against Robin Hood Airport [The Lede/NYT]

Apparently PwC Partners Aren’t Eligible for Anti-Bullying Protection

When you become a partner at a Big 4 firm, the culture rewards you with certain privileges. Some of these include: 1) the ability to strut out the door before 5 pm and no one gives you the stink eye; 2) stealing food out of the fridge without fear of retribution; 3) “Black” Starbucks cards; 4) private bathrooms that blast “You’re the Best” when you walk in the door, among others.

Unfortunately, it turns out that sometimes you lose some privileges when you take seat at the big table.

We previously mentioned Colin Tenner, who is suing PricewaterhouseCoopers for disability discrimination, alleging that he was fired after taking time off due to depression and anxiety. His suffering was caused, he claims, by a client bullying him (e.g. taking his lunch money, using emails as TP and returning them) and PwC’s mishandling of the situation.

His fellow partners weren’t buying it, claiming that he was a total wuss, “partners simply do not get sick” and possibly just faking it.


At first, we thought this sounded a little harsh but the Times Online is now reporting that there is a perfectly good explanation for partners’ reaction. They had a policy to back them up:

Mr Tenner, 45, said that a junior member of his team had raised a formal complaint against the same individual, which was investigated by PwC.

Although he complained about his treatment from the individual on several occasions over six months and had asked PwC to implement specific procedures in its anti-bullying policy, “nothing was done”, it is alleged.

Instead, Mr Tenner said, several senior managers told him that he was not protected by the anti-bullying policy because he was a partner.

Now this makes sense. Had this been one of P. Dubs’ rank and file, certainly there would have been hell to pay for this type of treatment by a client. But since a partner was involved, they figure your bully tolerance should be at such a keen level that no protection is necessary.

Bullying ‘did not apply’ to PwC partner [Times Online]

(UPDATE) Accounting News Roundup: Europe’s $1 Trillion Deal; PwC Gets Some Action in Dubai; The Longest Auditor-Client Relationships | 05.10.10

EU Crafts $962 Billion Show of Force to Halt Euro Crisis [Bloomberg]
With the Euro under pressure, the European Central Bank has hatched a plan to “offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators.” EU countries are chipping in 440 billion in loans, the EU’s budget throws in 60 billion, and 250 billion from the International Monetary Fund.

The funds will be available to those countries that experience a financial crisis similar to Greece. Portugal and Spain have debt to GDP ratios of 8.5% and 9.8% respectively, exceeding the EU’s mandated limit of 3%. package approved last week, receiving 110 billion euros “after agreeing to unprecedented austerity measures,” triggering riots in the country.


Dubai Holding Hires Debt Advisers [WSJ]
Dubai Holding Commercial Operations Group, a part of Dubai Holding (not to be confused with fellow Dubai conglomerate Dubai World) has hired PricewaterhouseCoopers to help them with a teenie debt restructuring project. DH’s debt issues come about after Dubai World is still working to restructure the $14 billion in outstanding debt that it has with its creditors after a slight panic late last year.

UPDATE: KPMG and Deloitte are getting in on the fun as well, as the Financial Times reports that they have been engaged to advise Dubai Group and Dubai International Capital, respectively.

You Complete My Audit [CFO]
Had your auditor for awhile? If you want to crack the top 100 of longest auditor-client relationship, you’d have to be putting up with the same firm for over 50 years. According to the CFO’s analysis of Audit Analytics data, the longest auditor-client relationship belongs to Deloitte and Proctor & Gamble who have been together since 1890. PricewaterhouseCoopers’ longest relationship is with Goodyear Tire & Rubber, starting in 1898; Ernst & Young with Manulife Financial, 1905; KPMG and General Electric go back to 1909.

Of the 100 companies that have stuck with their auditors the longest, 97 of those companies were with Big 4 firms:
• PricewaterhouseCoopers – 34
• E&Y – 25
• Deloitte – 24
• KPMG – 14

Straight Talk about Brutality of White Collar Crime from a Convicted Felon [White Collar Fraud]
GC friend and forensic sleuth Sam Antar recently had some a two part interview produced that from his recent speaking presentations at Stanford Law and Business Schools. Part one is below and you can see part two over at WCF.

Who Is Doing the Tax Revenue Projections for the State of California?

Because they’re not doing such a bang up job:

State tax collections plummeted unexpectedly in April, wiping out months of steady gains that legislators hoped would ease their budget troubles and restore California’s economy faster than experts predicted.

Revenue for April, the biggest revenue month because it is when most Californians pay their taxes, lagged projections by nearly 30% — roughly $3 billion, according to state officials. The drop was steep enough to erase improvements recorded in each of the four previous months.


Just when you thought state fiscal crises couldn’t get more out of control. That’s way to big to be a fat finger error.

This makes the projected budget deficit approximately $18.6 billion, according to the L.A. Times. California’s lawmakers have to come up with a solution soon, as the state’s fiscal year ends next month. But hey, they pulled a rabbit out of their ass last year, why not try for a repeat?

With this new bar in state fiscal nightmare hilarity, the only question now is – how can New York top it?

Job of the Day: Fannie Mae Needs a Senior Accountant

Fannie Mae is looking for an Senior Accountant – Debt, Derivatives in their Washington, DC/Metro location.

The position requires a minimum of six years experience, with exposure to FASB 52, 91, 133, 155, 157, 159 a plus.


Company: Fannie Mae

Title: Sr. Accountant – Debt, Derivatives

Location: Washington, DC/Metro

Description: Operate with considerable latitude in performing highly complex duties related to preparing and analyzing financial information to record transactions, prepare financial reports, and review and verify accuracy. Provide value-added expertise to consultants, auditors, and others in development of new concepts, techniques, and standards. Utilize wide-ranging experience to conduct research and problem-solving. May operate in a lead role within the team.

Responsibilities: Compile, review, analyze, and record financial information to the general ledger; Complete monthly closings; Prepare balance sheet and profit and loss statements, consolidated financial statements, and other accounting schedules and reports; Prepare daily, weekly, and monthly reconciliations to ensure general ledger account information is accurate, consistent, traceable, and auditable; Execute and manage timely and accurate transactions; Identify control weaknesses, communicate to management, and operate in a lead capacity in making remedial changes to tighten and enhance controls and mitigate risk; Design and produce reports; Conduct research and analyses on highly complex issues. Devise creative and effective solutions; Provide requested information to auditors, consultants, and others on highly significant matters requiring coordination; Design, modify, install, and/or maintain accounting systems to ensure adequate recognition of financial transactions; May perform highly complex projects or participate as a team member on projects at the highest level of complexity.

Qualifications/Skills: Bachelor’s Degree or Equivalent required; 6-8 years; CPA preferred; Knowledge of financial instruments (debt, derivatives, short term investments) and/or familiarity with financial statements of financial services companies; Knowledge of any of FASB 52, 91, 133, 155, 157, 159 a plus.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

Accounting News Roundup: Times Square Gets Back to the Grind After Bomb Scare; Down with the Corporate Income Tax; The Politics of Spending | 05.07.10

Times Square Goes Back to Work After Bomb Scare [FINS]
FINS checked in with several companies who have locations in the Times Square area to see if things are back to normal after last weekend’s failed bombing. Most companies are officially mum on the issue including our favorite TS resident, Ernst & Young, who was quoted as to have, “reached out [to their employees] on an informal basis.”

And by “informal” apparently that means “nothing” in some cases We checked with a couple of our own sources at E&Y and we were told that they had not received any communication at all. If there’s an email floating around out there, let us know but it sounds like any reassurance of safety was passed around on a post-it note.


A.I.G. Said to Dismiss Goldman [NYT]
Back in the game AIG! Thanks for the good times GS, Citigroup and Bank of America will take it from here. All it took was a little money for AIG to realize that they were in an abusive relationship.

Time to Junk the Corporate Tax [WSJ]
Michael Boskin argues for dumping the corporate income tax in an op-ed in yesterday’s Journal, citing several reasons that it sucks big time including double taxation, “Corporate income is taxed a second time at the personal level as dividends or those capital gains attributable to reinvestment of the retained earnings of the corporation. Between the new taxes in the health reform law and the expiration of the Bush tax cuts, these rates are soon set to explode.”

…And that stakeholders ultimately bear this cost, “the corporation is a legal entity; only people pay taxes. In a static economy with no international trade, the tax is likely borne by shareholders. The U.S. economy is neither static nor closed to trade, and taxes tend to be borne by the least mobile factor of production. Capital is much more mobile globally than labor, and the part of the corporate tax that is well above that of our lowest tax competitors will eventually be borne by workers.”

The Political Economy of Consumption: ‘Tis Better To Give, and Give, and Give [Tax Vox]
This sums up why America’s deficit problems and citizens personal debt problems will never be fixed:

Not to stereotype, but nations do have personalities. Italians eat. Russians drink. Americans spend. And when anything—or anyone—gets between us and our consumption, watch out.

Recessions make us grumpy in part because we can’t consume as much as we like. In the depths of the current downturn, the savings rate in the U.S. topped 5 percent. But retail sales have been rising since October, and the savings rate has fallen in half. I suspect Americans won’t really feel better until we drive our savings rate back to zero.

Accordingly, politicians have to pander to masses about “cutting taxes” and “reducing spending” when it’s very simple and popular to the do the former, while in reality it’s very difficult and unpopular to do the latter.

While the World Implodes, Let’s Bicker About Accounting Program Rankings

Despite your 401k taking a deuce and the entire continent of Europe about to sink into the Atlantic, the Bloomberg Businessweek Business School undergraduate speciality rankings are out and the accounting rankings are, shall we say, interesting. Maybe no one is that worried about it but if sports play any part in your like/dislike of a particular school, then there should be a few words:

1 University of Notre Dame (Mendoza)
2 Brigham Young University (Marriott)
3 Emory University (Goizueta)
4 University of North Carolina – Chgler)
5 Wake Forest University
6 Lehigh University
7 Boston College (Carroll)
8 University of California – Berkeley (Haas)
9 University of San Diego
10 Southern Methodist University (Cox)


11 Babson College
12 University of Washington (Foster)
13 University of Richmond (Robins)
14 Villanova University
15 Case Western Reserve University (Weatherhead)
16 University of Texas – Austin (McCombs)
17 University of Virginia (McIntire)
18 Cornell University
19 College of William & Mary (Mason)
20 New York University (Stern)
21 University of Southern California (Marshall)
22 Tulane University (Freeman)
23 Fordham University
24 Georgia Institute of Technology
25 Loyola University – Chicago
26 University of Illinois – Urbana Champaign
27 Ohio University
27 University of Denver (Daniels)
29 University of Texas – Dallas
30 University of South Carolina (Moore)
31 University of Connecticut
32 Boston University
33 Santa Clara University
34 University of Maryland (Smith)
35 Indiana University (Kelley)
36 Syracuse University (Whitman)
37 Washington University – St. Louis (Olin)
38 Binghamton University
39 University of Pennsylvania (Wharton)
40 Texas Christian University (Neeley)
41 University of Miami
42 University of Missouri – Columbia (Trulaske)
43 University of Michigan (Ross)
44 North Carolina State University
45 University of Wisconsin – Madison
46 Texas A&M University (Mays)
47 The College of New Jersey
48 University of Minnesota (Carlson)
49 Miami University (Farmer)
50 University of Georgia (Terry)
51 Massachusetts Institute of Technology (Sloan)
52 University of Delaware (Lerner)
53 Ohio Northern University (Dicke)
54 Seattle University (Albers)
55 Northern Illinois University
56 Michigan State University (Broad)
57 Georgetown University (McDonough)
58 California Polytechnic State University (Orfalea)
59 Loyola College in Maryland (Sellinger)
60 University at Buffalo
61 Bentley University
62 DePaul University
63 University of Iowa (Tippie)
64 Drexel University (LeBow)
65 Northeastern University
66 Marquette University
67 St. Joseph’s University (Haub)
68 University of Pittsburgh
69 University of Utah (Eccles)
70 University of Oregon (Lundquist)
71 Seton Hall University (Stillman)
72 Bowling Green State University
73 Kansas State University
74 Colorado State University
75 Louisiana State University (Ourso)
76 Baylor University (Hankamer)
77 University of Oklahoma (Price)
78 University of Colorado – Boulder (Leeds)
79 University of Massachusetts – Amherst (Isenberg)
80 James Madison University
81 George Washington University
82 University of Tennessee – Chattanooga
83 University of Houston (Bauer)
84 Xavier University (Williams)
85 Florida State University
86 John Carroll University (Boler)
87 University of Hawaii (Shidler)
88 Arizona State University (Carey)
89 Florida International University
90 University of Louisville
91 Bryant University
92 Rensselaer Polytechnic Institute (Lally)
93 Purdue University (Krannert)
94 Illinois State University
95 University of Arizona (Eller)
96 Texas Tech University (Rawls)
97 Hofstra University (Zarb)
98 Ohio State University (Fisher)
99 Clemson University
100 University of Florida (Warrington)
101 University of Akron
102 University of Arkansas – Fayetteville (Walton)
103 Butler University
104 University of Nebraska – Lincoln
105 University of Illinois – Chicago
106 University of Central Florida
107 Virginia Polytechnic Institute and State University (Pamplin)
108 Carnegie Mellon University (Tepper)
109 Temple University (Fox)
110 Pennsylvania State University (Smeal)
111 Clarkson University

Apparently Ernst & Young Doesn’t Buy the “C’s Get Degrees” Mantra

We know that lots of you out there are perfectionists, so this could never happen to you but for you mere mortals, you can sympathize a little bit.

Courthouse News Service reports that a class action suit in California has been filed against E&Y claiming that the contracts signed by graduating seniors “compel” them to work for the firm but allow the company “to legally renege or cancel the offer of employment” if the senior does not maintain “continued strong academic standing.” Apparently this means if you slack off your senior year and slip a couple of C’s in there, you could be out on the street.


Yunjung Gribben, 43, is the named plaintiff in the suit and she is seeking damanges for wrongful termination, age discrimination, breach of employment, specific performance and violations of the Labor Code.

Ms. Gribben claims that she graduated from Cal State Fullerton with a 3.6 grade point average but, “After working for Ernst & Young for a month, Gribben says, she got a call from human resources, questioning her about the C’s she got in her senior year. She says she was fired the next days [sic].”

She claims that “continued strong academic standing” was not defined in her contract, although she admits that there is a “hazy reference” to the term on the firm’s website.

Dale Fiola is representing Ms. Gribben and he us, “No student should be under the impression that they have an employment agreement once they graduate. Most of the time when people sign offers of employment they think they’ve got something.”

The suit alleges that other students have cited the “continued strong academic standing” language and in Ms. Gribben case, “younger employees were allowed to stay at the company.”

Ernst & Young spokesman Charlie Perkins had no comment at the time our post was published.

Class Sues Ernst & Young Over Contract [Courthouse News Service]

Accounting News Roundup: Will an International Audit Regulator Become a Reality?; GMAC Shopping for a CFO Candidate; FASB Sued for Antitrust Violations | 05.06.10

Audit chief welcomes debate on international regulator [Accountancy Age]
The idea of an international audit regulator is being kicked around in the EU with about as much seriousness as returning to the moon. That is, it’s absolutely something to be discussed but at this point nobody’s firing up the boosters just yet. IFRS has been proved to be, putting it lightly, a challenge but ever since the Lehman Brothers/E&Y fiasco, reform of the auditing business doesn’t seem far behind.

And while the idea is being entertained, the hurdles to an international regulator sound a little familiar:

Ian Powell, senior partner at PwC UK, said the establishment of an international regulator is “worthy of debate” but believes global consensus among nations may prove difficult.

“Most countries think their regulation is good and it is their system which should be applied – that is going to make it difficult to convince them to give up their system,” he said.

“If you talk to virtually any regulator in any country they do want to see more globalisation of regulation, but the big problem is there are certain political issues that are different in different countries.”

GMAC Said to Consider Ex-Citigroup Banker Yastine as Next CFO [Bloomberg Businessweek]
GMAC is hot on the trail for a new CFO after their last one bolted in March shortly after his TARP testimony. The ward of the state is said to be considering Barbara Yastine, who formerly was the CFO at both Credit Suisse’s and Citigroup’s investment banking groups.

FASB Defendant in Suit Alleging Antitrust Violations and Patent Misappropriation [Silicon Economics, Inc. Press Release]
Silicon Economics, Inc. is suing the FASB, alleging “antitrust violations and with willfully attempting to misappropriate patented technology,” according to the San Jose-based company’s press release.

The lawsuit concerns Silicon Economics’ EarningsPower Accounting™ (EPA™) – a patented method developed by the company to improve the accuracy, validity, and usefulness of financial statements. Silicon Economics recommended the merits of EPA to FASB in response to FASB’s request for public comment on the objectives of financial accounting (No. 1260-001, July 6, 2006). FASB claims that its website terms and conditions gave it ownership of Silicon Economics’ technology, even though such terms were not part of FASB’s invitation for public comment or otherwise disclosed to Silicon Economics.

Accounting Fraud on the Stage Fails: Enron to Close Sunday

After mixed reviews, it seems that no combination of nostalgic accounting fraud, raptors in Brooks Brothers and former President Charles Logan could save Enron the musical.


The play will close Sunday, May 9th after 22 previews and 15 regular performances despite Stephen Kunken’s portrayal of Andy Fastow was nominated for a Tony.

Maybe the producers completely misjudged the interest of theatre-goers on this side of the Atlantic. Enron was a huge success in Britain where accountants get red carpets and trophies.

In the States they get on look at porn, support terrorism (allegedly!) and create awkward videos. There’s a disparity there.

Enron on Broadway to Close Sunday, May 9TH, 2010 [Broadway’s Best Shows]

Accounting News Roundup: Dissecting Overstock.com’s Q1 Earnings; The “Audit the Fed” Drum Still Has a Beat; AMT Patchwork Continues | 05.05.10

Can Investors Rely on Overstock.com’s Reported Q1 2010 Numbers? [White Collar Fraud]
Sam Antar is skeptical (an understatement at best), that Overstock.com’s recently filed first quarter 10-Q is reliable and he starts off by citing their own words (his emphasis):

“As of March 31, 2010, we had not remediated the material weaknesses.”


Material weaknesses notwithstanding, Sam is a little conpany’s first quarter $3.72 million profit that, Sam writes, “was helped in large part by a $3.1 million reduction in its estimated allowance for returns or sales returns reserves when compared to Q1 2009.”

Furthermore, several one-time items helped the company swing from a net loss of nearly $4 million in Q1 of ’09, including nearly $2 million in extinguishment of debt and reduction in legal expenses due to a settlement. All this (and much more) gets Sam to conclude that OSTK’s Q1 earnings are “highly suspect.”

UBS Dividend in Next 2-3 Years ‘Symbolic’: CFO [CNBC]
UBS has fallen on hard times. The IRS, Bradley Birkenfeld, a Toblerone shortage and increased regulation and liquidity requirements have all made life for the Mother of Swiss Banks difficult and CFO John Ryan told CNBC that could hurt their ability to pay their usual robust dividend, “They (capital regulations) are essentially rigorous to the extent that it is unlikely we’ll be able to pay anything other than a very symbolic dividend over the next two or three years,” Cryan said.

While that is a bummer but a “symbolic” dividend is still an improvement over “we’ve recently been informed that the Internal Revenue Service and Justice Department will be demanding that we turn over the names of our U.S. clients.”

Effort to expand audits of Fed picks up steam in Senate [WaPo]
Going after the Fed makes for good political theatre (*ahem* Ron Paul) and rhetoric to fire up the torches of the populist masses. The “Audit the Fed” drum continues to be beaten by the likes of Rep. Paul (R-TX) and Senator Bernie Sanders (I-VT) to much success and Sanders is quoted in the Washington Post as saying “We’re going to get a vote.” Pols want to crack open the books at the Fed to find out what the ugliest of the ugly is inside our Central Bank.

Ben Bernanke isn’t hot on the idea because letting the GAO sniff around may expose the Fed to short-term political pressures. For once AG – not a fan of the Beard per se – sides with BSB. As she said last fall:

It’s right there in the footnotes – pulling out the closest Fed annual report I’ve got (Richmond Fed 2007), both Deloitte and PwC agree that the Fed is a special case in Note 3: Significant Accounting Policies:

“Accounting principles for entities with unique powers and responsibilities of the nation’s central bank have not been formulated by accounting standard-setting bodies.”

The note goes on to explain why government securities held by the Fed are presented at amortized cost instead of GAAP’s fair value presentation because “amortized cost more appropriately reflects the Bank’s securities holdings given the System’s unique responsibility to conduct monetary policy.” Right there, you can see why auditing this thing might be a problem.

This might be one of those “careful what you wish for” scenarios.

Why We’re Going to Keep Patching the AMT—And Why It Will Cost So Much [Tax Vox]
The Alternative Minimum Tax has been a unmitigated failure in the eyes of many tax wonks. Congress has been talking reform in this area for some time and yet, the AMT remains largely unchanged, relying on temporary fixes that could eventually turn into a disaster:

Last year, about 4 million households were hit by the tax, which requires unsuspecting taxpayers to redo their returns without the benefit of many common tax deductions and personal exemptions. That would jump to 28.5 million this year, except for what’s become an annual fix to the levy, which effectively holds the number of AMT victims steady.

Here’s what happens if Washington does not continue that “temporary” adjustment. If Obama gets his wish and extends nearly all of the Bush taxes, the number of households hit by the AMT would soar to more than 53 million by the end of the decade—nearly half of all taxpayers. AMT revenues—about $33 million last year—would triple this year and reach nearly $300 billion by 2020. That is a nearly 10-fold explosion in AMT revenues.

Howard Gleckman argues that the AMT is too big of a political threat to let members of Congress let this sneak by and that the patchwork will continue but that it probably shouldn’t, “The President can assume the AMT will be patched indefinitely, but assuming won’t pay the bills. Unless he is willing to raise other taxes or cut spending to pay for this AMT fix, he’ll have to borrow more than $1 trillion to kick the can down the road for the rest of this decade.”

DOJ: You Bet Your A$$ We’re Going After More Offshore Tax Evaders

It appears that the offshore bank account crackdown tour is going straight through Asia, where DOJ senior tax attorney Kevin Downing gave a speech saying, “We expect over the next couple of years, in addition to the UBS cases, to have somewhere between 4,000 and 7,000 more cases coming to us with. These are from banks and governments cooperating.”

Obviously the UBS flogging was such a huge success that the DOJ/IRS figures they might as well keep a good thing going and is making a nice little swing through Asia to give them fair warning that they could be traipsing through their backyard very soon:

Singapore was one stop in a tour of Asian cities also including Hong Kong, Beijing and Shanghai by Downing and his U.S. Justice Department team. The tour featured meetings with financial and tax regulatory bodies and bankers discussing cross-border tax prosecutions.

He said that since the start of the U.S. crackdown on tax evasion, money has moved from the Caribbean to Switzerland and Asia.

Of course Mr Downing doesn’t want to get ugly saying, “he hoped the U.S. authorities would not have to conduct “UBS-style” probes,” but obviously that option is always on the table.

U.S. to probe thousands more offshore tax evaders [Reuters]

REMEC Court Decision Could Expose Companies to More Accounting Fraud Litigation

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

As if it wasn’t a big enough risk already, CFOs may have to brace themselves for more private litigation over accounting fraud if a court decision on April 21 involving failed telecom equipment maker REMEC serves as precedent. The good news is that plaintiffs will have to show evidence of the executives’ intent in such cases.


Most cases involving accounting are either dismissed because they involve judgment or are settled before they go to trial, Robert Brownlie, a partner in the law firm of DLA Piper who represented the defendants in the REMEC case, told CFOZone last Thursday. The Del Mar, Calif., company filed for bankruptcy in 2005.

One of the largest such cases involved former Lucent executives, whom shareholders charged had defrauded them through improper accounting for goodwill. In that case, shareholders agreed in 2003 to accept a $600 million settlement.

In contrast to the Lucent case, the one filed by shareholders against REMEC’s former CEO, Ronald Ragland, and former CFO, Winston Hickman, was dismissed, though it also rested on charges that they misled investors because they didn’t write off goodwill that was impaired.

But the dismissal was more difficult to achieve than it would otherwise have been, said Brownlie, because the plaintiffs submitted evidence of internal reports and testimony showing that the company was behind schedule on certain objectives and not meeting its internal forecasts. The court said that those reports created a factual issue that should be determined by a jury; the defendants had to show there was no evidence of intent to deceive on the part of management.

“Normally, with matters of opinion or judgment, you either can’t bring a suit or it’s very difficult to do so,” Brownlie said. But he warned that the decision could mean more cases against corporate executives over accounting fraud.

The court dismissed the charges even though the plaintiffs’ accounting experts testified that they would have reached different conclusions than the former executives did.

Brownlie added that his case was helped by evidence of good faith conduct by the defendants, including evidence of transparency between the company and its auditors, disclosures of disappointing results and write-offs of other accounting items during the period of the alleged fraud and the absence of stock sales.

Describing the outcome for CFOs as “both good and bad news,” Brownlie said the decision showed that the critical issue in such cases will be “a connection between claims and evidence.” And he cautioned that in other accounting cases, it’s likely to be harder to defend executives on the basis of intent, which is why he said “there’s a paradox” in the REMEC decision.

Accounting News Roundup: Senate Starts Voting on Financial Reform; Risk Management Succumbs to Risk Intelligence; Six Flags Emerges from Bankruptcy | 05.04.10

Voting begins in Senate on Wall Street reform [Reuters]
The latest partisan bickering effort in Congress will get underway today, although the first votes are not likely to be controversial. The first amendment to Senator Chris Dodd’s (D-CT) 1,600 page epic has been proposed by Barbara Boxer (D-CA) and it state “that no taxpayer funds could be used again to bail out financial institutions,” something that anyone up for reelection will likely get behind.

PwC partner Colin Tenner sues over redundancy [Times Online]
Mr Tenner claims that he was let go because of his suffering from depression and anxiety. He claims “mismanagement at PwC and bullying by a client led to him to take sick leave in September 2007. He alleges that he approached PwC in spring 2008 to arrange a phased return to work but says that these discussions broke down, leading to his redundancy.”

Of interest is how the tribunal will decide, “what responsibilities partners at a professional services firm have when one of their number displays signs of stress or becomes mentally ill but wishes to remain in the partnership.” This seems odd primarily because most partners are constantly showing signs of stress and if they’re not, one just assumes they’re mentally ill.


Picower Estate to Pay Billions to Madoff Investors [WSJ]
The estate of Jeffery Picower, a Madoff investor who drowned in his pool last fall, will pay $2 billion to the Madoff trustee in charge of recovering money for investors. This will more than double the $1.5 billion recovered so far.

New Career Path: ‘Risk Intelligence Officer’ [FINS]
Much can be learned from the financial crisis; not least of which is that a lot of companies sucked at managing their risk. Case in point, “risk management” is a prehistoric idea now and one Deloitte principal argues that a “risk intelligence officer” is new sage in this area:

The job of a risk intelligence officer is to assess the organization’s risks and inform business line managers where they need to focus their risk-management efforts.

“They need somebody who can see the big picture and connect the dots,” said [Rick] Funston, who is a principal with Deloitte in Detroit. Deloitte has been encouraging its clients to develop the new role, he said…

Effective risk professionals find a way to discuss systemic failures and take steps to strengthen the organization’s resilience and agility. Part of the job is to understand a company’s vulnerabilities and make it OK to talk about them, institutionalizing the discussion.

Six Flags Emerges From Bankruptcy [Reuters]
Six Flags has emerged from Chapter 11 bankruptcy just in time for summer and now “has more financial flexibility to pursue a shift in strategy toward attracting more families to its amusement parks.” Not sure who an amusement park company would target other than families but it’s nice to see you back in the game, 6F.

Pennsylvania’s Tax Amnesty Ad Will Work on the Most Paranoid of Citizens

Pennsylvania’s tax amnesty program started on April 26th and to help taxpayers get off their non-complying asses, this ad has been introduced to motivate Keystone Staters that owe back taxes.

If this doesn’t get Quaker stoners into compliance, nothing will:


Personally, we would liked to have seen the PA Dept of Rev go the route of PICPA and incorporate Snuggies or breathlessly judgmental friends. Although we understand that scare tactics may be effective, a state must be pretty desperate to run this to get taxpayers motivated.

Btw, Philadelphia’s tax amnesty program started today and, so far, is considerably less Orwellian.

Earlier:
Tax Amnesty Programs: A Gold Mine for States or Bad Policy?

Compensation Watch ’10: GT Reassures Merit Increases, Jury Out on Bonuses

On Friday, Grant Thornton had a firm wide call to discuss several things including layoffs, compensation, and grab-bag questions.

Headcount Reductions – Steve-o believes that the worst is over and that “restructuring efforts are substantially behind us.” If there happens to be additional “headcount transitions” it will be to refine operations or part of the no He went on to say that the people that are GTers now will, “in very large part,” remain GTers. So can we assume the action in Cleveland and Chicago was the last of it?


Compensation: GT seems is making big push towards a “pay for performance” model for its employees which means compensation adjustments will focus on top performers (“5s” in GT world) and market based adjustments (i.e. keeping up the Joneses) won’t be happening. SC cited a downward trend of salaries in the accounting profession based on a survey that GT does with Mercer (sounds convenient) for the phasing out of market adjustments. He said there might be some exceptions to this.

The size of the merit adjustments have not yet been determined because it all depends on how well 1) GT performs through the end of the year and 2) individual performance. Chip said that enough people were belly aching about the old adjustment system that a change was warranted. This will be implemented slightly for this fiscal year (can’t get all Darwin about it 3/4 of the way through the fiscal year) and will be the main methods for next year and going forward.

Bonuses: SC cleared this whole issue up saying that it has not been determined if bonuses will be paid this year. It all depends no the firm’s performance in the final quarter of the fiscal year. He did say that he’s pre-tay, pre-tay, pre-tay optimistic about the firm “being in a position to pay bonuses” but they’re still crunching the numbers so there’s no telling if it will be a mini-windfall, pocket change, or a set of steak knives.

Not to worry though, as the top performers will certainly get something if everything goes well at the firm overall.

This “new” focus on pay for performance seems kind of familiar since all the firms assign rankings to employees (with their own bizarro methodologies) and are paid accordingly. It makes you wonder if those that fall in the meaty part of the GT curve will get such a small adjustment that it will be another twist on the forced ranking trend amongst accounting firms.

Steve-o then shared his general optimism about the direction of the economy and what it means for the firm, a few recent client wins, yada yada yada. He also updated everyone with some very vague details on the firm’s new strategy “Unleashing Our Potential” that will be rolling out in the next fiscal year. Basically all non-partners will have the chance to drop their $0.02 on this strategeroy very soon but other than that we couldn’t tell if the new strategy involved a lunar landing or full-scale assault on financial reporting fraud.

Last but perhaps most importantly, Steve-o admitted to enjoying the Masters very much, however he was quite clear that he was less than thrilled to see KPMG on Phil’s lid. We’re sure it’s nothing personal against Phil but those may be fightin’ words directed straight at Johnny V.

The “Red Flags” Rule is Still Useless for CPAs

In more government bureaucracy news, the FTC is granting a reprieve to CPAs when it comes to a new law that deals with identity theft, one which some CPAs say is useless given professional responsibility.

The new FTC rules requires businesses to “develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities -– known as ‘red flags’ — that could indicate identity theft.” The problem with that, of course, is that the AICPA Code of Professional Conduct already deals with the issue of identity theft in that there is an iron-clad confidentiality rule by which all CPAs must abide. Seems simple, right?


The US District Court has ordered an FTC delay of the rule for AICPA members in public practice, says the Maryland Association of CPAs. Barry Melancon, AICPA President said in 2009 when the AICPA filed a lawsuit against the FTC, “We do not believe that there is any reasonably foreseeable risk of identity theft when CPA clients are billed for services rendered. As trusted advisors, CPAs are personally acquainted with their clients and already adhere to strict privacy requirements governing identifying information.”

Don’t take it personal, Barry, the FTC is just trying to do its job, even if that means overreaching its authority and attempting to place restrictions on professionals who already go above and beyond the intent of the FTC on a daily basis.

In the meantime – and just in case the rule cannot be delayed indefinitely (as is, implementation has been put off until June 1, 2010) – the AICPA has some guidance for CPAs on creating an identity theft prevention program. Keep in mind the new requirements, if implemented, only affect CPAs who bill their clients on a monthly or revolving basis as it is meant to place additional controls in client billing.

The American Bar Association is also fighting the rule.

Another ‘Red Flags’ delay: CPAs get 90 more days [CPA Success]

Former PwC Senior Manager Charged with Supporting Terrorism

Late on Friday, two men were charged with conspiring to support al-Qaida, including a former senior manager at PricewaterhouseCoopers, according to the AP.

Wesam El-Hanafi a computer engineer, and Sabirhan Hasanoff, the former P. Dub SM, were both in court on Friday after being arrested overseas and returned to the United States from Dubai.

The AP reports that the “vaguely-worded” indictment states that El-Hanafi was instructed by al-Qaida “on operational security measures and directed him to perform tasks for al-Qaida” and that Hasanoff was paid $50,000 by an unnamed co-conspirator and was ordered to perform unspecified tasks for AQ in New York.

The U.S. Attorney was quoted that the two men are accused of helping “to modernize al-Qaida by providing computer systems expertise and other goods and services,” which involved purchasing seven Casio watches (?).

Prosecutors described Hasanoff only as a dual citizen of the United States and Australia who has lived in Brooklyn. Public records show he has a Queens address and is a certified public accountant.

A professional networking site says a Sabir Hasanoff was a senior manager at Pricewaterhouse Coopers who graduated from Baruch College in Manhattan. Pricewaterhouse spokesman Kelly Howard said the accounting firm employed Hasanoff from 2003 to 2006.

This LinkedIn profile shows the details reported by the AP. A call to PwC was not immediately returned.

The Sydney Morning Herald reported that Hasanoff’s brother and sister-in-law had not spoken to him in 12 years, “No, he was never in trouble. I don’t know what’s happened now. He studied at a private school. Maybe he has changed. I don’t know if he’s a good person or a bad person because we haven’t been connected now for a long time.”

We’re not insinuating that his time at PwC was the reason for his lifestyle change but three years at any Big 4 firm would change anybody. That being said, turning to terrorism is deplorable. Couldn’t he have developed a dependancy problem of some kind instead?

2 men charged in NYC with supporting terror [AP]
2 U.S. men charged with aiding al-Qaida [UPI]
Australian ‘linked’ to al-Qaeda [Sydney Morning Herald]

(UPDATE) Friendly Reminder to TierOne Bank: Today Is the Last Day to Get Your Act Together

Catch up, we covered this on Sunday night: In a bizarre piece of auditing news released late on a Sunday night, KPMG has verbally resigned as Nebraska-based TierOne Bank’s independent auditor, withdrawn its audit opinion for 2008 and taken back its review of TierOne’s financials for the quarter ended March 31, 2009. Citing risk of material misstatement, KPMG has also warned the audit committee that TierOne’s financials are not to be relied upon by investors.


Well today is April 30th and that means TierOne has run out of time to get its shit together to please the OTS. Meanwhile, KPMG is still paddling away in the lifeboat before the ship sinks but with a week’s head start, we’re sure they’ve gotten far enough away from the scene of the crime to be entirely unaffected by the outcome, whatever it may be.

In a textbook case of he said/she said, TierOne is a little butthurt that KPMG would suddenly change its tune and bail on the bank so close to such an important deadline. Adding insult to injury, KPMG claims that TierOne destroyed a document on specific reserves required by the OTS, even though the auditors had requested the document more than once. TierOne claims that it gave the document to both the OTS and KPMG as requested. TierOne also enthusiastically states that not once did KPMG express any concerns about the bank’s condition until just before bailing on the bank and resigning from the audit.

We’ll update if the FDIC moves in later this afternoon and takes down TierOne.

UPDATE: TierOne tried to sell itself to Great Western Bank but the deal was shot down by the OTS. The $2+ billion bank is sort of just sitting there exposed in the open without an auditor and no real plan, you can pretty much guess what happens from here. Meanwhile, it was a busy Bank Fail Friday but TierOne was not among them. See you next week?

TierOne sale plan due today
[Lincoln Journal Star]

You Can’t Force Convergence According to the IASB (Allegedly)

IASB member Phillippe Danjou would be happy to see convergence go well and according to schedule but like most of Europe, he’s concerned that what’s good for America may not be good for the rest of the world.

Earlier in the week, the European Central Bank said nearly the same thing, going so far as to call out FASB for its archaic fair value rules that disregard liquidity (or lack thereof) in markets.


“Can we converge on everything? What’s good for America is not always seen as being good for the rest of the world, and vice versa… Convergence is the aim. It is a very desirable goal, but you cannot force it.

“If our stakeholders say we should take slightly different solutions, we will have to accept that,” he said. “If we can’t reach a solution, we can bridge.”

This brings us right back to the question of the IASB’s independence and the announcement by the SEC that funding the IASB would be a priority moving forward. Maybe that’s the bridge to which Danjou was referring; America buying its own piece of international accounting standard influence. 20% won’t cut it, people, where did the SEC get those bribe numbers from anyway?

It looks like Plan B for accounting convergence [Reuters]

Accounting News Roundup: ‘Enron’ Opens to Mixed Reviews; Grant Thornton Closes Madison, WI Office; New CFO at Credit Suisse | 04.30.10

With ‘Enron,’ Financial Misdeeds Hit Broadway [DealBook]
“Enron” opened on Tuesday at the Broadhurst Theatre and is receiving mixed reviews. Given the time and subject matter, brief and inadequate descriptions of the accounting techniques involved (e.g. champagne metaphor to explain mark-to-market) were necessary and some didn’t appreciate the patronization:

At the after-party for “Enron,” the most common complaint about the play was the incessant use of metaphors and monologues to explain financial topics. It took up a large amount of time in the show and some audience members felt like they were being “talked down to.”

“I know what mark-to-market accounting is,” said one audience member who did not wish to be identified but did not work in the financial industry. “I felt like they were bashing me over the head with their juvenile explanations.”

Regardless of the “one-dimensional view of this multifaceted accounting technique” and its “lacking of dramatic depth,” “Enron” also has raptors and mice in suits. That, along with choreography using light sabers has led some to call the show “visually stimulating.” If your subject matter includes accounting rules, putting them in an acid trip seems like a good approach.

Grant Thornton to close Madison office [Business Journal of Milwaukee]
Grant Thornton is closing its Madison, WI office, consolidating those operations in Milwaukee. The firm stated “its goal is to retain as many of the Madison office’s 61 employees as possible,” and that it is “committed to assisting all employees during this transition.”

This latest move follows the Grant Thornton office closure in Greensboro, NC that occurred earlier this year.

Credit Suisse Taps Mathers as New C.F.O. [DealBook]
David Mathers is currently the COO and Head of Finance for the investment banking unit at CS. He takes over for Renato Fassbind in October.

Georgia Voters Will Decide on the Use of Accrual Accounting by the Department of Transportation

Interestingly enough, Caleb just covered accrual vs cash here on Going Concern the other day. Not interestingly enough, as a subsection of the Georgia state government, the Georgia DOT’s only option is government accounting and that sure as hell ain’t accrual. Apparently Georgia governor Sonny Perdue is hip to this accounting trick that just can’t be tapped and is questioning whether or not the DOT has the legal authority to use accrual for multi-year state funding commitments.

The short answer, without being an authority on matters of accounting legality, is HELL no. They better stick to fund accounting like every other government agency but that comes with its own set of flaws. See also: 49 of 50 states facing massive budget deficits.


If you aren’t familiar with government accounting, let me make it very simple: in regular accounting, balance sheets balance. Companies shoot for assets to outweigh liabilities and if they don’t for an extended period of time, shareholders bail and the company goes under.

In government accounting, there is no real concept of “balance” and it’s all about expenditures and estimates of spending that have little connection with actual money coming in. Most government agencies would be crippled if they were forced to institute GAAP, even with the magic of government accounting we have already witnessed from the smallest municipality to entire sovereign nations.

Anyway, in 2008, an audit of DOT practices concluded that accrual accounting was a violation of Georgia’s constitution (and the sanctity of government accounting fortheloveofsweetbabyJesus) but DOT officials claim that sweating their questionable accounting methods prevents the state from funding important road projects.

Again, magic on paper, garbage in practical application. Accounting methods are not meant to turn insolvency into funding, they are merely options and their use should not be abused for users. Seriously.

Georgia voters will be trusted with resolving the issue. Better start reading some Advanced Accounting textbooks, Georgia voters, you’ll need them to pick the right door on this little game show.

Voters to weigh on DOT accounting system [Atlanta Business Chronicle]

Believe It or Not, There’s a Millionaire Accountant Love Triangle

I know, I had to read it twice. First of all, millionaire accountant?! Second of all, the guy was ancient and probably hasn’t calculated depreciation since 1971. Whatever, he was depreciating some hot assets and I guess that’s all that matters.


Here’s the sitch:

Millionaire UK accountant Peter Rust is being sued by both the wife and the mistress as they apparently both share a piece of his £3.2million [$4.86 million US] property portfolio. What kind of firm did this guy work for amassing a portfolio like that?! Patricia Rust (the 58 year old wife who has stood by his side for 40 years, even through jailtime Peter served for money laundering) and Virginia Madden (the 38 year old mistress who claims dibs on some of his property) are both claiming that part of Rust’s assets are theirs and theirs alone.

The problem is that he didn’t exactly tell his estranged wife that he was going to get some property with the new chick. Oops. The Daily Mail has the scoop:

In a statement provided to the court, Mr Rust said that in 2000 he and his wife agreed to start investing in property – using joint funds – even though they had separated.

“Although we were living apart at this time, Pat agreed I could do this providing she had an equal share in the properties,” he said.

But he added: “But I did not tell Pat that I intended to buy these properties in the joint names of myself and Ginny Madden.”

Listen, dude, you need to read a book on keeping mistresses. Property?! Come on, everyone knows you are supposed to rent them a pad or maybe get taxpayers to pay for it or claim nonprofit status to house the hoes at your “church”, whatever, you don’t actually buy property with her.

Anyway, as if it couldn’t get worse, Madden was paid over the years as “stable girl” with investment income from the properties (and, presumably, action from Mr Rust but there is not IASB guidance on how to classify affairs in the books and records) and claims a 50% share on five homes. Mrs. Rust claims 50% rights to her house and 6 others.

The millionaire, his stable girl mistress and her £3m property battle with the betrayed wife [Daily Mail]

Accounting News Roundup: Would IFRS Prevented Repo 105?; The Crazy Eddie Movie Hits a Snag; JP Morgan May Bolt Tax-Refund Loan Business | 04.29.10

Lehman case “backs” accounting convergence [Reuters]
Philippe Danjou, a board member at the IASB has been quoted as saying that Repo 105 would not have been allowed under IFRS, “From an IFRS perspective I would suspect that most transactions would have stayed on the balance sheet. It makes a case for convergence, it makes a case that we should not have different outcomes under different accounting standards when you have such big amounts.”

The G-20 asked the sages at both the FASB and the IASB to converge their rules by June-ish 2011 but some people don’t sec, as there are too many disparities on treatment of key issues between the two boards.


The Real Reason Behind Danny DeVito’s Crazy Eddie Movie Project Meltdown [White Collar Fraud]
Danny DeVito wants to make a movie based on the Crazy Eddie Fraud, which was perpetrated by, among others, Eddie and Sam Antar. The project has run aground primarily because of Eddie Antar’s life rights and the potential profit he would reap from the making of the movie. Danny D is disappointed by the developments and has sympathy for Eddie, discussing it in s recent Deadline New York article:

“He’s gone through tough times, and he’s not the aggressive tough guy they paint him to be,” De Vito said. “He’s in his 70s and the past has come back to bite us all in the ass. Peter [Steinfeld] and I told him we think there is a terrific story there, but we can’t do it with you involved, in any way. We’ve taken a breather, but we’re figuring out how to jump back in.

Sam Antar is not amused by this and chimed in with his side of the story:

Eddie Antar is plainly still in denial about his cowardice towards his own family and investors. There actually is a “family dynamic” that “explains Antar’s fall” as DeVito claims. However, Eddie Antar and other members of his immediate family are simply unwilling to give a truthful account of what really happened at Crazy Eddie, while Danny Devito is willing to accept Eddie Antar’s bullshit excuses for his vile behavior.

As Chipotle Sizzles, CFO Sells Stock [Barron’s]
Ten thousand shares at $144 and change will buy a bunch of burritos.

Medifast Lawsuit: Anti-SLAPP motions filed [Fraud Files Blog]
Back when we discussed forensic accounting, the aforementioned Sam Antar said that forensic accountants can look forward to “making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct.”

Tracy Coenen, no stranger to this retaliation, is now fighting back against Medifast who has sued her and others for saying not so flattering things about the company:

Anti-SLAPP motions have been filed in the Medifast lawsuit by me and by my co-defendant, Robert FitzPatrick. My motion can be read in its entirety here, and Fitzpatrick’s can be read here.

SLAPP stands for Strategic Lawsuit Against Public Participation. It’s basically when a big company tries to shut up a little guy with expensive litigation. In my opinion, Medifast sued me and others in an attempt to get us to stop publicly analyzing or criticizing the company and it’s multi-level marketing business model.

In filing an anti-SLAPP motion, we are essentially asking the court to rule in our favor and in favor of free speech. Consumers should have the right to discuss, analyze, and criticize companies without the fear of expensive lawsuits.

JPMorgan May Quit Tax-Refund Loans, Helping H&R Block [Bloomberg BusinessWeek]
Bloomberg reports that JP Morgan may discontinue its financing of 13,000 independent tax preparers, a move that will benefit H&R Block, according to a competitor:

“Block is the biggest winner in this,” said John Hewitt, chief executive officer of Liberty Tax Service, a privately held company in Virginia Beach, Virginia, that also may benefit…

The reason HSBC is exiting this industry, even though they’re making $100 million a year in profit from it, is because of reputation risk,” Hewitt said in an interview. “Bankers don’t like the consumer advocacy groups picketing outside their offices.”

Refund anticipation loans (RALs) are attractive to clients that need cash immediately, based on their anticipated refund. The business is controversial because the high interest rates can drive people further into debt and consumer groups oppose them vehemently.

Funding for smaller shops that offer these loans will likely lose the business altogether as large banks like JP Morgan discontinue the financing, thus driving the business to franchise tax prep shops like H&R Block, Jackson Hewitt, and Liberty.

The ECB Doesn’t Like FASB Fair Value Nor Prospects for a Single Global Standard Come 2011

European Central Bank Executive Board member Gertrude Tumpel-Gugerel insists that fair value is useless in illiquid (read: dysfunctional or non-existent) markets, putting forth the all-important query “what is the use of marking-to-market when there is no market?” in a Paris speech yesterday.

Tumpel-Gugerel is also a tad concerned that the push for convergence around the globe by 2011 could mean compromised accounting standards. “The ECB strongly opposes a full fair value approach,” she said. “In this context, convergence should not come at the expense of high-quality accounting standards.”


The ECB has taken the financial crisis as a lesson in valuation, guidance, and a deft accounting system that leaves plenty of slack available for adjustments should the need arise in, say, a crisis situation. That’s all well and good but guidance only gets you so far and without a firm commitment to when and how to use fair value around the globe, we can pretty much keep debating this point indefinitely.

Her views on FASB’s fair value approach are not at all subtle. In short, it appears as though the ECB supports convergence but only if the idiotic American ways are better aligned with the IASB’s. “With regard to recent assertions made by the IASB and FASB that convergence is on track, I would like to highlight that we are not so optimistic,” she said. “In this regard, putting in place a reconciliation mechanism that simply discloses figures at amortised cost and fair value for each item on the balance sheet would certainly not achieve the aim of convergence.”

Well snap, guess she told us.

Elements for intervention on accounting issues [ECB]