News

Yet Another Case of an Accountant Taking Out Adolescent Frustrations on an Athlete

Obviously it’s pigskin Monday here at GC. This afternoon we touch on washed-up linebacker turned D-Actor, Brian Bosworth who is suing his former agent for hooking him up with a shiesty accountant.


B-squared alleges that the accountant was arrested for “and pled guilty to crimes related to misappropriating the funds of clients.” The Boz’s claims that his former agent, Gary Wichard, was getting a cut of the earnings from the investments that the accountant, Judd Rothman was putting his Bozness into.

While a couple of business savvy types taking advantage of an athlete is nothing new, this may be the first case that we can remember where we feel it’s totally justified based on past hairstyle mistakes.

Ex-NFL Star Sues Agent Over Bad $$$ Advice [TMZ]

Despite Endless Tweets to the Contrary, Recent Poll Debunks “Accounting Is Boring” Stereotype

Unbeknownst to us (until a little bit ago), Ajilon Finance has declared April as Accountant Appreciation Month and has marked the occasion by encouraging displays of appreciation through the most official of means: Facebook.

And that’s not the all! A recent poll done by Ajilon says that 88% of respondents don’t believe the stereotype that accountants are boring. The same poll found that 84% of the respondents don’t think the profession is boring. These findings contradict a constant Twitter feed so you’ll have to make your own conclusions on the validity of the poll.


In other mind-blowing results from the poll, 98% of those surveyed “recognized that accountants work hard all year round and not only the months during tax season.” The other 2% obviously assume that your 8 month vacation started last Friday.

In other developments, 100% of Big 4 auditors get annoyed when their family, friends, and other non-accountants (like the ones surveyed by Ajilon) ask how their tax season went.

Accountants Can Celebrate: Tax Day is Over & Americans are Seeing the Profession in a New Light [Ajilon Press Release]

Marcum Officially Announces Purchase of UHY New England Locations

Marcum officially announced its take over of the UHY Advisors locations in New England that we mentioned last week.

We can only assume that the 150 employees at new Marcum offices passed the due diligence with flying colors. According to the press release, the new locations will make 15 total for Marcum with over 950 total employees and 117 partners.

Marcum LLP Expands Practice into New England

Members of New England Practices of UHY Advisors and UHY LLP Join Marcum

April 16, 2010, New York, NY- Marcum LLP, one of the largest independent public accounting and advisory services firms in the nation, announced that it has acquired the New England practices of UHY Advisors and UHY LLP effective April 16, 2010. Marcum will now have offices in three of New England’s major business markets – Boston, Massachusetts, and New Haven and Hartford, Connecticut.

The members of the New England practices of UHY Advisors and UHY LLP who are joining Marcum have a 30-year history in the New England market providing audit, tax and business consulting services in the construction, high technology, financial services, healthcare, manufacturing, not-for-profit and higher education arenas. Marcum LLP, with its outstanding reputation at the national and regional levels, has strong service niches in SEC registrants, alternative investment partnerships, family office services, business valuation, bankruptcies and receiverships and services for the government and public sector.

“Expansion into the New England region increases Marcum’s presence in the Northeast and offers our clients greater resources and new areas of expertise,” stated Jeffrey M. Weiner, Managing Partner of Marcum LLP. “The new locations tie in directly with our growth plan and will help us meet the changing accounting, tax and consulting needs of our clients.”

The entire 150 plus team from the New England practices of UHY Advisors and UHY LLP will join Marcum. With this latest development, Marcum now has more than 950 professionals, including 117 partners, in 15 locations throughout New York, New Jersey, Connecticut, Pennsylvania, Florida, Massachusetts and Grand Cayman.

“The members of the New England practices of UHY Advisors and UHY LLP are looking forward to the growth opportunities this transaction will bring in New England and beyond,” stated Anthony Scillia, who will serve as Managing Partner of Marcum’s New England Region. “Marcum’s geographic footprint, devotion to technical excellence and extensive range of professional services will bring added value to our existing clients and increase our ability to serve new clients in the New England area.”

Tax Return of the Day | 04.15.10

On a day like today, words alone will simply not suffice. Things like “Thank God it’s over,” “I am getting cop-slugging drunk,” or “If I get asked to prepare one more extension I’m going to have a panic attack” are expected. Instead we’ll present you with the following clip of a certain taxpayer’s haul in 2009:

[Source]

Did Lehman’s Arrangement with Hudson Violate Accounting Principles?

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

I’m far from the only person having a hard time understanding the significance of the deals arranged by a company that this page one New York Times story referred to as Lehman Brothers’ “alter ego.”

From the looks of it, the company in questastle, was set up simply to serve in the traditional role of outside investor in another company’s off-balance-sheet financing vehicle, which is known as a special purpose or variable interest entity to accountants and a conduit or structured investment vehicle in the world of banks.

The arrangement is common enough and there’s nothing wrong with it, strictly speaking, so long as the outside investor is independent of the sponsor of the entity and the arrangements are properly disclosed.


Remember Citigroup’s SIVs? They spawned the first ill-fated bank bailout effort, by former Treasury Secretary Henry Paulson. And they were similar to the entity that Hudson created for Lehman, called Fenway.

The problem with these gizmos, of course, is that sponsors often claim not to be responsible for the assets and yet end up on the hook for them anyway, which is what happened to Citi. But that in itself doesn’t make them fraudulent, at least not according to GAAP.

In Lehman’s case, the problem seems to be that Hudson was controlled by Lehman, if not at the time it was created, then certainly under later rules, according to Charles Mulford, an accounting professor at the Georgia Institute of Technology and an advisor to CFOZone.

At first glance, it seems like the opposite might be the case, since Lehman reportedly dominated Hudson’s board when it was created in 2001. And Lehman’s influence over Hudson diminished significantly in 2004, when its board seats were reduced from five to one, presumably along with Lehman’s equity in the firm.

Just conceivably, that might have been done to conform with the changes in the accounting rules. But Mulford says that might not have been enough to comply, because the new rules require the so-called primary beneficiary of the vehicle to consolidate its assets regardless of how much equity the outside investor has in it. Even after 2004, Lehman remained the single largest investor in Hudson, according to the Times.

“Given changes to accounting for SPEs, one could argue that Lehman had effective control of the Hudson Castle SPEs, even if it didn’t have voting control, necessitating consolidation,” Mulford said in an email to CFOZone.

Of course, the significance of the arrangement remains unclear, as the Times article failed to explain how much of Lehman’s debt was shifted into the Fenway SPE. It looks as if at least $3 billion was shifted into Fenway in this fashion, but that’s a lot less than the $50 billion Lehman shifted off of its balance sheet through so-called Repo 105 transactions in 2008.

Incidentally, while Lehman’s auditor Ernst & Young recently claimed that amounts Lehman shifted in this fashion weren’t sufficient to cause the firm’s failure, since its total assets exceeded $600 billion, I just saw in the bankruptcy examiner’s report that the firm refused to say the amounts weren’t immaterial when it signed off on Lehman’s financial statements. And the examiner’s report insisted that they were indeed material.

Weiser’s Doug Phillips: Combination with Mazars Was the Next Logical Step

Last week Weiser announced that it was joining Mazars Worldwide as a member firm, a move that would alleviate their relationship to one of a joint venture to that of a full combination. Accordiess release the combined firm will employ 12,500 people worldwide after adding the 650 Weiser professionals to its international network.

Earlier in the week, we were fortunate enough to arrange a chat with Doug Phillips, Managing Partner of Weiser, LLP to discuss the new firm, the challenges of a cross-Atlantic combination, personnel and client reaction to the combination and the plans for future.

A Solid Business Case Made for a Global Strategy
Doug told us the that joint venture between Weiser and Mazars that begun in February 2000 has been great success for both firms, particularly in the last two years. “The business case for us here at Weiser and for Mazars came to a point where it was quite logical to elevate the joint venture to the next logical step of growth and maturity,” he told us. Doug insisted that this was not a “Resistance is Futile” situation for Weiser, because the firms were in fact combining as opposed to a takeover by Mazars.

According to Doug, the business case for the combination was one of primarily of global strategy. Both firms had experienced significant growth in the last 10 years; their clients’ needs became increasingly global in focus. Doug said, “It gives us a distinct competitive advantage in the marketplace. Existing clients will receive a higher quality of service and we will enjoy the advantage of proposing to new clients.”

Combining Transatlantic Cultures
With regards to the meshing of the firms’ two cultures, Doug said that navigating the tricky waters of an international combination wasn’t as challenging as you might expect, ” We’ve ‘dated’ for 10 years. We know each other’s strengths. We know each other’s weaknesses. The overarching cultural issue is the quality of service. The firms are identical in that regard.”

And to ensure that the Weiser is well represented at the global level, Doug was elected to the group executive board of the firm. This is committee of five that is responsible for running the global organization. “The importance of the combination is recognized by the fact that I took a seat on that board to ensure the effective integration of the cultures of the cross-atlantic combination,” Doug said.

Communication with Employees, Clients was Ongoing
Communication about the combination was ongoing at Weiser. “Things were business as usual and the only real change is that firm’s brand will change to WeiserMazars,” Doug told us. The same approach was taken with Weiser’s clients, “the communication process was ongoing. It’s been universally well received and applauded as a business step without concerns about what will be impacted because [clients] have the assurance that our people remain in place and our dedication to the quality of service remains unchanged.”

Future Plans
With regards to the future, there are no immediate plans for new offices or mergers with other firms but Doug does expect some new non-attest service opportunities for the firm that could result in the hiring of some new experienced professionals not already in-house, “We look forward to increasing the talent pool to provide higher quality sophisticated services to both our current clients and prospective clients.”

Tax Season Ends Thursday Which Means You Don’t Have to Hit the Snooze on Friday

Along with improved personal hygiene, the end of busy/tax season brings the end of sleep deprivation.

Yes, we realize that some of you dolts out there that like to boast that you still dominate your workload on as little as 3 or 4 hours of sleep are either A) lunatics or B) so delirious that you don’t realize that you’re on the brink of lunacy.


FINS surveyed some tax pros about their sleeping habits and found that on average, those surveyed only got 6.8 hours of sleep and that 30% of them felt fully rested while at work.

For the rest of you, getting the 7 to 9 recommended hours of sack time will not only benefit your health (sleep deprivation is also related to weight gain) but it also could result in a safer work environment.

Not to mention that your significant other will appreciate the additional attention which might, if you’re lucky, result in other nocturnal activities as opposed to just sexting. Unless of course you happened to fall bassackwards into a work relationship then you can keep up the cubicle sex as you see fit.

Tax Accountant Survey: Sleep, a Career Casualty [FINS]

With IFRS Waiting in the Wings, Will Private Companies Get GAAP of Their Own?

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

A blue ribbon panel on private company accounting is holding its inaugural meeting Monday, to assess how financial reporting standards can best meet the needs of users of US private company financial statements, which are mostly for bankers and other types of lenders.

The panel, formed by the Financial Accounting Foundation, the American Institute of Certified Public Accountants and the National Association of State Boards of Accountancy, will meet five times throughout the year and will issue a report with recommendations on the future of standard setting for private companies by the end of the year.


The debate has resurfaced after the International Accounting Standard Board issued international standards for private companies last July (called IFRS for SMEs). Financial experts have been discussing this topic for decades. For instance, in 1996, the Financial Executive Research Foundation issued a paper titled “What do users of private company financial statements want?”

Some of the old and new questions the panel will address:

• What is the key, decision-useful information that the various users need from GAAP financial statements?

• Are current GAAP financial statements meeting those needs?

• How does standard setting for private companies in the US compare to standard setting in other countries, both those that have adopted IFRS for small and medium-size entities and those that have not?

To the extent that current GAAP is not meeting user needs in a cost-beneficial manner, what are some possible alternatives or private company standards?

Even if GAAP is found wanting, however, the panel might not be all that keen on IFRS as an alternative, given the limited experience of US companies with the international regime and rising skepticism on the part of the Securities and Exchange Commission about the independence of the body setting international standards.

Not that public or private US companies are eager to switch to IFRS, which will be costly and cumbersome. At this point, it seems as if private ones would rather have the accounting devil they know, except they no doubt wish it were a bit less hellacious on their results. And that’s been pretty much a forlorn hope for years.

Picture of the Day: How to Keep Staff at Work During the Waning Days of Tax Season | 04.09.10

We’re dispensing with words today in favor of the following deterrent.


It’s our understanding that if you breach this guard before granted permission to leave, then something like this could happen:

Accounting News Roundup: The Debate Over IRS-prepared Tax Returns; KPMG HK Senior Manager Arrested for Bribery; CFOs Starting to See Job Options | 04.09.10

Should the IRS Fill Out Our Tax Returns? [TaxVox]
Some say, YES! At the very least the Service could get the ball rolling, “by filling in your wage income, exemptions, and standard deduction and perhaps even figuring some other deductions and credits. This…could be a huge benefit for those who file Forms 1040A and 1040EZ.” Naturally, the taxpayer has to approve the return prior the actual “filing” of it but this would potentially assist millions of Americans who are otherwise stumped by 1040s of any stripe.


The other side of this argument is that it will delay refunds:

Bob Weinberger, a senior fellow at the Aspen Institute Initiative on Financial Security and a former top executive at the tax prep firm H&R Block. Bob counters that the “fatal flaw” of such a system is that it could delay refunds for months. For many taxpayers, Bob argues, getting a check from IRS in April is a key to their annual financial planning, and postponing that refund would generate a huge backlash. Bob also said such a system would be a huge drain on IRS resources.

While this likely true, the root of the problem is the “check from the IRS is key to financial planning” part. If these people need the money so bad, they should adjust their withholding so they don’t pay in so much during the year. Perhaps that’s not an easy concept to grasp, so if we say “You’re giving the government an interest-free loan for 12 months,” that will help.

HK charges KPMG man with bribery [FT]
Leung Sze-chit, a senior manager in the Hong Kong office, has been arrested on corruption charges after offering a co-worker a $12,280 bribe related to a client’s IPO. The FT reports that the firm learned of the situation via its internal hotline, “After investigation, the member of staff in question was suspended by KPMG and a report was then made . . . to the relevant authorities.” So yes, to answer some of you, people do call those internal hotlines.

CFO Job Options Opening Up [FINS]
After hunkering down for the last couple of years or so, CFOs are starting to see some new job options. FINS reports that “Some felt loyalty to organizations in financial straits, while others hesitated to jump given uncertainty about potential landmines at other companies.” Now that growth is slowly creeping back, “some companies are likely to find they need a different type of executive in the role. And some CFOs may even find themselves in line for positions higher up the corporate ladder.”

What Was the Emergency Meeting at Grant Thornton’s Cleveland Office All About?

After Grant Thornton sprung into layoffs ahead of everyone else (based on what we’ve heard anyway) on Tuesday, the Cleveland audit practice leader apparently arranged an impromptu sit-down to discuss some things, among them, the headcount.


From an accountant close to the situation:

They let go of an A2 on Tuesday also. The audit practice leader then called an emergency audit dept meeting referring to us as “inventory” and that they were “managing the pipeline.”

We left another message with GT Cleveland to see if we could get a copy of the minutes or something but no one is calling us back.

Regardless, we get the “inventory” analogy but in this case, the inventory happens to have rent/mortgage and possibly a cocker spaniel or other human beings to feed. But seriously, we still get the analogy.

Taking it a step forward, was the “inventory” all that was discussed? Something else could have come up, say Stephen Chipman’s blog? Speculating about the whereabouts of Gabriel Azedo? Arguing over Indians tickets for Monday? Any other ideas? Discuss or let us know.

Are the Roots of Accounting the Root of Our Problems?

I’m not an accountant, but I play one in social media.

My brother, who is an accountant, is mad for old accounting and economics textbooks. He’s of the opinion that these classics provide a less adulterated view of the subject than a lot of the current stuff. In fact, anything published after the creation of FASB in 1973 is considered suspect. Call it an aversion to “rules inflation.” And while I make fun of him A LOT about it, I have to wonder who is the greater fool. If the last few years have taught us anything, it’s that newer and more doesn’t always equal better. But I digress.


When I’m on vacation in cottage country, a trip to the lois tradition and this past holiday weekend was no different. This beauty had my brother’s name written all over it!

This book, “An Accounting Primer: The ABC’s of Accounting for the Non-accountant,” was originally published in 1968. Based on my reading of it, I think it’s safe to say Elwin W. Midgett did NOT spend The Summer of Love dropping acid in Golden Gate Park listening to The Dead jam out with an extended version of Born Cross-Eyed; although, and not to disparage Middle Tennessee State University, he was probably relatively well acquainted with the affliction.

For $4 bucks, I had to pick it up.

So, what did accounting look like back in the late 60’s?

Here’s my greatest hits courtesy of my brother, Mr. Elwin W. Midgett, and Middle Tennessee State University. Go Blue Raiders!

Preface
“… the author is always amazed at the total lack of understanding of a balance sheet or a profit and loss statement. Although the author does not believe that this situation is one that calls for immediate action…”

Hear that? I think Fra Luca Pacioli just rolled over in his grave.

Midgett does reference the Italian monk credited (no pun intended) with inventing the double entry system way back in 1494, and rightly focuses on the Accounting Equation as being the foundation of the whole business. That said, you can’t help but laugh when Cash Flow Statements are referred to with terms like, “Where Got and Where Gone”.

There’s more than a few laughs, but there’s also quite a few truths in that ‘News From 1930’ kind of way.

The topic of borrowing comes up a lot. On the second page of Chapter 1, Midgett cautions that a business should not “buy on credit indiscriminately, because many assets decrease in value rapidly.” Now Henry Lehman is rolling in his grave. “Business runs on credit and if all credit were suddenly cut off, the economy of the country would all but grind to a screeching halt.” Okay, now he’s SPINNING in his grave.

It’s either laugh or cry, right? Or in Gonzalez’s case, bust out a string of expletives that’ll take the paint off the walls! Lovely girl.

Of course, even back then Midgett can’t help but betray accounting’s doom with his unfortunate choice of sample company:

Or it’s dork label,

Chapter IV: Debitus And Creditus

In Brief
The Owner, or the Owning thing,
or whatsoever come to thee:
upon the Left hand see thou bring
for there the same must placed be.

But –
they unto whom thou doest owe
upon the Right let them be set;
or whatsoe’er doth from thee go
the place them there do not forget.

Whaaaaaa?

“One should never attempt to memorize the theory of debit and credit…. Memory is too fickle.”

“Fortunately, an account has only two sides.”

I think I could harvest enough out-of-context quotes to write an entire book of my own!

Around p.27 it kind of strikes me that the roots of accounting aren’t about decision making, strategy, or business insight – All the stuff we are being encouraged to consider today. The roots are about one thing and one thing only, tracing transactions.

That’s not all bad, is it? Could it even be…. precious?

Chapter VI: The Worksheet – It’s Wonderful

“It truly is a marvelous device…. The accountant does not necessarily show it to anyone, but he knows its value…”

However,

The worksheet, marvelous as it is, is not magic…. When two columns of accounts are in balance and they are separated into four columns of accounts, keeping debits debits and credits credits, the difference between the new columns will be the same and on opposite sides.

Simple.

This was the paragraph that really made me think we need a “Best Before” date on these types of books. I can deal with the quaintness of referencing handwritten journals, carbon copies, printing calculators and the like, but I draw the line at the old-timey word maze.

Midgett goes on to actually do a pretty decent job of covering off the various sub-ledgers, adjusting entries, payroll, and accruals. Being buried deep within the technology industry for Accounting and Business Intelligence (B.I.), I haven’t actively thought about these Journals for a while. It was okay. Grounding.

You know that feeling, like… coming home?

Anecdote:
‘I’ve been recording them this way for ten months,’ she replies, and adds a little sarcastically, ‘If I have been doing it wrong, why haven’t you told me before now?’

Yes, it was a simpler time. A time when you could fit about everything you need to account for business in 165 pages. A time when the tax code was comprehensible and “The prospective auditor learns that he must be liberal in his thinking and tolerant of the techniques of others”.

Thank you Elwin W. Midgett. And Fare Thee Well.

Elwin W. Midgett {December 31, 1911 – November 22, 1993}

Geoff Devereux as been active in Vancouver’s technology start-up community for the past 5 years. He regularly attends and contributes to the growing entrepreneurial ecosystem in the city through the Vancouver Enterprise Forum, guest blogging on Techvibes.com, and as a mentor with ISSofBC. Prior to getting lured into tech start-ups, Geoff worked in various fields including a 5 year stint in a tax accounting firm. He is currently working in a marketing/social media role with Indicee, a Saas Business Intelligence company, bringing B.I. to mere mortals.

Partners of Mazars, Weiser Approve Merger

Seems like a long time ago when we’re speculating about Mazars merger with Weiser. Oh wait. It was. Busy season had just started.

At the time, it sounded like the deal was all but guaranteed, just a small matter of the partners voting on the merger and shazam! Global 6 Contender!


Accountancy Age reports that “vast majority of partners on both sides agreed to the officially resides in the good old US of A as “WeiserMazars.” The article states that no layoffs will occur as a result of the merger. AA also reports that the new executive board will be meeting next month to discuss “driving growth from the newly combined business.” Whether this includes more mergers in the Western Hemisphere, we can only speculate.

The combined firm has 12,500 employees including 680 partners. According to Mazars’ most recent annual report, the firm had over €773 mil in revenues (just over a $1 bil) while Weiser had just over $135 million in revenues.

WeiserMazars spokeswoman Laura Kucera provided us with the firm’s press release:

Weiser LLP Joins Mazars Group Worldwide to Offer Clients International Services Opportunities

Mazars, an international group specialising in audit and advisory services and Weiser, an audit and advisory firm with a strong presence in the north east region of the U.S., have announced today that their businesses are to combine.

Partners from both entities have voted to incorporate 74 Weiser partners into Mazars’ international integrated partnership. Reflecting this new arrangement, Weiser will become a Mazars member firm and be renamed WeiserMazars LLP.

The deal marks a new stage in the Mazars’ international development, and means that it will have member firm offices in 56 countries, served by 12,500 professionals, including over 680 partners.

Mazars and Weiser, which employs more than 650 professionals and has annual revenues of $ 135m, have maintained a close and fruitful relationship for the last ten years via a joint venture agreement.

Patrick de Cambourg, Chairman and CEO of Mazars says: “We have worked with Weiser for ten years via a joint venture agreement. This combination is the result of our excellent relationship, our shared values and commitment to offering high quality services to our clients. This enhanced relationship is a natural development based on our mutual trust. We are delighted to welcome Weiser into our partnership. They are a first-rate firm with an excellent reputation in the New York area market. It is an important step in Mazars’ development and our clients will benefit from the formal combining of our services in the U.S. market.”

Douglas A. Phillips, Chairman of Weiser, added: “Serving our clients means helping them on a global level, beyond borders. This is why we made the choice to develop an international joint venture with Mazars in 2000. Today, we are happy to develop our relationship with Mazars by fully joining the Mazars international integrated partnership as we know that when like-minded professionals work together, they obtain excellent results.”

A video interview with Patrick de Cambourg and Douglas Phillips, is available. Please contact us if you wish to receive a copy.

Since it’s inception, Weiser has provided quality accounting, audit, tax and consulting services to clients in industries spanning, manufacturing and distribution, real estate, financial services, healthcare, nonprofit, media/entertainment and automotive, as well as to high net worth individuals and their families. The firm is headquartered in New York City.

Some New Jersey Taxpayers Can Put Off That 1040 For Awhile Longer

Are you dreading April 15th North Jersey? Thought so. With just over a week to go until deadline, it may have crossed your minds that you should start tearing your house apart for that W-2.

Well, you can postpone the treasure hunt for now because the IRS is showing mercy on you for the Biblical rainfall that poured on the Garden State last month.


The IRS announced on Monday that they are delaying the filing deadline “for taxpayers who reside or have a business in the disaster area. This includes the April 15 deadline for filing 2009 individual income tax returns, making income tax payments and making 2009 contributions to an individual retirement account (IRA).”

The counties declared a disaster area by the POTUS include Atlantic, Bergen, Cape May, Essex, Gloucester, Mercer, Middlesex, Monmouth, Morris, Passaic, Somerset, and Union and thus qualify for the extended deadline, which is now May 11th.

New Jersey makes the third state allowed a prolonged procrastination period, joining counties in Massachusetts and all of Rhode Island.

Don’t try to get cute though, Garden Staters, if you’re thinking you can falsely claim residency in one of the affected counties, the IRS will be all over your shit, “IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief.” So appreciate the compassion if you can get it but don’t get any ideas; the IRS is still watching.

New Jersey Severe Storm and Flooding Victims Have Until May 11 to File Their Tax Returns [IRS.gov]

Accounting News Roundup: SEC Image Makeover is a Work-in-Progress; Washington Considers Increasing Sales Tax on Beer; Ex-CFO in Backdating Trial Blames Dead CEO | 04.07.10

SEC faces setbacks, skepticism in trying to reform its enforcement image [WaPo]
Whether you believe it or not, the SEC is trying like hell to turn it’s image around. As you know, this is not a small challenge when you check down the list of ball drops and/or embarrassing moments. Plus, when Real American Hero Harry Markopolos repeatedly refers to the SECstaff as idiots, who’s not going to believe him?

Tasked with this turn around, Mary Schapiro and Rob Khuzhami are on the offensive, doubling the number of investigations from ’08 to ’09, as well as doubling fines. Emergency stop actions have also increased over 80%, according to the Commission’s data.


Yet, some remain unconvinced, like Commissioner Luis Aguilar who was quoted in the WaPo, “I’m looking to see whether or not all of the new initiatives are actually resulting in improved sanctions. I don’t yet see the empirical evidence.” Patience, Luis. We hear there’s a couple of things possibly in the pipeline.

Beer Today, Taxed Tomorrow [Tax Girl]
Everyone in Washington State that isn’t a recovering alcoholic (or a teetotaler) should probably start freaking out. WA is considering a “temporary” sales tax increase to 50 cents per gallon, or 43 cents per sixer, sayeth La Tax Chica. The current tax is 15 cents per six pack.

What’s worse (for most anyway) is that only “big-brand” beer is subject to the tax, leaving the micro-breweries alone and TG thinks this will be challenged as unconstitutional for protectionism. In our opinion, punishing people that drink bad beer is a completely acceptable sin tax, since they choose to drink the bad beer, unconstitutional or not. It definitely doesn’t help the college kids though; that’s an $8 extra on a keg.

Ex-Maxim CFO Blames Dead Boss at SEC Backdating Trial [Law.com]
Carl Jasper is the former CFO of Maxim Integrated Products and is currently on trial for backdating stock options. This is the first case of this kind since the SEC started cracking down on the practice a few years ago. Mr Jasper is relying on the defense that his dead boss, Maxim founder Jack Gifford, is to blame.

The SEC finds this all too convenient:

Mark Fickes delivered a crisp, scripted opening statement for the SEC, beginning simply: “This case is about cheating and then lying about it.” Fickes hammered on the hard-to-ignore fact that Jasper is an accountant who presumably knows accounting rules about granting stock options.”When it came to accounting, no one knew more at Maxim than the defendant,” he told the jury.

Yeah, so that could be a bit of a problem for Jasper which is probably why he invoked his 5th Amendment privilege.

Quote of the Day: The AP Doesn’t Hire Criminal CFOs | 04.06.10

If you want to know what the firm’s actual P&L is like, I suggest you read people who can perform basic addition and subtraction.

~ Barry Ritholtz, who was not impressed with the Associated Press story on Overstock.com’s 2009 profit. He suggests this.

Will CFO’s Audit Fee Benchmark Tool Help Keep the Big 4 Honest on Fees?

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

There’s a bit of a tiff going on over at my former place of employment as a result of the cover story in the latest issue of CFO Magazine on the recent fall in auditor’s fees.

Some critics seem to fear that the phenomenon will be encouraged by a new benchmarking tool the website unveiled on April 1.

For a fee of $1,200, the tool allows companies to compare the fees that their peers pay for auditors. The process should be both quicker and more comprehensive than the requests for proposals now put out by many companies trying to figure out what they should be paying.


Accounting mavens David Albrecht and Lynn Turner, however, seem to worry that such an exercise will lead to the further commoditization of audits, and so to lower quality financial reporting, even though there’s no evidence the increased fees we saw in the wake of the Sarbanes Oxley Act did anything to improve its quality. Lehman Brothers, anyone?

Yet after the article appeared, Turner sent around comments on his list serve saying it contained several “factual inaccuracies” and that “a firm cannot do the same amount of work with these lower fees without seeing a huge reduction in profits.”

One problem here, it seems to me, is that we’re talking about an oligopoly, which invariably skews the normal effects of supply and demand. Albrecht concedes that the industry is an oligopoly but doesn’t make a cogent point about the significance of that. And he misses the other complication, which is that SarBox not only required auditors to review a company’s internal financial controls as well as its financial results, but also prevented auditors from offering audits as loss leaders for their more profitable consulting services. Now auditors can’t offer both services to the same clients. So audits have to stand on their own two feet.

Turner gets this point, though he confuses the chronology of the regulatory events involved. And he seems to suggest the article is flawed in the conclusion it draws about it, without saying how.

Here’s the point. If, in fact, the extra work SarBox required inflated auditors’ profits, why shouldn’t CFOs be able to make sure they’re getting what they pay for?

And the apparent assumption that benchmarking will inevitably lead companies to push for lower fees seems a bit shaky to me. As CFO.com’s editorial director Tim Reason points out, the process may instead merely keep auditors on their toes. Are Albrecht and Turner arguing that opacity is necessary for the public good, so auditors can pad their fees with impunity? Sorry, but that just doesn’t compute.

In an email to me this morning, Tim wrote: “We think finance executives and audit committees will benefit from having an independent, trusted editorial source provide them with a quick way to benchmark their fees-and make sure they are neither too high nor too low.”

Too low? Sure. You get what you pay for.

Tim also points out that there are no advertisers or sponsors for the tool. “It is a pure editorial offering being made directly to our readers, giving them information they’ve been asking us for years.”

Now there’s a radical idea.

Layoff Watch ’10: Grant Thornton’s Cleveland Office Starts Early

From Casa de Chipman:

A manager, a senior III, and senior II were quietly let go yesterday. In addition, the conference rooms are booked for today. I have not heard from other offices, but the Cleveland office appears to be kicking off the race early.


Seems early but our source indicated that these were audit professionals and we’re sure each office has their own method to the madness. Layoffs as this level were also not mentioned by Stephen Chipman during his firm-wide call back in January, although many have indicated that they would be happening regardless.

We left a message with the Cleveland office’s HR but so far we haven’t heard back and GT’s national PR has not responded to our email. If you’ve got an unexpected meeting coming up or have more details, get on the horn.

Live Blogging the Overstock.com Earnings Call

4:57: Everybody ready to do this? We exchanged an email with Sam Antar a little bit ago and he says he never gets on the call so we know he’s listening along. Sam, can’t you get one of those things that will disguise your voice and that makes it sound like your voicebox was removed?

5:00: Slides are working but These Salt Lake City people need to get their act together.

5:02: Jonathan Johnson in the hizzous! Dr. Patrick is in attendance and Steve Chestnut. Yeah, that 10-K was two weeks late, Johnnie. You should probably mention that. Non-GAAP financial measures? You mean the whole 10-K? We kid, we kid.

5:03: Chestnut gets on and he name drops KPMG. Thanks Klynveldians for making this a virtually painless process. Chesty agrees with Patsy’s sentiments that he’s sorry for the delay but appreciates your patience throughout this whole mess.

Oh boy. Accountants getting thrown under the bus. They’re hiring new people though. Ones that have appropriate training in debits and credits. Hell, they’ll throw in some internal audit people too. Progress is being made, make no mistake.


5:07: Patrick Byrne is up! He’s stoked to be here. Going through the numbers and Patsy mentions that Johnnie Johnson never sounds bored while going over the minutiae. “ALL IS GOOD!” Stalling…Skips an entire slide for some reason (probably not important). Pat doesn’t know what the future holds. That’s deep man. He’ll stop talking about the future now. You know who Patrick cares about? The consumers! He’s passing savings on to you, the American people and Overstock shoppers.

5:11: This thing is generating cash, sayeth Chestnut. Jesus, we are cruising through these slides. Think he’s skipping over anything? An investment banker told Patsy that “profit is noble.” He thinks its Chinese or something. Definitely not Nietzsche. Pat likes LL Bean, btw. Johnnie Johnson is back on. Just because LL Bean is a great company doesn’t mean OSTK isn’t going to try like hell to be numero uno in customer satisfaction.

Okay, these guys really like LL Bean. Patrick is talking about duck boots and grandpas now. Really profound stuff here. Did they mention they were above Amazon, Zappos, etc?

5:15: No reason to read slide 13…moving along, moving along. Patrick is reminiscing about someone at Allen & Co. who said something smart at one time in the past. Not really going anywhere…Yes. Please keep up the abrupt stops and starts. Johnnie do you want to chime in? Pat says they have tight expense controls. This must be the one area of the company where controls are just a-okay. $46 million in cash flow is nothing to sneeze at people. Patrick still doesn’t want to talk about the future.

5:19: Questions. Matt Schindler/BofA (sorry if I butchered the spelling): nice revenue number guys. How’d you do it? Great question, sayeth Patrick. Patrick can’t believe this didn’t happen three years ago but hey, whatever. ’09 wasn’t so hot compared to other years because you know, it pretty much sucked for everybody.

What about gross margin? Patsy said that 20% gross margin was too high and was going to give it back to customers? Now it’s 17% WTF? Are you doing customers a favor or did you get hammered by the seasonal whathaveyou? Patsy says that OSTK wants to be cheaper than everybody in the entire universe, so hell yeah, they’re passing it on to the consumer.

5:26: WE ARE NOT TALKING ABOUT THE FUTURE! Do you know what the future holds? We sure as hell don’t but chances are it involves the SEC so we’re not going there. END. OF. STORY.

The book of this company will be written one day and chapter one will be human development. Who will write this book? Patrick? Robby Boyd? Floyd Norris? Good God, when is this BofA guy’s turn over? One final question: Q1 is the past so that’s technically not the future so how is it??

Patrick says that you may have heard that he was in some hot water, so Q1 actually is the future, thankyouverymuch. Next question.

5:30: Patrick’s fraternity brother is next up and they compliment each other for being such swell guys. Patrick especially likes his buddy’s Minnesota accent. Sounds like Johnnie is running the show because Patrick says that he’s the one insisting that Patrick keep his piehole shut about the future.

5:35: Jesus, Marge Gunderson asks another snoozer of a question. Patrick plugs another book that no one has ever heard of called “The Dick” or something.

Marge Gunderson: Any litigation? – Johnnie will handle this. Prime brokers are going down in September of 2011. Byrne can’t help himself and blurts out that the it will be the OJ Simpson trial of the financial world. That’s nice. Murder. The murder of OSTK.

Hey! What about those Q1 earnings?? It’s still TBD but we’re tentatively shooting for late April. KPMG has been burning the midnight oil! Patrick is singing their praises right now. They’re a great crew. Not like the hacks at Grant Thornton. Herculean effort KPMG. Props. Tons of props. Nice job team. No plans for you to be fired.

5:42: Tom O’Halloran from an bank I’ve never heard of. Byrne claims that the OSTK is part of the American psyche now. Coca-Cola, Baseball, and Overstock.com. Steve Chestnut number drops $900 million in revenues. That’s almost a billion! But we’re still kind of small, we’re not delusional. Johnnie knows that Americans see OSTK as a real alternative for stretching their nickel.

Patrick is now talking macro-econ now and we’re totally disinterested. Btw, did you notice that OSTK is the only discounter on the customer satisfaction survey?

5:48: Talking inventory…What about cash levels? You’ve got about $140 mil in cash. Is that enough? What do you like to see in the future?

Patrick says if working capital drops $30 mil they’re in deep shit. Since this involves the future, Johnnie Johnson takes over and Patrick shuts his trap.

5:51: A emailed question from fellow named Nick whose last name is being withheld to protect him. Weird. He wants to know about patent infringements. Jesus, are Sam’s questions going to get asked or not? The Company will fight these tooth and nail. Johnnie will fight these suits dammit. No settlements. It’s about principle, after all.

Michal Ungai (sp?) is up. Something about future depreciation. Patrick asks Johnnie for permission to answer the question, so it must be serious. Are we talking about this?…stand by…If you’re assuming what we are, then you’re good to go.

5:58: Johnnie says time is up so everybody beat it. Patrick says KPMG needs to get the Q1 done and then they can go on vacay. That’s reassuring.

Will Patrick Byrne Answer Sam Antar’s Questions?

Sam probably won’t be getting a real apology so maybe Patrick will answer his questions on the earnings call today? It’s going down in little while and it’s sure to be a do not miss event.

To give you a little preview, Sam Antar provided us with his questions that he submitted to P. Byrne, the Company’s President Jonathan Johnson and Joe Tobacco (independent member of the audit committee). We’ll be live-blogging the call starting at 5 pm EDT to see if these get answered and if anything else exciting happens.

From: Sam E. Antar
To: Patrick Byrne ,
Joseph Tabacco ,
Board – Jonathan Johnson
Date: Mon, Apr 5, 2010 at 2:04 PM
Subject: Overstock.com conference Call Questions

Dear Patrick Byrne:

The following questions are submitted for Overstock.com’s conference call scheduled today. I respectfully request that each question be read aloud in its entirely and that you and Johnson specifically answer each question.

1. Will you admit that I correctly identified GAAP violations by Overstock.com in its accounting treatment for recoveries from underbilled and overpaid fulfillment partners and that the company was dead wrong?

2. Will you admit that I was correct when I properly reported that Overstock.com’s GAAP violations caused the company to report an improper Q4 2008 profit, rather than a properly reported net loss?

3. Will you admit that Overstock.com continued to violate GAAP even after being notified by me of specific GAAP violations?

4. Will you and Jonathan Johnson admit that you made the following false statements to investors?

On February 6, 2009, you responded to my original February 4 blog post identifying specific GAAP violations on the InvestorVillage message board by claiming that:

Antar’s ramblings are gibberish. Show them to any accountant and they will confirm. He has no clue what he is talking about.

On November 18, 2009, during a conference call with analysts and investors, you falsely claimed:

In fact, we as I understand it, this doesn’t change any positive quarter to a negative quarter or any negative quarter to a positive quarter.

In a November 25, 2009 Salt Lake Tribune article, company President Jonathan Johnson was quoted as saying:

None of these changes that they [Grant Thornton] are talking about, or that people at the SEC are now asking about, make any of our quarters go from negative to positive or from positive to negative.

Will you and Johnson admit that your quoted statements above were false?

Regards,

Sam E. Antar

Marcum Purchasing UHY New England Locations, Tax Quizzes to Be Given?

Web CPA is reporting that Marcum, the firm best known for quizzing potential employees, is purchasing three offices of UHY Advisors (Boston, Hartford and New Haven) effective April 16th.

The addition of the three locations would make fourteenfifteen total for Marcum, who currently only has a Greenwich office in New England. After the deal is closed, UHY Advisors will have fourteen locations well.


No financial details were reported but it is reported that all the UHY employees will be retained by Marcum, pending the successful passing of a rigorous quiz given in a room with no windows, air conditioning and a one hour time limit.

A Marcum spokeswoman declined to comment and a message with UHY was not immediately returned.

Marcum to Buy UHY Offices in New England [Web CPA]

Overstock.com Blames Restatements on Accountants

Last week the financial three-ring circus Overstock.com officially put an end to its 2009 by filing its 10-K with the SEC (after a two week extension). Ring managed to keep his promise about turning a profit and managed to keep his head about it in his letter to shareholders only mustering, “It’s nice to be profitable.”

As you might expect, Sam Antar was not impressed and since the Company’s filing he and others (including Gary Weiss) have pointed out major internal control problems, mistakes in the footnotes, false disclosures related to an alleged “tax dodge” and now, NOW the most unforgivable thing yet.


Sam notes that the Company, in its infinite wisdom, has decided to blame its own accountants and their lack of knowledge for the most recent restatement in its 10-K:

We lacked a sufficient number of accounting professionals with the necessary knowledge, experience and training to adequately account for and perform adequate supervisory reviews of significant transactions that resulted in misapplications of GAAP.

Information technology program change and program development controls were inadequately designed to prevent changes in our accounting systems which led to the failure to appropriately capture and accurately process data.

These are the only two “control failures” identified by the Company in its filing that constitute material weaknesses. Naturally, the management team and the audit committee agreed with this assessment, “Our management concluded, and the Audit Committee of the Board of Directors agreed with management’s conclusions,” that former CFO David Chidester and former Treasurer Rich Paongo are the ones at fault here.

Is that class or what? So did Patrick Byrne finally realize that David Chidester and Rich Paongo, after several years at Overstock, lacked the “necessary knowledge, experience and training” so they and the Company “parted ways” (aka fired their sorry asses) for the latest restatement? What about the previous umpteen restatements? Why wasn’t didn’t the parting of ways occur after those?

Regardless of the answers to these questions, Sam has appealed to none other than Mary Schapiro to make sure the shenanigans don’t continue:

From: Sam E. Antar
Sent: Monday, April 05, 2010 3:56 AM
To: ‘Mary Schapiro’; ‘enforcement@sec.gov’;
Cc: ‘Patrick Byrne’; ‘Joseph Tabacco’; ‘Board – Jonathan Johnson’
Subject: Open Letter to the Securities and Exchange Commission (Part 8): Bring Enforcement Action Against Overstock.com for False and Misleading Disclosures
Importance: High

To Chairperson Mary Schapiro:

Enclosed is a link to my blog post entitled, “Open Letter to the Securities and Exchange Commission (Part 8): Bring Enforcement Action Against Overstock.com for False and Misleading Disclosures.”

Link here: http://whitecollarfraud.blogspot.com/2010/04/open-letter-to-securities-and-exchange.html

The blog post referred to in the link above, is to be considered a formal complaint to the SEC for continued false and misleading disclosures by Overstock.com and its officers. Please note that as a courtesy, I have cc’d Overstock.com on this email.

Respectfully,

Sam E. Antar

Is the SEC not interested in a slam dunk case? We’ll see.

Holiday Weekend Accounting News: KPMG Bolts Iran; Financial Statement Reader App for iPad?; IRS Job Creation; Another Koss Fraud Theory; Toni Braxton Tax Trubs; Illegals Bilk IRS for $13 mil; Job of the Day | 04.02.10

See you Monday, capital market servants. It’s okay, tax warriors – Just think, two weeks from today and you’ll be sleeping in.

KPMG severs Iran ties [FT]
T Fly and Co. has pulled the plug on Iran after big pressure from the UANI, “Tom Wethered, KPMG International’s general counsel, wrote to UANI on Thursday that the accountancy network had terminated the membership of Bayat Rayan, one of Iran’s biggest accountants.” The FT reports that the firm cited “serious and escalating concerns,” about the country’s government.

Imagine: iPad App l Statements [XBRL Business Information Exchange via CPA Trendlines]
Someone make this happen ASAP. “Imagine it. Everyone connected by the Web, not the current Web but the Semantic Web. iPads, iPods, iPhones, Androids, Smartphones; maybe a few PCs will still be around. IFRS used globally. Financial information in XBRL making it dynamic like a pivot table, rather than static like the legacy paper statements.”


Is Hiring More IRS Employees ‘Job Creation’? [The Atlantic]
There’s a lot of hysteria over the 16,000-some odd new IRS agents that will be running around the country trying to steal your freedom. Those are real jobs though.

Koss Fraud: Unrecorded revenue? [Fraud Files Blog]
Tracy Coenen kicks around another theory of how alleged shopaholic Sue Sachdeva hid her embezzlement from Grant Thornton, “I’ve heard from a few sources who I consider to be very reliable that Sachdeva hid her theft by not recording revenue. This would mean that Koss’s revenue was understated by $31 million during the time she was committing her theft.” Tracy points out that this method would be “messy” but “There is almost no chance that the auditors will discover the theft and the cover-up. The bulk of the auditors’ work is spent on the balance sheet. So long as transactions related to the theft don’t show up in the ending balances of the balance sheet accounts, she’s pretty safe there.”

Singer Toni Braxton bobbles tax bill [Tax Watchdog]
Toni Braxton really needs help. She now owes the IRS nearly $400k after a $71k tab from last summer. We’ll say it again – Get Ludacris on the phone.

10 illegal aliens in S.C. admit to bilking IRS out of $13 million [Greenville Online]
Who do the teabaggers get mad at for this one? Don’t they hate the IRS and illegal aliens equally? We can only hope that this will cause their heads to explode. Oh, and because it’s in South Carolina we can probably expect a lynching of everyone involved.

Job of the Day: Fannie Mae Needs a Experienced Accountant [GC Career Center]
Four to six years experience, CPA required. Responsibilities include: 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. Located in DC Metro. You!

Five Questions with Norman Marks

Norman Marks is an “evangelist for GRC” (that’s governance, risk management and compliance for those of you that can’t do a Google search). He is a CPA, a chartered accountant and vice president, governance, risk, and compliance for SAP’s BusinessObjects division, and has been a chief audit executive of major global corporations for more than 15 years.

He blogs at the IIA website and keeps a personal blog on governance, risk management and internal controls. He is also the contributing editor of Internal Auditor’s “Governance Perspectives.”

If you read a few Norman’s posts you’ll understand his passion for internal audit, GRC and helping companies find solutions for these issues. Simply stated, Norman is one of the good guys and is doing more than his fair share to help take on the challenges in these areas.


Why should accountants read your blog?
My blog is for anybody with an interest in monitoring events and sharing views around governance, risk management, and internal audit. Accountants are more than people who maintain the books: they are businessmen and women interested in advancing and protecting their organization. That makes them natural leaders in each of these areas.

What are your three must-read accounting blogs and one must-read non-accounting blog?
I read the occasional business blog (aren’t all the better so-called accounting blogs really business blogs) when the topics are interesting. Certainly reTheAuditors by Francine McKenna is interesting. But I really enjoy Mike Jacka (an auditor/humorist) and Richard Chambers, President and CEO of the IIA.

A good accounting blogger is…
Not somebody who writes about (yawn) accounting, but about the accountant’s role in business and advancing the success of his or her organization.

The biggest issue facing accountants today is…
Will the inevitable court cases around Lehman and the principle of ‘fair presentation’ change the nature of external auditing, so that compliance with the rules of US GAAP is no longer sufficient?

Best accounting firm we’ve never heard of (and why they’re great)…
The firm that John Cleese worked in Monty Python (accounting is not boring). Seriously, though, the best accounting firm is the one that puts the interests of its customers first and foremost, consistently performs quality work, exercises fine judgment, provides sound and valuable advice, and sets fees that are reasonable by eliminating unnecessary work and recognizing that fees should not rise faster than wage inflation. You have never heard of them, because I have yet to see them. Sorry, sad, but true.

Here’s Why No One Needs to Get Worked Up Over the Healthcare Reform Earnings Hit

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

The brouhaha over the hits to earnings from the new healthcare law that companies are announcing is much ado about very little.

First of all, the charge is an estimate of future costs and will have no immediate impact on cash flow. And the estimate is unusually large because the accounting rules require costs that would otherwise be reported in the future to be reported now, simply because they are the result of a change in tax treatment.


As my former colleague Marie Leone reports at CFO.com, such “true-ups” over differences in tax and book accounting practices are just that. The real cost will be spread out over many quarters.

More importantly, the hit is the result of a loss of a major taxpayer subsidy. Maybe it made sense before to provide that. But given all the concern about the federal deficit, it seems to me that asking shareholders to bear a bit more of the burden for retiree drug benefits is hardly unfair.

And in the greater scheme of things, the hit may be so small as to have little impact on companies’ valuations, as a Credit Suisse analyst pointed out the other day. General Electric didn’t even break out its estimate for that reason, calling the cost “immaterial.”

The question is whether companies will stop paying for the benefits because of the cost, and that’s unlikely unless they’re willing to compensate for the loss with higher wages, as economist Dean Baker reiterated to me in an email late last week.

“The standard economist view is that the cost of health care comes overwhelmingly out of wages,” Baker wrote. “If they have to pay more in taxes, then it will mostly come out of workers’ pay and have very little impact on their costs and ability to compete.”

If on the other hand, a decline in healthcare costs leads to higher wages, that would mean a stronger economy, so I don’t see how either taxpayers or shareholders will lose here in the long run.

Yes, that’s a big if, but as I’ve said before, the new healthcare law is the biggest effort to rein in costs undertaken to date. Of course more must be done, but the law will provide a big impetus to those efforts.

Hopefully, all this will become clearer as a result of the hearings Rep. Henry Waxman plans to hold next week on this issue, but I’m not holding my breath.

Overstock.com Turns a Profit; Patrick Byrne Writes a Very Un-Patrick Byrne Letter to Shareholders

This morning we thought the KPMG audit team working on Overstock.com would continue slaving away through the extension deadline tomorrow to get that beast of 10-K finished. Well! Turns out they’ll bet of you tonight because the OSTK 10-K has been filed and, as promised Overstock shareholders, your humble servant Patrick Byrne and Co. are reporting an annual profit for the first time ever!


After such a high, restatement or not, we’re guessing Sam Antar definitely won’t be getting an apology but Gary Weiss has already noted a couple of things:

First–stop the presses! Overstock’s auditors at KPMG says that Overstock has insufficient internal controls.

Second, the Marin County District Attorney and four other DAs in northern California want the company to fork over $8.5 million to settle consumer ripoffs by Overstock. The company disagrees and is fighting it, so …. No, wait a moment, make that read “$7.5 million.”

First off, we share Gary’s shock — SHOCK! — on the insufficient internal controls revelation. Second – AUDITORS! We talked about this, remember? Read the 10-K carefully. Overstock’s “Risk Factors” section runs 25 pages for crissakes. A million fucking clams can’t get missed!

You know what though? Mistakes happen, so we’ll let it slide.

Oh, and about that letter to shareholders. Patsy doesn’t bring up former auditor Grant Thornton once, doesn’t quote Nietzsche, compiain about short sellers, bring up Facebook, or say anything remotely antagonizing (although on page 32, the Company’s states he still might).

This makes think: 1) Is he not feeling well? 2) We want the old Patrick back! Read for yourself:

Dear Owner:

In Q4 our revenues grew 27%, twice the ecommerce industry’s rate, and we earned $12.7 million in net income. In 2009 we grew revenues 6%, earned $7.7 million in net income, generated $46 million in operating cash flow, and generated $39 million in free cash flow. It’s nice to be profitable.

I am proud that, for the second year in a row, we rank number 2 in the NRF/Amex survey of American consumers, behind only LL Bean and ahead of Amazon, Zappos, eBay, Nordstrom, and many other fine firms.

As you may know, at the end of Q4 we engaged KPMG as our independent auditors, and announced that we were restating our FY 2008 and Q1, Q2 and Q3 2009 financial statements. I thank you for being patient with us as we worked through the questions raised by the SEC, the transition to the KPMG team, and the extra time it took to ensure that our financial statements are accurate.

I look forward to our conference call next Monday. Until then, I remain,

Your humble servant,

Patrick M. Byrne

SEC Deadline Watch: Try Not to Make a Scene

So today marks the last major deadline for those working on SEC filers and that could mean that your life belongs to you once again. We should also mention that March 31st is a major deadline for many non-SEC clients so there are a lot auditors rejoicing today (or completely losing their shit).


Whether you plan on celebrating the end of your busy season by drinking yourself blind or sleeping at home rather than the office, is matter of personal choice. There will be no shortage of celebrations anyway – clients, team members and if you’re lucky, a firm-wide celebration after the tax trolls cross their finish line.

This also means that the talk of merit increases, promotions and layoffs will start swirling. PwC and E&Y have already re-reassured their troops that raises are coming this year. Some offices have seen the exodus begin so things will remain interesting and we definitely want to know about it.

Not everyone will be raging however. The aforementioned tax return jockeys still have two weeks of listening to ball-baby clients. For those that are still chasing their CPA, maybe you take a breather or maybe you just keep killing yourself and granted, some audit teams (e.g. Overstock.com) are still working but if you passed the finish line today, congrats, well done, yada yada yada.

Quote of the Day: Explaining Accounting Principles to Congress | 03.30.10

“There’s no chance that four CEO’s are going to explain the accounting code to the fine folks in Congress; explaining how to boil water would challenge the format.”

~ Megan McArdle, Business and Economics Editor of the Atlantic, on why asking CEOs to explain why they are complying with GAAP vis-à-vis healthcare reform is a pointless exercise.

Let’s Take a Closer Look at This Shia LaBeouf and InterOil Situation

There’s some funny business going on in InterOil and a lot of it is pure juvenile humor. First of all, you have Louis from Even Stevens pumping their crap stock. Then you have him in Playboy saying he’s less than well-endowed.

It’s as if the jokes write themselves but then you realize that investors are actually counting on the soundness of markets and suddenly it’s not so funny. Never mind, it’s funny.


The first problem with InterOil isn’t really that the guy from Transformers is clumsily pushing it now that he’s worked beside the real Gordon Gekko – sure Wall Street is cool again but not cool enough to rub off on Shia LaBeouf who has apparently taken to pumping stocks lately.

Yeah, we know, we’re confused too.

Getting ready to play next to Michael Douglas for Oliver Stone’s “Wall Street” sequel “Money Never Sleeps”, LaBeouf studied under the financial ninjas at John Thomas Financial (yes, JDA already made that joke. A bunch of times) and apparently turned $20,000 into $489,000 says Business Insider.

And yes, he really did tell GQ readers to grow some balls and short gold at 120 (whatever that means). 120 what? Euros?

“He’s So Money” says GQ in the April 2010 issue. Give me a break. From the mouths of garbage-stock-pumping babes:

“I thought my life was pretty wild. I’m Richie Rich. I land in New York, secretly thinking I’m like the coolest guy in the world. I’ve been on the cover of GQ! But then I met these guys, and it’s humbling. It’s the most sex-drugs-and-rock-‘n’-roll atmosphere that exists on the planet. I was hanging out with some wild human beings.”

So we’ve established Shia is a douche but what about InterOil’s “fundamentals”? I’m so glad you asked!

How about this “bad faith” bankruptcy filing by InterOil’s esteemed CEO Phil Mulacek?

InterOil also recently announced a that part of the Antelope-2 well will need to be re-drilled, greasing it up further for 14-year-old humor for months to come. For 7 years InterOil has promised awesome discoveries and for 7 years it has failed to deliver. Since we no longer have logical fundamentals (InterOil outperformed well through 2009), the best we can do is juvenile humor, I guess.

Grow some balls and short InterOil or just sit there and wait for it to implode, up to you.* Shia needs to hurry up and jump on the tax problems bandwagon like many of his fellow “stars” so we don’t have to listen to this anymore. Wonder how much his toilet seat collection would snag at IRS auction?

Earlier: QOTD: Sam Antar is Ready to Rumble

*Disclaimer: nothing here should be taken as investment advice and I don’t take back what I said about Shia’s John Thomas nor his Financials.

Five Questions with Sara McIntosh

Sara McIntosh’s (a pen name) blog is described as “Devoted To Rocking the Worlds Of Finance, Accounting and Auditing.” And if you’ve read any of her posts you’ll know that by “Rocking” she means in the carnal sense.

She is a lifelong writer and accounting/finance industry expert and entrepreneur. After earning an MBA at Northwestern, she started her own finance and accounting consulting business specializing in acquisitions, implementing worldwide accounting systems, haltingg systems malfunctions in global financial operations.

Having conquered all her professional goals she now focuses on writing, having completed her first novel Shell Games in the Summer of 2009. She is currently working on her second novel, Tricks of the Trade.


Accountants are . . .
Sexiest when thinking outside the box.

What are your three must-read accounting blogs and one must-read non-accounting blog?
Francine McKenna’s posts here at GoingConcern and at her own blog, re:TheAuditors – There is no one else that I’ve read that tears apart the accounting essentials from complex 10Ks and 10Qs and scours board minutes to report on the indisputable facts about frauds and other financial shenanigans behind the recent financial crisis and pointing toward future blowouts waiting to happen.

Professor David Albrecht’s The Summa – Hands-down his posts are the most interesting briefs on everything you need to know about accounting standards. That world is going through some crazy, most-likely-not-in-out-best-interest changes right now and he is one of the few voices in the industry trying to stop the decline in U.S. financial reporting standards.

Edith Orenstein’s FEI (Financial Executives International) blog – What can I say, Edith is everywhere! If you only could go one place to find out everything going on in the accounting, finance and audit industries her blog posts would be the place to go, period.

Chris Brogan – He blogs about blogging and other social media galore. He is an amazingly high-energy, extremely warm and witty guy—and it comes across in his posts, making them all the more memorable. He also has a best-selling book on the subject entitled, Trust Agents.

If someone had to read just one post of yours which one would it be?
According to the rest of the internet universe, “Handcuffed Without Consent.”

The biggest issue facing accountants today is . . .
How to restructure the audit industry to become a profession based upon integrity (auditors no longer selected, managed and paid for by the companies they audit) versus what we have today—an environment too often based on greed. If we get the restructuring of the audit industry right, the crooks who ruin it for the rest of the public audit professionals will leave the industry for more lucrative pastimes elsewhere—you’ll most likely find them in the executive suites of their former clients.

Best Accounting firm we’ve never heard of . . .
The Johnsson Group, based in Chicago. Their specialty is improving the internal financial operations of some of the largest corporations in the world. They’re the been-there, done-that consultants every major corporation wishes they had in their back pocket long before the regulators started knocking . . .

Eight Accountants Opt to Risk Their Professional Reputations

We kid! We’re sure it it’ll be a rocking time being a Professional Accounting Fellow with the Office of the Chief Accountant and it will get them all into their respective partnerships with no problem.

The OCA hasn’t been overtly chastised by anyone to our knowledge so maybe this wing of the Commission is idiot and porn free.

• Jouky Chang, currently a director in Duff & Phelps LLC’s Valuation Advisory Services group based in Detroit, Mich.

• John M. Donohue, currently a senior manager in Moss Adams LLP’s audit practice based in Portland, Ore.

• Rachel M. Eckstein, currently a senior manager in Ernst & Young LLP’s National Professional Practice Group based in New York, N.Y.

• Michael Keehlwetter, currently a senior manager in KPMG LLP’s Department of Professional Practice based in New York, N.Y.

• Neil J. Laverty, currently a senior manager in Deloitte & Touche LLP’s Global IFRS and Offerings Services Group based in New York, N.Y.

• Josh D. Paul, currently a senior manager in PricewaterhouseCoopers LLP’s assurance practice based in San Jose, Calif.

• Christian J. Peo, currently a senior manager in KPMG LLP’s Department of Professional Practice based in New York, N.Y.

• Jason K. Plourde, currently a senior manager in Grant Thornton LLP’s audit practice based in Chicago, Ill.

Congrats to all honored. Try to stay out of trouble.

Office of the Chief Accountant Selects Eight Professional Accounting Fellows [SEC.gov]

You Don’t Want to Imagine the World Without Sarbanes-Oxley, Says Michael Oxley

We really don’t foresee any scenario where a politician would denounce a piece of legislation with his/her name on it but since the MSM has the tendency to bludgeon the Enron/Andersen/Sarbanes-Oxley mantra into everyone’s gray matter, Ox figured he’d better get on record saying that SOx might be the most important moment in U.S. history since the Louisiana Purchase.

When asked if pols can ever stop corporate malfeasance, Ox more or less, compared it to Law & Order, “We have laws against homicide and people kill one another every day. That doesn’t mean that you back off and stop fighting.”


When asked if SOx was a success, we expected a resound, “You bet your ass it’s a success!” but he was a slightly more reserved saying that you should only imagine a world without SOx if you want to scare the bejeezus out yourself:

Sarbanes-Oxley was all about accountability and transparency and restoring investor confidence. We lost almost $8 trillion in market capitalization in 2001 and 2002 because of fraud at places like Enron and Worldcom.

Even though the recent meltdown has hurt confidence again, things could have been much worse if accounting regulations had been as lax as financial regulations.

There’s the magic E word! Maybe we should try focusing on the Tonys as opposed to being so negative when it comes to Enron?

So what about this financial regulatory reform, is this a drag or what?

Critics and the financial press said that Sarbanes-Oxley was rushed through, even though it actually took eight months from the time of the first hearing on Enron until the passage of the bill.

Now, more than a year since the financial crisis, Congress hasn’t dealt with regulation and people are criticizing politicians for moving too slowly. But by taking more time Congress has had a chance to delve into complicated and multi-faceted issues like too-big-to-fail, over-the-counter derivatives, and bank regulations. This is heavy lifting and I give the Congress a lot of credit for working hard to put something together.

Do you think Congress would work on something for eight whole months and it would end up being a failure? If elected representatives work on something for that long it’s bound to be an unmitigated success.

Is Sarbanes-Oxley a failure? [Fortune]

Stephen Chipman Begrudgingly Wore Green on St. Patrick’s Day

Stephen Chipman’s blog post from last week got lost in the shuffle but you’ll be happy to know that you didn’t miss anything. Our lack of enthusiasm is not shared however, as the daily grind for a globe-trotting CEO seems to be enough to entertain some of the GT faithful. How do we know?

He shared one reader/fan’s thoughts this week, that’s how, “So, you really don’t just drink coffee and check e-mail!” While SC neither confirmed nor denied this particular allegation, one could assume that this is a big part of his day.

Moving on…Of the near 1,000 words in this week’s masterpiece, the only thing really worth mentioning is that the GT CEO spent his first St. Patrick’s Day in Chicago last week. And guess what Chi-town? You didn’t let him down; Steve-o was impressed.

This is my first time living in Chicago to experience St. Patrick’s Day; it was very interesting to see the Chicago community’s commitment to this holiday. Dutifully I wore my green tie, in respect of St. Patrick, which was very challenging to do for an Englishman. Nevertheless, I thought it appropriate…even though the Irish did beat the English at rugby a couple of weeks ago in the Six Nations Championships…which was a crushing disappointment…but I digress.

Digression! He’s really getting the hang of this. Maybe Chip’s blog readership is increasing?

The real question is what did SC see on St. Pat’s that piqued his interest? The green river? The turnout at the parade? The vast number of people vomiting in the streets? More details Stevey!

On the biz-nass front, SC did have a conference call with all the GT global leaders and he had to get up bright and early to get on the call at 8 am Chicago time. He did admit that this is NBD because when Steve-o was in China, he had to do the call in the god-awful morning hours to accommodate the BSDs in the U.S. and London.

Speaking of China (and digression), does anyone think Steve knows where mini-Madoff of Hong Kong Gabriel Azedo is? Dude has been missing for awhile.

Former Jack Bauer Nemesis Will Portray Ken Lay in Enron the Musical

So preview of Enron the musical opens in just over two weeks but most of you probably aren’t aware because busy season has been sucking the life out of you. Since we always feel your pain here at GC, it somehow slipped past us that the role of Ken Lay was announced last month and the role has gone to Gregory Itzin who played spineless President Charles Logan in one of the seasons of 24 that we can’t remember.

Anyhoo, since most of you living in New York avoid Times Square (except 5 TS peeps) like the Plague and the rest of you probably need a break, check out a few photos from the Broadhurst sent to us by readers:


Most Top Ten Accounting Firms Saw Lower Revenues, Headcount for 2009

Accounting Today put out their annual Top 100 Firms list late last week and while it focuses on the practices in United States it give us a little bit of room to speculate about who the real contenders are for the Global Six whathaveyou.

The ranking is based on net revenues from U.S. operations but it includes a lot data on each firm including # of offices, partners, total employees, and fee split.

Deloitte runs away with this list in three of the major categories – revenues, number of partners and total employees. The Casa de Salzberg had U.S. revenue of over $10.7 billion which was greater than #2 E&Y by over $3 billion.


Here are the top 10 firms along with their revenues, number of offices, number of partners and total employees

1. Deloitte – $10.7 billion; 102; 2,968; 42,367

2. Ernst & Young – $7.6 billion; 80; 2,500; 25,600

3. PricewaterhouseCoopers – $7.4 billion; 76; 2,235; 31,681

4. KPMG – $5 billion; 88; 1,847; 22,960

5. RSM McGladrey/McGladrey & Pullen – $1.5 billion; 93; 751; 7,755

6. Grant Thornton – $1.1 billion; 37; 535; 5,414

7. BDO – $620 million; 37; 273; 2,712

8. CBIZ/Mayer Hoffman McCann – $601 million; 180; 465; 4,580

9. Crowe Horwath – $508 million; 25; 240; 2,428

10. BKD – $393 million; 31; 258; 1,891

Some other interesting information from the list includes:

Declining Revenues – Revenues for all firms dropped with the exception of CBIZ/Mayer Hoffman McCann, Crowe Horwath and BKD. KPMG had the largest drop of nearly 11%.

Big 4 Dominate – The non-Big 4 firms’ combined revenue (approx. $4.7 billion) is still less than KPMG (smallest of the Big 4).

Personnel Changes – E&Y had a percentage increase in partners of 8.7% while total employees dropped nearly 6%. CBIZ/MHM saw a 32% increase in partners while total employees decreased over 12%. Only PwC and Crowe Horwath saw net increases in the number of partners and total employees.

Audit Heavy Firms – According to the list, PwC (52%), BDO (60%), Crowe Horwath (65%), and BKD (52%) all receive at least 50% of their revenues from audit fees.

So the whole Global Six thing, as much as we like to making a BFD out of it, is a non-issue. All the firms have global connections whether it’s through their own cooperative or through an international network so to cut it off at six seems a little clique-y. We’ll flip through the AT100 for any more interesting factoids but in the meantime feel to embellish any of the information presented here.

Top 100 Firms 2010 digital edition [Free registration for Digital Edition]

Why Aren’t Accountants Getting Fired for Status Updates on Facebook?

A friend of GC recently made mention of the number of people belly aching about busy season in the filterless universe of Facebook. Yes, we realize this is a shock.

Granted, kvetching about your job is a God-given right but at what point is someone just asking to get their ass thrown out? While “experts” are constantly telling you to “be careful about what you post online,” that seems to be overblown because we’re hearing and seeing people hating their jobs out in the open with no discernible repercussions.

God knows there were status updates from E&Y people re: lack of hoops during the Lehman talk.


Case in point, our friend shared this recent status update with us:

“stock options, fraud interviews, preferred equity accounting…my job is sexy.”

Now maybe this isn’t a “get your shit and get the hell out” offense but accountants have proven to be an easily rankled bunch and if the right person were to read this update, there at least might be a frank discussion about this. It’s become obvious that someone at all the major firms is doing nothing but snooping around the Internet, doing nothing but reading employee complaints.

And maybe we’re premature on this issue. Busy season, while winding down, is still going on and warm bodies are still needed, so some gnashing of teeth on FB might be tolerable.

Maybe this is an unwritten rule in the industry that has evolved with the popularity of Facebook. We ignore your rants for all the world to hear, we take pieces of your soul, one busy season at at time.

Job of the Day: BlackRock Needs an IT Internal Audit Manager

BlackRock is looking for an experienced auditor who has is familiar with testing of SAS 70 and Sarbanes-Oxley technology controls.

The position requires 9 years experience with Big 4 firm and professional certifications (e.g. CPA, CISA). The position also requires approximately 20% travel.

Check out the details for this position, based in New York, after the jump.


Company: BlackRock

Title: IT Internal Audit Manager

Location: New York, NY

Experience Required: 9 years

Description: The candidate will supervise one to two staff and will work closely with other internal auditors in executing the global integrated internal audit plan. The candidate will report to the Director of Internal Audit IT, who reports to the Global Head of Internal Audit. BlackRock’s internal audit group is comprised of approximately 40 professionals based principally in New York, San Francisco and London, with additional personnel in Edinburgh, Tokyo and Hong Kong.

Responsibilities: More than 9 years experience in the fields of information technology audit, information security and technology risk management; Strong experience auditing operating systems, databases, networks, and technology operations; Experience working within a risk based internal audit function executing audit planning, fieldwork and report writing; A good understanding of information technology, technology risks and emerging technologies; A good understanding of information technology best practice disciplines and frameworks such as CoBIT, ITIL and COSO; Experience managing small teams of skilled professionals and building strong trusted relationships with senior IT and business management.

Qualifications: Experience of auditing Unix, Linux, Sybase, Oracle, MSSQL and Windows; Experience working in a global financial services firm, and a good understanding of the asset management industry and regulatory environment; A “Big 4” background and experience of SAS70 and SOX technology controls testing; Experience working in a non-audit role such as information security or technology operations; Professional certifications such as: CPA, CISA, CISM, CISSP, GSNA, CGEIT, CRISC; Additional technical knowledge, e.g. attack and penetration techniques, security configuration audit tools and techniques, development tools and languages, data modeling and data management techniques.

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

CPA Suing Craigslist Vindicated by New Reviews

In Tuesday’s QOTD someone did not have kind words for Leo Kehoe, a Queens CPA. Specifically, “Watch out for this fraudulent scumbag! … He will botch up your tax returns and forget to submit them.” Scumbag? Fine. “Botch up” and “forget to submit” are also tolerable. Stuff like that happens (right?). What no CPA needs or wants, is their name associated with “fraudulent.”

Anyway, someone had a bad enough encounter with Kehoe that it demanded these words for anyone searching out both a CPA and perhaps some NSA coitus.


Mr Kehoe should be able to rest a little easier now as the Gothamist reported yesterday that a certain someone or someones has a completely different opinion on his services, “Leo Kehoe is a great CPA. He charged me a lower fee than what I had payed with someone else and he did a much better job,” and this one from yesterday, “Leo Kehoe: Much better than Cats. I’m going to see him again and again!”

Depending on your point of view, the “Cats” compliment may be worth far more than the $4 million that Kehoe isn’t likely to get but since accountants seem to be hung up on money far more than cultural comparisons, we expect him to continue moving forward with the lawsuit.

Accountant Sues Craigslist Over Negative Rant [Gothamist]

Former SEC Chairman Pitt: Criminal Prosecutions Are Possible for Ernst & Young, Lehman Execs

Okay then! Not exactly what you’d want to hear from a former SEC Chairman on Monday but what’s a former SEC honcho to do? Paint a rosy picture for everyone? Hell no! The man is gong to get real about this latest bank/accounting firm disaster. Barron’s ran down Harv to get his $0.02 on the whole Lehman/E&Y sitch and he he laid it out for Dick Fuld, E&Y, et al. as how to best handle this dicey situation.

Regarding the timing of a response to the report, you best explain yourselves ASAP and while you’re at it, none of that fancy-schmancy language. Everyone needs to be able to understand this:

If they want to avoid the logical consequences of the Report’s conclusions-and none of those consequences are at all good for either Fuld or E&Y-they will need to come forward quickly with a very plain, easily understandable explanation of the errors or their defenses. The longer it takes them to do that, the less likelihood they will have of mitigating the publicity the Report’s allegations have already received.

Consequences, you ask? How about indictments? How about no more SEC clients for E&Y? Next Andersen? Maybe! Shockingly, the SEC seems to be dragging its feet, per the usual standard operating procedure (emphasis original):

Many are wondering why there hasn’t been any action taken, and why the government hasn’t reported on the same events itself. Criminal prosecutions are possible, as are SEC civil actions. For Fuld, an SEC action could mean that he would forfeit his right to participate in the securities industry and possible disgorgement of monies he received over the years from Lehman. For E&Y, the SEC has the power to suspend their right to practice accounting, limit their ability to take on new clients, and impose remedial sanctions.

Yeah, that last part is kind of the crux. As you may recall, Andersen did not bite the dust because of the money it had to pay to Enron investors but because it’s reputation took such a bad hit that states began revoking their license even before the firm voluntarily surrendered its license to practice before the SEC. This occurred after Andersen clients started running away from the firm like a band of lepers. There’s no indication that’s what will happen to E&Y but there’s a 2,200 page report with E&Y’s name all over that says nothing flattering about the firm.

And say what you want about Harvey Pitt: bearded Bush yes-man, lawyer, whatever. As far as we can tell, he has nothing to gain by throwing out wild-ass speculation about what the possible outcomes could be.

Lehman: Criminal Prosecution Possible, Says Pitt [Barron’s]

Inside Ernst & Young: Talking Points on Lehman Brothers

If you’ve ever worked at a Big 4 firm, you’re aware that when big news hits the MSM, A) it’s never good and B) there is typically some sort of communication from management reiterating the firm’s position on the matter, everything is cool, thanks for your hard work, etc. etc.

With last week’s revelation of the bankruptcy examiner’s report on Lehman Brothers, E&Y seems to be following this protocol as it relates to the troops on the ground. As you would expect, leadership is keeping their heads about this while in the background in-house counsel is likely engaged in all-night smoky room strategy sessions.

We checked in with a few of our Ernst & Young sources to get an idea of what people were thinking and so far, there doesn’t sound like there are any signs of panic (yet!).


From one source:

Overall reaction from what I gathered is pretty muted. We did get a call from some of the higher-ups saying that we reviewed our work and that we feel that our audit was completely adequate and that Lehman’s failure was nothing more than the same systemic failure of two of the other major banks and that we plan to defend ourselves vigorously. Presumably, the examiner’s report really didn’t give any ah-ha moments….

[I]s there a possibility of a payout at some point? It’s possible. Are we worried that we’re the next Arthur Andersen? I don’t think so.

So at least on the surface, E&Y leadership is communicating that what came out in the report wasn’t surprising and that the defense of the firm’s position will be, as usual, vigorous.

That doesn’t of course stop the speculation:

I heard from a technical guy there was some concern because they didn’t issue a going concern opinion [for the previous audit].

And as you might expect, “I heard that [the firm] helped cook the books and is deep shit,” with the book cooking being arguable but pretty hard to prove and the “deep shit” aspect being a given.

Some Ernst & Young partners are probably losing sleep just thinking about the potential liability involved here but eventually they’ll get over it (until something else comes up).

No partner worth their salt got admitted to the partnership focusing on the downside. The problem is that when people use consistently use words like “deceptive” and “misleading” to describe Lehman’s accounting this reflects poorly on the firm since they were comfortable with the treatment.

And because it’s still busy season for a lot of people, they are focused on the shitstorm that currently surrounds them, not one that will likely drag on for years after they’ve left the firm (voluntarily or otherwise).

Anyone with more insight or thoughts on the matter, get in touch with us and we’ll keep you updated on the chatter inside E&Y.

Sam Antar Is Still Waiting for an Apology from Patrick Byrne and By the Way, Has Never Engaged in Naked Short Selling

Sam Antar knows an accidental criminal hero when he sees one: his cousin Eddie Antar was hailed as a champion of cheaply-priced consumer electronics in the Crazy Eddie days, though the poor saps in New York didn’t realize he could price his goods so cheaply because he was stiffing the government on sales and payroll taxes. Patrick Byrne and Overstock.com are pushing to corner the accidental criminal hero market by denouncing the evils of naked short sellers (bad bad bad), of which they seem to be convinced Sam is one.

While we’re on the topic of OSTK’s campaign to end evil naked short sales, I hereby volunteer to help Overstock edit their naked short selling page, by the way, as it’s not only a dry read but a tad poorly-written. Just sayin. Helpful girl that I am, it’s the least I can do.


Anyway, Sam’s still waiting for his apology from Patrick Byrne but in the meantime, would like him to take back those mean things he said about Sam naked shorting them to death. In an email to the SEC, Byrne himself and Overstock.com audit committee member Joseph Tabacco this weekend, Sam sets the record straight:

First off, I have never been involved any illegal naked short selling.

Second, how can Overstock.com label me as an “anti-Overstock.com blogger” when:

I correctly reported in my blog that Overstock.com used an improper EBITDA from Q2 2007 to Q2 2008 in violation of SEC Regulation G to materially inflate its financial performance, in light of its later amended disclosures.

I correctly reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement.

Third, please note Utah Attorney General Mark Shurtleff received $5,000 in cash from Overstock.com a few days prior to writing his defamatory letter about me. Both Chief Deputy Attorney General Kirk Torgensen and Deputy Attorney General Richard Hamp acknowledged that Shurtleff’s claims about me were false in various tape recorded conversations cited in my blog.

Sam goes on to explain that he’s actually doing Overstock a favor by uncovering fraud that its own audit committee has seemed to, um, overlook. You know, so they can set themselves right with the SEC and skip the restatement next year, filing all those extensions can get pricey and time-consuming you know.

See, Patrick, why so hostile? We’re all just trying to help!

One Accountant Was Enough to Discuss Lehman’s Accounting on CNBC

Maybe it’s because everyone is still working like crazy and couldn’t get away for a TV appearance. Maybe Jim Turley couldn’t find decent footwear but how CNBC managed to get only ONE accounting expert in on this panel to talk about the Ernst & Young, Dick Fuld, et al. Sarbanes-Oxley and the Repo 105 is beyond our comprehension. Throw in four journalists and a “fellow” and you’ve got yourself quite the free-wheeling discussion on the double-entry system.


Personally, “[N]ot technically violating the rules, that’s why the auditors could kind of sign off on it even though it was incredibly misleading and deceptive,” was our favorite line.

But the poor accounting expert seemed to be a nervous wreck. Aren’t wet bars standard?

Five Questions with Tracy Coenen

If you’re currently engaged in fraudulent activity at your company, eventually you’re going to find yourself in Tracy Coenen’s Fraud Files Blog. She has published two books on the subject, Expert Fraud Investigation: A Step-by-Step Guide and Essentials of Corporate Fraud and more than a 100 articles in industry publications.

When she’s not writing about all things fraud, Tracy runs Sequence, Inc., providing forensic accounting and fraud examination services. The Sue Sachdeva/Koss fiasco happened in her backyard of Milwaukee and she’s been all over it, providing fine quotes on the matter.


Why do you blog?
Somebody has to expose the frauds and scams!

Why should you accountants read your blog?
Because I have interesting insights and I’m not afraid to state my very strong opinions.

Who is your favorite blogger?
Mike Masnick at Techdirt

Best thing about blogging for accountants?
There is a wide open market for accounting bloggers to be thought leaders (and to market themselves) because so few accounting and finance professionals are blogging about their profession.

The biggest issue facing accountants today is…
Truly understanding how fraud happens and how to find and prevent it.

Three Ways That Patrick Byrne Can Apologize to Sam Antar

As you’re probably aware (if not, check the links below), it hasn’t been the friendliest of exchanges between criminal CFO/forensic accounting sleuth Sam Antar and Overstock.com CEO Patrick Byrne. Sam being Sam, he recently reached out to Patrick Byrne to see if he would be interested in a mea culpa:

From: Sam E. Antar
Sent: Monday, March 08, 2010 11:02 PM
To: Patrick M. Byrne
Subject: Overstock.com Restatement
Importance: High

Hi Patrick:

Will you finally admit that I was correct when I reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement?

You owe me a public apology.

Regards,

Sam


Our understanding is that Pat hasn’t responded to Sam’s request for an apology yet (we’re hopeful!) so Team GC thought we’d offer some suggestions to Dr Byrne should he decide to take the high road and apologize to Sam. Having been in this situation more than once myself, I can honestly say sometimes you’ve just got to suck it up, buy some flowers, and admit that you’re an ass but totally repentant.

Overstock.com gift cards – Nothing says I’m sorry like free stuff that the aggrieved party can pick themselves. Bonus, the overhead on Byrne’s own inventory must be low. You know, because it’s his, not because there is any monkey business going down on OSTK’s financials.

An SEC Gift Shop Goodie BasketI busted Sam in an SEC baseball hat at Stanford last week so wouldn’t it be cute if Byrne got him a whole basket full of fun regulatory shwag? Awww, what a precious moment it would be watching Sam pull out DoJ beer cozies and a color-changing SIGTARP coffee mug. Who doesn’t love tchotchkes? PB can’t go wrong! I’d even throw in a pair of NY Fed Pistol Team patches for that added touch of flair.

Cupcakes – Come on, no one can resist cupcakes, not even Sam E. Antar’s hardened criminal ass. You know, might as well send some to the GCHQ while he’s at it, we’ve been putting up with this Overstock shit for months too. Hopefully even Patrick Byrne knows when it comes to cupcakes, it’s best to invest in high quality, over-priced boutique cupcakes. Even my cheap ass knows that.

Earlier:
Winners and Losers in the Overstock Restatement
Even Earlier:
Is Patrick Byrne’s Facebook Friends List Motivated by a Farmville Obsession?

Is Stephen Chipman Preparing to Embrace Twitter?

We hope! Our speculation is fueled by a line from SC’s most recent post:

“Because I’ve heard it said that brevity is not my strong suit, I will try to explain it in 50 words.”

Whether Steve-o realizes it or not, at 50 words, he still needs to improve his brevity. But it’s a start and we’re hoping that he’ll get eventually embrace Twitter. We’re envisioning pithy Tweets followed by clever hashtags like #GTrocks or #Big4sucks or #isecretlyheartsuesachdeva.


The fact the whole brevity topic came up makes us curious. We only made mention of it once, ages ago, so we’re certain that he isn’t referring to our commentary (which we’re sure he reads religiously).

Anyhoo, Even-Stephen was referring to the difference between the Grant Thornton Senior Leadership Team and the Partnership Board. Disappointing everyone, he ended up using 51 words and 258 characters:

The SLT is the equivalent of executive management, and the Partnership Board is the governing body of the firm. The SLT is appointed by the CEO and approved by the PB. The CEO is appointed by the PB. The SLT reports to the CEO, and the CEO reports to the PB.

That’s followed up by Stephen getting back to his windy ways, describing what every member of the SLT does (you can get the gist from their titles).

So while we’re encouraged by Chip’s effort at getting to the point, he still has some work to do. Just sign up and go for it man. Plus we’d be interested to know who Steve-o would follow. Going Concern is a given but does he go intellectual and follow Taleb and Roubini? Or slum it with the rubes and follow Kim Kardashian, Courtney Love and Kanye?

Stephen, just get on Twitter.

Accounting Porn Does Not Involve a Guy Coming By to Fix the Cable

AG profiled Professor David Albrecht last week, which was an honor and a privilege for everyone involved. The Professor’s contributions to the accounting blogosphere are invaluable. Staying consistent with his priceless musings, his latest post asks an important question: “What Is Accounting Pornography?”

Now since we’re sure the professor wants us to think hard about this question, we’ll kindly oblige him.


Done.

As you might expect, this question has nothing to do with your particular taste in ladyboyx.com or whatever else the SEC staff might have turned you on to. No, this is more of the strange reading and/or viewing material that you might just enjoy a little too much (e.g. Lat’s proclivity for the Harvard Law faculty directory).

Okay, here are a few answers that come to mind:

Any internal report that you stumble across that details upcoming layoffs.

For Sam Antar and the rest of you sleuthy types, the notes to Overstock.com’s financial statements.

For the weirdos, it could be watching Big 4 CEOs’ banal talking points with a snowy backdrop. Or the thought of Jim Turley in his Timberlands.

For the sickos, nightmare CPA exam stories that end in a grade of 74.

If there’s something else that gets you off (Ben Bernanke testimony doesn’t count, AG) feel free to share. Just try to keep it relatively clean. In the meantime, we’ll be flipping through the Enron script.

What Is Accounting Pornography? [The Summa]

Are Accountants at a Higher Risk of Experiencing Workplace Violence During Busy Season?

Seems like logical conclusion, right? Okay, it’s not the post office but yeesh, have you noticed the bitter Bob in the cubicle next to you? Is he approaching the breaking point? Busy season sucks after all and who knows when he’ll eventually crack:


Is our suggestion that accountants might be more likely to snap a little overblown? Maybe. But read this description from AccountingWEB before you blow us off:

You are sitting at your desk on a sunny Thursday afternoon. Your company is experiencing some hard times, and there have been layoffs company wide. A co-worker has been part of the layoffs, and is very distraught. The co-worker may have known layoffs were eminent, and thought it would never happen to them. All of a sudden, the co-worker pulls out a gun and starts shooting up the office!

Sound familiar? Of course! We imagine that someone throwing their 10-key at your head is more likely scenario but violence is violence. The article cites OSHA stating that 2 million people are victims of workplace violence every year but what’s even more exciting/troubling is the BLS survey that “70% of workplaces don’t have any type of violence prevention program in place.”

The solution? Training of course! AccountingWEB breaks it down like this:

“Train managers and supervisors on how to detect the early warning signs of potential violence” – In other words, you know that guy who says ALOUD he’s thinking about punching the next person that asks him a stupid question? You should probably should have a word with him.

“Tell employees that the firm wants to know about any threats or incidences, and that they are extremely serious about handling these problems.” – Naturally it helps if your company follows through on “serious about handling these problems” part. In other words, the guy swinging the sledge around should be tarred and feathered and then fired in front of the entire company. The proceedings should be broadcast internally for those that can’t attend in person. It’s simply not enough to fire the person. Public humiliation is imperative so people get the picture that this shit won’t be tolerated.

“Implement a zero tolerance policy in the handbook relating to workplace violence” – And by zero tolerance, we’re talking no noogies, wedgies, open handed slaps, arm slugs, bloody knuckle contests or even berating someone to the point that they develop an eating disorder.

Violence in the Workplace: Are You Next? [AccountingWEB]

The Purpose of PricewaterhouseCoopers’ New HR Service in India Isn’t Entirely Clear

PwC has launched a new HR service in India and one can only speculate as to the inspiration behind staging the move there (I’ll give you a hint: it starts with Satyam and ends in fraud) but let’s take a look at the official spiel before we rush to judgment.


India’s Financial Express:

Global audit firm, PricewaterhouseCoopers, announced the launch of its human resources service ‘Saratoga’ in India along with India Human Capital Effectiveness survey (HCE), a top company official said.

“Saratoga is the most extensive database of HR metrics available globally. We are launching it in India and we have already got an immense response from Indian companies,” PricewaterhouseCoopers’ Partner and Global HRM network leader, Richard Phelps, told PTI here.

On the surface, Saratoga looks like little more than an inventory count of companies’ human capital, which means something when you have to keep a leash on a bunch of customer service guys with fake first names (how else would you keep track of them?).

See, PwC cares. They care that JP Morgan outsources call center jobs to India – I know this because I’m a Chase customer (leave me alone) and have had the misfortune of dialing in. Meanwhile, JPM’s off-shore hiring spree continues and someone’s got to handle all that “human capital”, why not PwC?

I don’t care that some guy in India has a job, I care that he calls himself Patrick and pretends to have a bizarre hybrid Texas/New Jersey accent. Is there going to be a check box on these PwC Saratoga metrics for guys who fake 50s-style American first names from Indian call centers?

I’m not bitter. It’s good that PwC cares about the global community and wants to reach out to facilitate cheap labor for its audit clients like JP Morgan (for the record I use BofA too and they have the decency to hire air-headed middle-state chicks named Kelly and Sarah).

Could you imagine what would happen if the Fed stepped in and barred PwC from auditing anything that’s moving here in the US? Hell, it happened in India.

Good luck with that human capital census or, uh, whatever it is, PwC. I mean that.

Accounting News Roundup: Japan Adopting International Fair Value; GAO Not Down with PCOAB Risk Standards; Oscar Gift Bags = $91k Income | 03.08.10

Japan embraces new fair value rule [Financial Times via Accountancy Age]
Here’s a novel idea: making a decision on IFRS! Japan’s Financial Services Agency will be allowing companies to adopt the international version of the new fair value rule developed by the IASB, starting Wednesday. Since the world’s second largest economy is opting to pull the trigger on IFRS it may throw the G20’s request/demand for the world to get all kumbaya when it comes to accounting rules.

“Fair value accounting…as unleashed one of the most divisive debates to have emerged from the credit crisis, threatening to disrupt a pledge by the G20 group of leading economies to create a single, global accounting system by mid next year,” reports the FT and judging by the SEC’s indecisiveness, they may be right. With this latest development, now leaders will be able to blame each other’s securities agencies for their particular actions that will likely lead to divergence.


The allowance of Japanese companies to adopt IFRS 9 could also give Knight of the Accounting Roundtable, Sir David Tweedie, even more leverage when dealing with countries around the world to adopt the IFRS.

Right or wrong, the Japanese are sending a signal that they are prepared to move forward while the SEC prepares to have more meetings.

GAO Criticizes PCAOB Approach to Audit Risk [Web CPA]
The General Accountability Office, never shy to point out the faults of others (that’s kind of what they do, after all), isn’t so keen on the PCAOB’s latest “risk assessment” audit standards. This after the PCAOB originally proposed standards in 2008 and then revised and re-released them late last year.

The GAO feels that the ‘duplication and inconsistencies’ created by the PCAOB’s new standards would likely lead to…more billable hours! So, as you might imagine, some firms are on board:

PricewaterhouseCoopers told the PCAOB, “We fully support the board’s objective to update interim standards regarding risk assessment,”

And some, not so much:

McGladrey & Pullen…warned that “unnecessary differences between the board’s standards and those of other standard-setters increase the costs of performing all audits because firms must develop and maintain two, and even three, audit methodologies and training programs, with no corresponding benefit to audit quality.”

Personally, we’re skeptical of anything that has the unmitigated support of the biggest players in the industry but from a more practical standpoint, do auditors really need more rules to follow? And now this could add to the workload? Is that really necessary?

Oscar Swag Bags to Result in $91k Income to Celebrity Presenters [TaxProf Blog]
Celebrities have enough tax trouble the way it is, how is giving them gifts going to make their tax returns easier? We’re guessing most of them have smart CPAs working for them that will suggest that they give it all to charity but we may be underestimating the temptation of free luxury swag.

Stephen Chipman Managed to Not Stop By Going Concern HQ While He Was in New York

This week in Stephen Chipman blog dissection, we learned that SC had another week full of travel, although he managed to resist the temptation to head back to Atlanta for the third straight week. It was typical back-slapping, glad-handing wily CEO shenanigans in Chi-town including a little chat with Assistant Secretary of State for East Asian and Pacific Affairs, Kurt Campbell. “Dr. Campbell recounted a wonderful story of his very first diplomatic event with Secretary Clinton at Blair House — entertaining a senior Chinese delegation.”

Yeah. He leaves you hanging. Our guess is that Hil was telling Bill jokes and/or doing armpit fart noises but it’s all a mystery because Stephen changes the subject entirely. C’mon man! You can’t do that!


Anyway it and then on to DC for a speech IFRS and why it’s on the road to nowhere in the US of A:

I had been invited to be the after-dinner speaker for the National Venture Capital Association (NVCA) Board of Directors meeting. Although I feared the impossible expectation of being a “rousing, after-dinner” speaker on the topic of International Financial Reporting Standards (IFRS), interest was high on the eve of the SEC’s highly anticipated announcement of plans to move forward with their Roadmap for IFRS adoption in the United States.

We’re continually impressed with Steve’s ability to throw in the dry humor, although we suggest dropping the unnecessary quotation marks. Definitely would read more deadpan. If you’re not familiar with the phenomenon of unnecessary quotation marks, you’re probably an abuser.

Moving on…

Chiparoo then trekked up to the City where he talked more about IFRS with the Center of Audit Quality, “The lively conversation focused on the SEC’s announcement regarding further clarification on their Roadmap.” And by that he means everyone there is pissed that the SEC is perfectly happy to drag this thing out.

Post-IFRS chat, SC met up with Ed Nusbaum and they did some MSM hopping, “I met up with Ed Nusbaum and Grant Thornton’s Director of Corporate Communications John Vita for a media tour. Ed is a veteran with the press, but press junkets are relatively new for me. We spoke to reporters at Bloomberg, Fox News, the Wall Street Journal and Thomson Reuters.”

Okay, we’re a little hurt by this. Sure we work remotely but would it have killed you to stop by Steve and leave a note? GCHQ might not have the fancy confines of the WSJ or the ‘Berg but we’d make you guys comfortable as possible. Plus there’s always stimulating conversation. Or just simple call saying “Sorry we couldn’t make it. Next time!” just to get our hopes up.

While we’re still getting over this little slight, we’ll just mention that Steve’s blog, to our knowledge, doesn’t have a name. We’ll take the weekend to mull over this but in the meantime, if you’ve got suggestions, feel free to share.

Five Questions with Accounting Professor David Albrecht

You might know him as Professor Albrecht (at least I still call him that) or you may read The Summa and have no idea who the guy is.

JDA recently forced him to answer some questions to get to the man behind the adamantly anti-IFRS curtain we love so much and discovered he’s proud to be a dissenting voice in the argument over global accounting standards convergence and then some.

First of all, Prof Albrecht is way more old school than just about anyone. He was “blogging” on listservs before there was a such thing as a blog and Caleb and I were still playing 8-bit Super Mario Bros.


Alright, maybe we’d advanced to AOL by the time Professor Albrecht was set loose among hundreds of accounting professors from around the world, the point is he’s been around. The Summa is only about a year and a half old but if you’ve ever read an accounting blog, chances are you’ve seen his work.

Secondly, he’s got opinions and lots of them. Better yet, he enjoys being a teacher; spreading the knowledge both to his own students and the “students” around the world who read The Summa regularly. That means he’d be happy to teach you why he feels the way he does but won’t hold it against you if you feel differently. That’s an admirable quality, and only part of what makes him one of my favorite accounting bloggers.

He also takes interrogation well.

Why do you blog?
I believe that writing something down helps you put your thoughts in order. Writing actually helps me figure out what I think about something. I want to make a difference. Blogging about IFRS is a way of drawing attention to the “other” side of the issue, the one you don’t hear from the large accounting firms or the SEC or the IASB or the EU.

Why should you accountants read your blog?
To find out an accounting professor take on accounting/business/finance issues. I’ve been on an e-mail listserv with hundreds of accounting professors from around the world for 14 years in the thick of many discussions. I take what I learn from these discussions and bring them to The Summa.

If someone had to read just one post of yours which one would it be?
I’ve written dozens of posts on IFRS, and you want just one? Dave Albrecht–IFRS Critic

A good accountant is…
Someone who can tell left from right.

Best Accounting firm program we’ve never heard of…
The Concordia College (Moorhead, MN) accounting major.

Hotel Doesn’t Like Being Duped by a Phony IRS Agent; Manages a Nonviolent Response

About a month ago we briefly mentioned Sheryl Lynn Vertoch who had been “staying at the Inn Marin Hotel in Novato, California for over seven years telling the staff there that she was an IRS agent.” Her cover was blown, not by hotel pool boys turned crack-squad investigators, but by the hotel calling the IRS to complain about their lack of support for this public servant that worked on important cases such as Enron.

Probably feeling a tad sheepish, the hotel is firing back by suing SLV for the $55,175.25 that she owes the hotel.


The hotel, being very thorough of its records (but not necessarily multi-year guests) attached a 24 page invoice to show the charges that Vertoch racked up for “guest fees, expenses and pet charges” from January 21, 2008, to January 26, 2010.

Somehow the hotel’s management/owners/lawyers came to the conclusion that A) the actual IRS wasn’t the cause of the problem and B) the use of a plane, bulldozer or firearm were simply not the best course of action.

Personally, we’re shocked but at the same time relieved that there is a sliver of sanity left in this country.

Novato hotel wants IRS imposter to pay $55,000 tab [Mercury News]
Earlier:
Phony IRS Agent Racks Up $55k Hotel Bill

Former Andersen CEO: Greed Brought Down Firm

Retired Andersen CEO and Managing Parter, Duane Kullberg was part of a panel discussion that went on at Carthage College in Kenosha, Wisconsin this week where he was the featured speak on the “The Rise and Fall of Arthur Andersen”.

Mr Kullberg was part of a panel that included our friendJim Peterson of Re:Balance and Bill Goodman, President of Schneck SC, a firm with offices throughout Wisconsin that also discussed the future of the audit profession.


Mr Kullberg served as the Andersen CEO from 1980 to 1989 but “the profit-driven company culture in the 1990s, that valued sales more highly than the ethically rigorous auditing practices that built the accounting firm,” was ultimately brought the firm down.

The greed came from the development of the consulting business that became a signficant part of Andersen’s business during the 1980s:

By the time Kullberg took the reins, Andersen was an international player, increasingly involved in providing consulting services. By 1988, it was the largest consulting firm worldwide, deriving 40 percent of earnings from that side of the business.

That brought growing demand for greater independence and a bigger piece of the money pie from partners on the consulting side, while those on the tax-audit side militated against revising the company’s historic approach to treating all partners as financial equals.

So the seeds for the firm’s demise were planted long ago and it was due, dare we say, partners that were jealous over the booming consulting side of the house. After Kullberg split the consulting from the audit/tax the feuding got bad and lawyers got involved. Then the bright idea of rebirthing the consulting business within the audit/tax firm came about:

Under Kullberg, two operating units were created: Arthur Andersen, the tax-audit/accounting group, and Andersen Consulting, both under Andersen Worldwide, each under its own managing partner.

The equal compensation system also was revised, with funds being set aside to reward individual partners and teams of partners for superior performance.

Fissures widened dramatically in 1997 when Andersen Consulting (now Accenture) won an arbitration against Andersen Worldwide and broke off on its own after the tax-audit group set up its own competing consulting service

“All of a sudden, they went back into the arena of business consulting. It was untenable,” Kullberg said.

The rest of this story is well-known. If not, there’s a play coming out this spring. That should catch you up.

Accounting for greed [Kenosha News]
Carthage welcomes Duane R. Kullberg [Carthage College]

How Huge Companies Are Dragging Down Our Economy

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

There are three pieces in the blogosphere today that touch on the fundamental problem with our economic system and why it will remain in a ditch, or just lurch onward to the next crisis, if it isn’t addressed.

And that is monopoly. I’ll leave aside the politics of that, which is addressed well enough by Thomas Franks over at the Wall Street Journal. In a nutshell, he warns of a return to feudalism, which I’ve done as well before.

What struck me as new was this analysis, which made me realize that the macroeconomic problem with monopolies is that they discourage hiring and capital investment.


After all, if you have a market locked up, your profits are so high that it makes no sense to take any risk on new investment. You just keep doing what you’re doing with the resources you have, hoping to maintain your barrier to entry. Oh sure, you expand, but only by acquiring competitors so as to keep your monopoly intact and your margins high.

Capital investment? Hiring? Forget about it. There’s no need. In fact, you want to reduce those things. That’s called synergy.

So where does expansion in GDP come from in that case? It derives more and more from speculation about where your stock price will go. Multiply that to the nth degree, a process known as financialization that’s been taking place for decades, and everything ultimately becomes geared to asset prices, with the bubbles and busts that inevitably ensue.

Yes, this description is woefully simplistic and won’t pass muster in a traditional macroeconomics course. There’s also plenty of room for argument as to what degree monopolies currently dominate the economy.

But it seems to me that this is the sort of analysis that’s required to restore the economy’s health. How else, after all, can one explain the paltry amount of hiring and capital investment we’ve seen since the late 1990s?

The point of such a discussion, of course, would be to come up with a solution to the problem. As cogent but unfashionable as its description of the problem may be, the Marxist view expressed in the Monthly Review article cited above is that it cannot be solved because of the irreconcilable contradiction at the heart of capitalism, and that political instability of the highest order is thus inevitable. Sorry, but no thanks.

The alternative: Vigorous antitrust enforcement, which, as Simon Johnson of MIT points out, is what the progressive Republicans pursued a century ago when financial trusts threatened to put a stranglehold on the entire system.

Indeed, breaking up monopolies, in banking and elsewhere, strikes me as the only viable means of growing the economy without creating a more dangerous asset bubble in short order.

Yes, you could conceivably do it instead through better regulation, and I’m all for that, but the back and forth we’ve seen in Washington over financial reform shows that better regulation is impossible until the economic power of the banks, and the political influence that goes with it, is sharply curtailed. The Federal Reserve and other bank regulators had all the authority they needed to keep banks in check, but failed to do so. Why? It wasn’t because they were dumb.

More Sue Sachdeva Fallout: Koss Resigns as Strattec Audit Committee Chair; Grant Thornton Dismissed as Auditor

The Sue Sachdeva wrecking ball continues to do damage as we learn today that Michael Koss has resigned as the audit committee chair of Strattec Security Corp. Oh, and Strattec also dismissed Grant Thornton from its audit duties for the Company, saying that “[it] decided to consolidate all of its outside accounting/auditing work with Deloitte”.

And yesssss, Michael Koss resigned, at least in part, due to the uesay achdevasay tealinsay oneymay:

David Zimmer, Strattec’s new audit committee chairman, said the problems at Koss Corp. played a role in Michael Koss’ decision to step down as the committee chair at Strattec. He said audit committee chair is a demanding and time-consuming job. “Everyone has to evaluate how much time they have to spend on things,” Zimmer said.

So in other words, you’re saying that Mr Koss, who by all accounts wasn’t spending any time keeping an eye on his own company, can’t be expected to serve as the audit committee chair of this company since it’s kinda sorta an important position. We get that.

As for GT, Pat Hansen, Strattec’s CFO said that this was something the Company was ‘mulling’ over anyway and that the Koss fiasco and the timing of this dismissal were ‘more coincidental’. Okay but it the made the decision a helluva lot easier, didn’t it?

And the Sue trainwreck rumbles on…

Koss resigns as audit committee chair at Strattec [Milwaukee Journal Sentinel]
Recent Koss/Sue Sachdeva News:
Koss Sues AMEX for Sachdeva Spending Spree
Koss: Financial Results Will Be Better Now That the Whole Fraud Thing Is Over

Grant Thornton Is on This National Employee Appreciation Day Thing

So, servants of the capital markets, how’s the motivation? Stable? Critical? Grave? Whatever your condition, if you work at Grant Thornton, you’ll be happy to know that there’s a chance (somewhere between slim and good) that you’ll receive a little token of appreciation tomorrow:


Exciting, right? We’re not sure these GT e-cards are of the erotic variety but that would definitely be a great show of apprect have the self-control to forward it to your non-GT address and wait to check it at home so you don’t end up like some people.

Turns out National Employee Appreciation Day has dropping on the first Friday in March since 1995 but we’ll be damned if we’d ever heard of such a thing. Is there some coordinated effort among accounting firms, large and small, to keep this thing as quiet as possible? It’s busy season after all; the close proximity to deadlines should be appreciation enough.

Anyway, Recognition Professionals International put this together back in the Clinton days and presumably it’s been a hit because, well, it’s still going on. Jump over to the website however, and you’ll find out that they have far bigger ideas that just e-cards:

Recognition can take a hundred forms and variations. Here are just a few ideas:

1. Ask an employee to write down six ways they would like to be rewarded. Anything goes. The only rule is that half the ideas need to be low cost or no cost.

2. Schedule lunch dates with employees. Give them an opportunity to select the luncheon site, and use the time to simply get to know them better.

3. Offer a free one-year subscription to an employee’s favorite business magazine and have it sent to their home.

4. Consider a gift certificate entitling an employee to lunch with you or another mentor of his/her choosing for the purpose of being coached on one or more topics.

5. Offer a shopping spree to a local supply store for an employee to get items (no staplers or paper clips allowed) to personalize his/her office or cubicle.

6. Give the gift of wellness. Have a limousine pick up an employee for a full day at a spa. Give gift coupons for ballroom dance, yoga or golf lessons.

7. Give a fun-loving employee a series of On your mark-get set-GO cards that they can redeem at their discretion. For example: Leave work early to go to a movie, or shopping, or play ball.

8. Send a handwritten note of thanks for the completion of a job well done.

9. If an employee stays late/goes above and beyond to complete a project, send the employee and his/her partner to a nice dinner.

10. Purchase a company “toy” your employees would most enjoy; a cappuccino machine, dart board, volleyball court, exercise room.

Now judging by this list, it appears that GT looked through these and thought, “Number 1 could be taken advantage of in ways that could get the firm in trouble (wink-wink, nudge-nudge) and the rest of these involve spending money. With the exception of number eight!”

So an idea was born. GT e-cards. Here’s hoping that you all get an inbox full of these because A) you deserve them and B) the better the odds are that someone will forward it on to us so that we may take a gander and then share it with everyone. If you don’t receive a GT e-card (or anything for that matter), then you have every right to go postal on whoever you damn well please.

AIG Keeps the Populist Wrath at Bay with Latest Deal

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

I’ve previously railed against American International Group for dragging its feet in repaying the $180 billion it owes to the U.S. government, so I need to tip my cap to it for the $35.5 billion deal it struck with Prudential for its Asian insurance division.

And unlike some previous deals, AIG will use a major chunk of cash from the sale of the unit — $25 billion — to pay down a credit line it has with the Federal Reserve. (The insurer will take the remaining $10.5 billion in Prudential securities.)


It’s a move the company had to make, really, especially as it continues to lobby against the pay caps the government has imposed.

“This diminishes the wrath directed at AIG from Americans angry at the bailout,” Clark Troy, a senior analyst with research firm Aite Group, told Bloomberg.

The anger directed at financial institutions is a big deal. Just ask Goldman Sachs, which listed “negative publicity” in the risk section of its recently filed 10-K.

So while AIG had previously done a number of relatively minor deals — at least minor compared to its indebtedness to the U.S. taxpayer — the insurer finally made a major act of good faith. Indeed, the unit was considered its crown jewel and Thomson Reuters data showed it was the largest insurance M&A deal ever.

But here’s hoping the company doesn’t take what little good will it will gain from the deal for granted. There’s still the matter of more than $100 billion left.

SEC Deadline Watch: Filing Late? Your Life Isn’t Over

Hey CIT team, sorry to hear about the tardy filing. But you know what? Considering all that’s happened in the past year, filing a couple weeks late isn’t that bad. And besides, now that John Thain is running the show, all signs are pointing to a turnaround of epic proportions.

For the rest of you engagements teams that have a late filing, you might have been feeling like LOSERS last night and maybe you spent last night sobbing over it and now it’s carrying over to today. We’re here to give you permission to blow it off.


We realize that doesn’t help the attitude of your [insert pissed off team member] right now but you know what? Shit happens. They’ll get over it too. Will this affect your performance rating? Maybe. Maybe not. One thing is for sure though, there’s plenty of blame to go around so if you’re feeling guilty, knock it off. Will you get shipped off to an engagement where auditors go to die? It’s possible but you’ll probably be better off.

So maybe it feels like the end of the world right now but whatever your sitch is, we assure you, it’s not. This isn’t life or death. You’ve got to work at the IRS to make that claim.

CIT Unable To File Annual Report On Time Monday [Dow Jones via WSJ]
CIT Form 12b-25 [SEC]

SHOCKER: GAO Says the Federal Government Has Weak Internal Controls

Talk about a blow. Everyone here at GC soiled themselves after finding out this piece of news.

The mother of all auditors, the General Accountability Office, released its FY 2009 Financial Report for the U.S. Government last week and things are, shall we say, typical. How typical? How about things are such a mess that the GAO can’t render an opinion on the consolidated financial statements?

“The U.S. Government Accountability Office (GAO) could not render an opinion on the consolidated financial statements of the federal government (other than the Statement of Social Insurance) because of widespread material internal control weaknesses and other limitations.”


That’s from the press release and while we were expecting a shitshow spread amongst all the agencies of the government, it’s due to the weaknesses in four agencies: the Defense Department, Homeland Security, State Department, and NASA.

Here’s the full rundown on the agencies from the report:

You may remember us noting the Defense Department’s audit problems back in the fall when we said:

For one of the 69 reviews the GAO performed, the audit report cited eight significant deficiencies in the contractor’s accounting system but since the contractor wasn’t really cool with that, the auditors dropped five of the [significant deficiencies] and recommended that the other three be “improved without additional work”.

So this really, really, really does come as a surprise. It is good to know that the GAO — never shy on tooting its own horn — is still out there earning it’s “taxpayer watchdog” badge.

At 256 pages, this thing is a beast. We’re plowing through it to find the more interesting tidbits where we can and if you’re on cruise control today, take a gander for yourself to see your tax dollars at work.

Fiscal Year 2009 Financial Report of the United States Government [GAO.gov]
U.S. Government’s 2009 Financial Report Shows Significant Fiscal Challenges [Press Release]
GAO Cites Weak Financial Management in Federal Government [Web CPA Debits & Credits]

Quote of the Day: Are Great Liars Powerful or Are the Powerful Great Liars? | 02.26.10

“I was shocked to see how beautiful the results are. I literally can say with total accuracy that high-powered liars are so good at lying that they look like truth-tellers in every way — physically, psychologically, emotionally, etc.”

~ Dana Carney, assistant professor of management at Columbia Business School, on the results of an unpublished study that shows that people in powerful positions have a knack for fibbing.

Five Questions with Edith Orenstein of FEI Blog

Anyone out there have to comply and/or pay attention to the anything and everything that is dropped by the SEC, IASB, FASB, or PCAOB? Does the mere thought of reading anything that these bodies cause you consider drowning yourself in the nearest toilet? Us too.

That’s why we like Edith Orenstein so much. She is the Director of Accounting Policy Analysis & Communications at Financial Executives International and the author of the FEI Financial Reporting Blog. Edith has the amazing ability to take all this regulatory wonky goodness and put it into a wonderfully concise package. She saves you to the trouble of drowning in minutiae and gives you what you need to know.

Plus, she’s really nice. Think of it this way: in terms of temperament, Edith sits on one end of the accounting blogger spectrum; on the other end is the Jr. Deputy Accountant.


Why should accountants read your blog?
To learn about what FASB, the IASB, the SEC, or the PCAOB decided yesterday or today, and why it matters. And when Congress, Treasury, GAO or another agency gets into the fray, that’s always something of interest.

If someone had to read just one post of yours which one would it be?
Auditors in Love (which links to an ‘accounting music video’ which has received over 5,000 views, by the way.) No! Just kidding! It would be “Why Accounting Matters.” But, in all seriousness, some of my personal favorite posts are the ones in which I could tie in a musical theme, like Under Pressure, Unstuck From the Moment, and Say-Say-Say On Pay.

A good blogger is…
Someone who can give you really good facts on a timely basis, or really good insights, or both.

Who is your favorite blogger?
Francine McKenna of Re: The Auditors. I don’t always agree with what Francine says, and it’s not unusual for us to have opposing points of view or perspective on certain matters, but I respect what she writes given her extensive background in practice, and I enjoy reading her blog; let’s face it, she’s got that tabloid quality that makes reading about auditing fun.

The biggest issue facing accountants today is…
The volume and complexity of accounting literature (GAAP), throw in a dash of SEC, PCAOB, AICPA regulations and standards, and a pinch of COSO, (not to mention IRS rules and regs and other regs) and I have to give a lot of credit to practicing accountants and auditors who are faced with keeping current on and correctly applying all of these standards and rules. And IFRS is looming over the horizon; as someone said recently on an academic listserv I read (the AECM listserv), IFRS is significant whether or not the U.S. moves to adopt it, given that most of the rest of the world has.

Reminder: Extended Haiti Donation Deadline for 2009 Tax Returns Is This Sunday

Despite many arguments that the extension was bad legislation, it cruised through Congress and was quickly signed by the POTUS and now the window is closing fast.

For those of you that are able to itemize deductions and you’re looking for a little extra deduction for ’09, the countdown is at t-minus two days.

If you are considering a last minute donation, A) what the hell have you been waiting for? B) you’re in a bit of luck because the deadline has a little bit of wiggle room, as Kay Bell tell us, “If you charge your donations to a credit card before the end of February, that counts even if you don’t get or pay the your credit card bill until next month or later.”


For those of you that don’t trust machines and are cutting a check, you best drop it soon if you want it to hit your ’09 return, “don’t send a check dated Feb. 28 on March 15 and claim it…if a tax examiner looks at your statement and sees the check didn’t clear until the last half of March, your deduction will probably be disallowed.”

Oh and it’s cash only. Your clothes that were originally meant for your garage sale this Spring are generous but not eligible for the extension.

On a related note, part of Stephen Chipman’s blog post from this week announced that Grant Thornton had raised approximately $140,000 that will be split between the Red Cross and the Salvation Army. Thumbs up GT.

2009 Haiti donation deadline Feb. 28
[DMWT]

Quote of the Day: Harry Markopolos Had That Crazy Look in His Eye | 02.25.10

“If he contacted me and threatened me, I was going to drive down to New York and take him out. At that point it would have come down to him or me; it was as simple as that. The government would have forced me into it by failing to do its job, and failing to protect me. In that situation I felt I had no other options. I was going to kill him.”

~ Harry Markopolos, in his new book, on Bernie Madoff.

Stephen Chipman Blog Watch: Back to Hotlanta

Today in Stephen Chipman blog analysis we’re thinking that the rager that he attended in Atlanta got him jonesing for another trip down south because he made another short excursion down to GA but this time it was for some strategory:

Attending a hard-working Senior Leadership Team (SLT) meeting in this wonderful city, I took a break to check e-mail. I thought perhaps I’d had too much BOLD coffee, when I skimmed this alert to our Atlanta personnel:

Please be advised that the downtown [Atlanta] connector is currently backed up due to a zebra escaping from the Barnum & Bailey Circus. Zebra has since been captured; however, traffic is expected to remain backed up

Right then, Zebra has been captured.

Two things: 1) is Chip a caffeine junkie? and 2) that last sentence strikes us as deadpan. Do we detect some style here?

Putting wild animals and addiction aside, SC goes on to tell us about a little rendezvous he had in London for some Grant Thornton International back-slapping that he got to do with his predecessor and current GTI CEO, Ed Nusbaum. Nothing really to report other than Steve-o claims that word round the camp fire is that Ed has started sneaking out the back door again but secretly doesn’t give a damn because he’s got the big chair now and he can do whatever he wants. He’s talking like he’ll start walking out the front door, in front of everyone, because he leaves when he wants.

That’s how we read into it anyway.

It seems that while Steve has taking this blogging thing by the horns there hasn’t been much commentary on more fun topics (maybe it’s just us). For example, we’d really like to know if he joined the “Sexy Accountant” group on Facebook or what his biggest audit room pet peeves are.

We’re just saying, don’t be afraid to put it all out there.

Deloitte Report: 475 Reprimands for Internal Noncompliance in 2009

How’s your Thursday morning going Sons and Daughters of Deloitte? Busy? Swamped, you say? Thought so. Well, whatever it is, it can wait.

YES. IT. CAN.

Barry Salzberg needs your full and undivided attention to an important matter today: compliance with internal policies, specifically independence and ethics. During the throes of busy season, you adherence to these important values must not waiver.

Are you trading in client stock in your Scottrade account? Ghost-ticking workpapers? Ramming meaningless numbers into that tax return? Stop it right now. Bar knows that sometimes you can’t just help yourselves, so he dropped a little reminder into your inbox this morning (we were told) with the subject “A must-read for everyone”.

Today, we have an important challenge that we simply cannot ignore. Our level of compliance with our internal policies – specifically our independence and time reporting policies – is not where we need it to be.

Please take a few minutes to read Beyond the Numbers: Our Independence, Ethics & Compliance Imperative from Mike Zychinski, our Chief Ethics and Compliance Officer. The report, which I consider to be a must-read for everyone, addresses concerns from our regulators, what we are doing as an organization to address them, and what you can do to meet your individual compliance requirements.

When it comes to issues of compliance, we must meet the expectations of our clients and regulators. What’s more, we must fulfill our own high expectations of ourselves. Thank you for taking a few minutes to read the report and for your focus on meeting your individual compliance requirements.

Regards,

Barry Salzberg
CEO
Deloitte LLP

Bolding is ours. After this email, a 2,100 (give or take) word report follows from Chieftain of Ethics Mike Zychinski. Despite the high standard that Deloitte holds you to — higher than the SEC, PCAOB, and the AICPA, we might add — this happend, “Based on our own reviews and that of the PCAOB, we believe compliance with our independence policies is not what it should be, and the PCAOB has, in fact, questioned our commitment to adhere to our own policies. This is clearly not acceptable.”

Our contributor Francine McKenna reminded us that Deloitte didn’t think too much of the PCAOB’s report from last year, “They [are] the same firm that famously responded to the PCAOB’s latest inspection report, ‘How dare you second guess us?‘”

Based on the following list of reprimands, perhaps the PCAOB has a leg to stand on?

Four hundred seventy-five total reprimands were issued for noncompliance issues, including:

31 reprimands for independence-related violations of SEC or AICPA rules
174 reprimands for noncompliance with Deloitte independence policy
218 reprimands for failure to meet mandatory training requirements
45 reprimands for CPE noncompliance
7 reprimands for noncompliance with Deloitte CPA Licensing policy

Is 475 a lot or a little? An improvement from last year or is it worse? We’re not really sure. We haven’t received any comment from Deloitte and their Transparency Report doesn’t have more details. But since Barry Salzberg never seems to be satisified with anything, we’re guessing you can do better.

Accounting News Roundup: SEC Delay on IFRS Irks Some; Client Opinions of Big 4 Audits Not So Hot in UK; IRS Asks for $21M to Answer More Phones | 02.25.10

U.S. delay on global accounting leaves world waiting [Reuters]
The head of financial reporting at the ICAEW is not impressed with the SEC’s plan to string everyone along on IFRS. Although we’re sure Dr. Nigel Sleigh-Johnson is bright guy, we’re not sure what the good doctor was expecting from, you know, the SEC.

Dr. Johnson complains that ‘the world [has] been awaiting clear signals from the Securities and Exchange Commission as to how and when it is going to start the process of completing the convergence to International Financial Reporting Standards,’ which is probably true. Think about it. If 110 countries have jumped on the IFRS ship, they sure as hell would want the US of A on that ship too because that way, if this turns out to be the worst idea in the history of double-entry accounting, then at least the U.S. went along with it too.


Big Four audits are off the pace [Accountancy Age]
As a group, the Big 4 didn’t fare to well in the inaugural “Accountancy Age Finance 360 survey of client opinions” which asked participants to give their “views on the service they received from their last audit provider”.

Out of twelve firms, PricewaterhouseCoopers ranked the highest at #5, KPMG #9, Deloitte #10, and Ernst & Young brought up the rear at #12. The Age reports that “[E&Y] Staff were described as ‘pretty dire’, short on technical knowledge, confidence and even decent written English. Negative comments outnumbered the positive two to one.” Comments on KPMG and Deloitte were a little better:

While KPMG won plaudits for technical skills, it was let down by perception of its added value, with one FD claiming “very little feedback on potential improvements” their money.

Deloitte also struggled to prove it added value, while clients felt the firm’s audits were “mechanical” and an exercise in “box-ticking”.

One FD felt Deloitte was “more concerned with gathering enough evidence to stand up in court with a defence if there were ever a negligence case”.

All the firms not happy with their ranking essentially said that they were “committed to the highest standards of work” or something like that. You know the drill.

The tops firms in the survey were all included two Global 6 candidates: Mazars at #1 and Grant Thornton at #3 with Horwath Clark Whitehill taking the silver.

IRS Commissioner Requests Additional $21m So IRS Will Not Answer Taxpayer Phone Calls 25% of the Time [TaxProf Blog]
Doug Shulman asked the House Appropriations Subcommittee on Financial Services and General Government for $21 million to improve the customer service. Apparently this would result in a 4% jump in calls answered. That sounds like magical government math if we have ever heard it.

Ohio Man Fighting the IRS May Not Be Done Bulldozing

Great news everyone! There’s a chance that more bulldozer fun will be had in Ohio, courtesy of Terry “Dozer” Hoskins.

Having demolished his house in less than two hours and knowing that it was only a matter of time before the bank came after his business property, he’s giving serious thought to renting another dozer and finishing this thing once and for all. Small town bank and IRS be damned.


Hey, we’re all for it. If you can a dozer for $500 why not introduce a little more chaos in your life? And don’t worry, the man is a professional and is always mindful of safety, “‘You have to know what you’re doing before doing something like this’ to avoid being hurt, Hoskins said of destroying his house. ‘I’ve run heavy equipment for years.'”

Believe it or not, Dozer’s wife wasn’t thrilled with the whole razing of the house, “Also not happy about the destruction of their house was his wife, Hoskins said. They are now living in one of the buildings on the commercial property.” He must have concluded that since he had already declared bankruptcy and destroyed one piece of property, floating the idea of flattening the business property couldn’t piss off the Mrs. too much more.

Question Hoskins decision-making skills if you like but it’s good to see a man taking pride in his work, “I don’t regret one bit of it.”

Home razer might take business next [Cincinnati Enquirer via TaxProf]

Bad News: Forensic Accountants Are Crooks Too

Allegedly of course! Despite our best wishes for a forensic accountants to be fraud-busting crusaders that pursue truth, justice and all that crap, this corner of the profession is not immune from shiesty characters.

Lewis Freeman, “Miami’s go-to forensic accountant”, has been charged with embezzling $2.6 million from his clients. The Miami Herald is reporting that Lew has pleaded not guilty but is planning to change his plea to guilty “within a few weeks” while his attorneys try to negotiate a lighter sentence. The Herald also reports that two other employees of his firm, including the CFO, will be charged as co-conspirators in the case.


When you think about it, this really exposes Freeman as not being a very smart guy, just smarter than the people he was ripping off. As criminal mastermind Sam Antar told us in an email, “Lewis Freeman may have been considered ‘Miami’s go-to forensic accountant’ but he was not a very bright guy. He simply took old money from his client’s trust accounts and replenished it with new money. As a forensic accountant, he should have known that ultimately such Ponzi schemes end up collapsing over time.”

Despite this, Freeman was able to carry on the scheme for approximately a decade, swindling up to 250 victims.

Wondering what this latest development meant in terms of fraud involving forensic accountants, Sam told us, “Forensic accountants turned white collar criminals present a real challenge for law enforcement, since they (excluding Lewis Freeman) are far more sophisticated in their knowledge of anti-fraud measures and are more innovative in exploiting weaknesses in internal controls than the common white collar criminal.”

And don’t worry, they’re out there, “Freeman is probably not the only forensic accountant turned Ponzi schemer out there. The smarter and more sophisticated one’s have not been caught yet,” Sam said. Got it. Suspect everyone.

We first mentioned Lewis Freeman last fall when his firm was under investigation by the FBI and that his firm briefly served as the Chief Restructuring Officer for the Palm Beach Funds that were part of the Tom Petters orgy of fraud.

The bright side is we can’t foresee any scenario where the image of accountants gets worse.

Miami’s ‘go-to’ forensic accountant pleads not guilty to fraud [Miami Herald]

Even More Tax-Related Violence: Wife Shoots at Refund Hogging Husband

As we still tread in the wake of the Joe Stack attack on the IRS, it seems that bizarro things are happening all over this great land of ours and many of them have to do with taxes and/or the IRS. Jailbirds requesting fraudulent refunds and receiving them, IRS-inspired bulldozing of houses and now we’ve learned about a woman who tried to kill her husband who wouldn’t share their tax refund money.

And like Joe, Bulldozer Terry and the Florida inmates, the woman is pretty satisfied with her actions:

Investigators say the woman then went into the city of St. Louis and threw the gun in a sewer. Police contacted the woman a short time later and she turned herself in. Police say she didn’t seem sorry.


“She felt more than justified. She cooperated very well, with the reasoning why she fired the shots, as well as recovering the gun. She said she didn’t want a child to find the gun in the sewer,” says Daniel O’Conner, the Assistant Chief of Police for Pine Lawn.

This lady can’t be all bad; she was thinking about the kids when she threw that gun in the river. There’s no indication that the husband in this little caper was just a greedy SOB or if his not-so-good sharing skills were justified due to a spendy Mrs.

Regardless, it’s seems that every hour brings another story that strengthens the argument that taxes are the cause of all the strife and violence in this country. We should have taken the IRS shotgun shopping spree as a sign.

[h/t TaxProf and Tax Update]

Quote of the Day: Hero Qualifications Are Slipping | 02.22.10

“Yes. Because now maybe people will listen.”

~ Samantha Bell, daughter of Joseph Stack when asked if she thought her father was a hero.

David Paterson Not Unpopular Enough, Considers Refund Delay

Okay, so New York is in a dire fiscal situation and David Paterson is pulling out all the stops. Last week, he started kicking the idea around of temporarily freezing New York State tax refunds for individuals and businesses until a state budget is in place.

Naturally, the Governor is putting this on the New York State legislature saying that if they do not ‘act, and close this deficit with real and recurring deficit reductions, not made-up, phony revenue enhancers that don’t really exist’ then the state could go bankrupt. Don’t blame him, New Yorkers! He’s trying to fix this damn mess.


According to a report from WRVO, the state would freeze $500 million in taxpayer refunds and $200 million in business refunds to April 1st. Are people really getting their tax returns filed that quickly? Is there some kind of recessionary trend that shows that tax returns are filed more quickly during bad economies? Nothing is official yet so don’t worry but sounds like they’re running out of ideas up there.

Regardless of the suggestion, Paterson’s critics are not down for this, as Assembly Minority leader Brian Kolb called the withholding tax refunds “an absurd and crazy idea.”

Since “absurd and crazy” seems to be par for the course in Albany, we can’t really say that this is the worst idea David Paterson has ever had. He’s talking to Eliot Spitzer again, isn’t he?

Gov. Paterson Comments on Withholding Tax Refunds [WRVO via Web CPA]

Crowe Horwath Files Creditor Claim Against Michael Jackson Estate

How’s this for weird: accounting firm Crowe Horwath has filed a creditor claim against the estate of Michael Jackson, claiming that they handled his “business affairs until the day he died,” according to TMZ.

The claim is for about three weeks of work, from June 4, 2009 to June 29th (DOD) and the total bill reported is $38,495.

Since this was the weirdest thing we’ve read in the past hour, we called up Crowe to find out their side since TMZ didn’t seem to bother. They’re currently checking into it and will hopefully get back to us. Stay tuned…

We Worked for Michael Jackson Til He Died [TMZ]

Sarbanes-Oxley’s Latest Unintended Consequence: Even Worse Postal Service

I never believed Sarbanes-Oxley could even be blamed for shrinking media distribution but the impossible has happened and CPA Trendlines shares the Compliance Week article that enlightens us on this latest unintended SOX consequence:

The Clovis News Journal—paper of record for Clovis, population 37,200—says that it cand no longer deliver newspapers to its subscribers. The reason? Sarbanes-Oxley.

“Due to the federal Sarbanes-Oxley Act and its required implementation locally by the U.S. Postal Service, the Portales and Clovis post offices no longer can provide same-day mailed service of the Portales News-Tribune and the Clovis News Journal,” according to the News Journal website.


News Journal’s circulation director tells Compliance Week that the issue could be due to a “misinterpretation” of SOX rules by the local Post Office, who swears it is simply complying with the Postal Accountability and Enhancement Act of 2006.

Section 404 strikes again!

It appears as though the USPS also misinterpreted pension accounting rules, leading to it overpaying some $75 billion to the Postal Service’s Civil Service Retirement System pension (so says the USPS Inspector General). What the hell is going on over there? Is that SOX’s fault too? I love blaming Sarbanes-Oxley for stuff too but let’s be reasonable here, these guys are a mess.

By March 2010, the USPS will be “locking down” its tech systems for six months as it struggles to comply with only the worst bits of SOX for the sake of, uh, efficiency? Intelligent Mail has already proven to be a burden in a climate where more of us email than use stamps, online bill pay is the norm and publicly-traded bad boys like UPS and FedEx dominate market share. They already know their way around SOX and have the capital to handle it if they need a few compliance artists around. The USPS? Not so lucky.

Perhaps the local Post Office is confused and Clovis News Journal’s 410 print delivery subscribers will get their papers at last. If not, is it really appropriate to blame SOX? Sure, why not, if not this I’m sure we can find something else to peg to it if the need arises.

Making mailers sign off like auditors on a piece of mail? Oh now that’s tedious. Yay SOX!

Quote of the Day: Somewhere Phil Mickelson Is Doing a Fist Pump | 02.19.10

“I do plan to return to golf one day, I just don’t know when that day will be.”

~ Tiger Woods

Just So You’re Aware: There’s a Facebook Group “Sexy Accountants”

From the group description:

“Basically, we’re Accountants aaaaaand very sexy. Aint no pocket protectors here, we’re all about Montblancs and Prada. All sexy accountant impersonators will be removed.”

Lame? Perhaps. Surprising? Hardly, dude.

What’s even less surprising is that Joseph Stack has waaaaay more members/fans in his FB groups.

Five Questions with the Jr. Deputy Accountant

You’re probably not aware of this but the Jr. Deputy Accountant (aka Adrienne Gonzalez) has been working outside her normal confines of the Bay Area this week in an undisclosed location.

While her current location is a mystery, what’s not up for debate is her ability to opine (frequently with too many words) on all things Federal Reserve, church accounting or the CPA Exam.

Besides her daily chores at GC, JDA has been published at a plethora of other blogs including Goldman Sachs 666 and BankFailFriday
.

Why do you blog?
For the same reason people play Grand Theft Auto; it helps to have a productive outlet for my frustration with our regulatory and banking system. That and I’m an attention whore.


What are your three must-read accounting blogs and one must-read non-accounting blog?
I love Krupo.ca, Skeptical CPA, and The Summa. For non-accounting, I’d have to say either Lew Rockwell or Daily Reckoning for my daily dose of doom and gloom. I’m obviously a miserable bastard.

If someone had to read just one post of yours which one would it be?
I’m partial to my recent “Fed Year in Review” but with almost 2000 posts, how the hell am I supposed to pick favorites? “You Want to Audit the Fed But Why?” is also a favorite of mine.

Accountants are…
Awesome because they pay my bills.

The biggest issue facing accountants today is…
Globalization. It’s the vampire lurking outside of accounting’s window whispering “let me in” and too few accountants are focused on the impact. IFRS adoption in the United States is a perfect example of what happens when we bow to global expectations in financial reporting and accounting. I of course don’t believe we need to bow to anyone.

Arguments Heard in BDO Appeal of $521 Million Verdict

Oral arguments for BDO’s appeal of the verdict in the Banco Espirito fraud case were this past Tuesday, the 16th, in front of the Florida 3rd District Court of Appeal in Miami.

If you’re not familiar with this case, we’ll catch you up: Banco Espirito Santo International Ltd., Banco Espirito Santo S.A., and ESB Finance all invested in E.S. Bankest L.C. BDO served as the auditor of Bankest. Crazy massive fraud (bogus accounts receivable) was going on at Bankest that was discovered by Banco Esprito. Bankest went bankrupt, their executives went to jail, Banco Espirito lost millions.


Banco sued BDO in 2004 and in 2007 a jury found the Firm liable for malpractice and gross negligence. Prior to the jury’s decision, BDO CEO Jack Weisbaum testified that the firm would not be able to pay punitive damages. The jury didn’t care and awarded Banco $170 million in compensatory damages and $351.7 million in punitive damages for a grand total of $521.7 million, the same amount of accounts receivable that BDO “audited”. Now here were are, it’s 2010, appeals process. Whew. Follow?

We spoke with Steven Thomas, who has represented Banco Espirito Santo throughout this case, earlier this week and he filled us in on many details. BDO is appealing the verdict arguing that the case should not have been bifurcated (i.e. divided into two) at trial. In other words, it sounds as though BDO has resorted to arguing technical legal points in this appeal as opposed to defending against the finding that they both performed malpractice and were grossly negligent.

As we explained above, the malpractice and gross negligence arose out of BDO’s failure to discover the fraudulent accounts receivable at Bankest. At trial, Mr. Thomas told us that under cross-examination, the BDO engagement partner admitted that it was the auditors’ job to find fraud and then subsequently contradicted himself when being questioned by his own counsel, saying it wasn’t their job.

Regardless of what side you fall on in the whole auditors’ responsibility to discover fraud argument, Mr. Thomas told us this, “I have a litigated a lot of cases on this issue and we never, ever, ever lose.”

We reached out to BDO and Greenberg Traurig the law firm representing BDO for comment. Neither firm has gotten back to us.

BDO has indicated that it will appeal this case to the Florida Supreme Court if necessary and since BDO International was found to be not liable, the entire judgment falls to the U.S. firm. BDO had $620 million in revenues in its most recent fiscal year and currently has around 3,000 employees. And despite the fact that this case will not be resolved for some time, if BDO ultimately compelled to pay the damages it could have a devastating impact on the firm.

The Full Text of Joseph Stack’s Manifesto: Details His Struggles With IRS

It would be very easy to use words like “insane” and “rambling” to describe the manifesto/suicide note left by alleged the alleged pilot of the plane that crashed in Austin today. The actions taken by him were undoubtedly insane and the note he left today shows that he was sick of struggling.

The long/short of it is that Joseph Stack was an engineer who was grappling with the IRS over his status as independent contractas denied employee status and was thus subject to taxes on income that he had not previously remitted to the IRS.

When an engineer (or any other consultant for that matter) goes independent they’re not “employees” thus they don’t have tax withheld from their pay (ordinarily via a W-2) and companies/clients report the payment to the IRS via 1099 (often time with nothing withheld). If engineers not careful and report a lot of income and no tax withheld the IRS will come back and say “where the hell is ours?”

The other situation is if they work almost exclusively for one “client” the IRS might say, “you’re really an employee because you don’t have income from other companies.” The Company then gets in trouble because they should be remitting payroll taxes (Social Security/Medicare) and the employee could get in trouble if they aren’t making estimated tax payments.


Engineers often have to face the facts as to whether or not they are truly an independent contractors or not and Stack seems to have struggled with this for many years. The amendment to the tax in 1986 was what haunted him, “The bottom line is that they may as well have put my name right in the text of section (d). Moreover, they could only have been more blunt if they would have came out and directly declared me a criminal and non-citizen slave. Twenty years later, I still can’t believe my eyes.”

Obviously, this was very personal for him.

Without all the facts surrounding his professional situation, it’s impossible to know if Stack’s frustrations were legitimate but his note has brought out the extreme political factions Headlines like this: “Austin Plane Crash Labeled ‘Right-Wing Domestic Terror Attack’ By Obama Supporters” are popping up already and message boards are filling up with comments like:

“YOU need to take an ounce of responsibility. All you repubbers[sic] are complaining about Bush but still putting all the blame for Bush’s errors on Obama or “The Government”. This plane guy decided to attack the Government. Pilot-guy sounds like a thousand posts I have read on thee[sic] boards.”


“There is no point in ‘dialogue’ with you right wingers, you guys are the taliban of america.”

Hell, there’s already a Facebook fan page set up touting the “The philosophy of Joe Stack” which if you read one of his last sentences, shows just how fed up and desperate he had become, “Sadly, though I spent my entire life trying to believe it wasn’t so, but violence not only is the answer, it is the only answer”

If you’re reading this, you’re no doubt asking yourself, “Why did this have to happen?” The simple truth is that it is complicated and has been coming for a long time. The writing process, started many months ago, was intended to be therapy in the face of the looming realization that there isn’t enough therapy in the world that can fix what is really broken. Needless to say, this rant could fill volumes with example after example if I would let it. I find the process of writing it frustrating, tedious, and probably pointless… especially given my gross inability to gracefully articulate my thoughts in light of the storm raging in my head. Exactly what is therapeutic about that I’m not sure, but desperate times call for desperate measures.

We are all taught as children that without laws there would be no society, only anarchy. Sadly, starting at early ages we in this country have been brainwashed to believe that, in return for our dedication and service, our government stands for justice for all. We are further brainwashed to believe that there is freedom in this place, and that we should be ready to lay our lives down for the noble principals represented by its founding fathers. Remember? One of these was “no taxation without representation”. I have spent the total years of my adulthood unlearning that crap from only a few years of my childhood. These days anyone who really stands up for that principal is promptly labeled a “crackpot”, traitor and worse.

While very few working people would say they haven’t had their fair share of taxes (as can I), in my lifetime I can say with a great degree of certainty that there has never been a politician cast a vote on any matter with the likes of me or my interests in mind. Nor, for that matter, are they the least bit interested in me or anything I have to say.

Why is it that a handful of thugs and plunderers can commit unthinkable atrocities (and in the case of the GM executives, for scores of years) and when it’s time for their gravy train to crash under the weight of their gluttony and overwhelming stupidity, the force of the full federal government has no difficulty coming to their aid within days if not hours? Yet at the same time, the joke we call the American medical system, including the drug and insurance companies, are murdering tens of thousands of people a year and stealing from the corpses and victims they cripple, and this country’s leaders don’t see this as important as bailing out a few of their vile, rich cronies. Yet, the political “representatives” (thieves, liars, and self-serving scumbags is far more accurate) have endless time to sit around for year after year and debate the state of the “terrible health care problem”. It’s clear they see no crisis as long as the dead people don’t get in the way of their corporate profits rolling in.

And justice? You’ve got to be kidding!

How can any rational individual explain that white elephant conundrum in the middle of our tax system and, indeed, our entire legal system? Here we have a system that is, by far, too complicated for the brightest of the master scholars to understand. Yet, it mercilessly “holds accountable” its victims, claiming that they’re responsible for fully complying with laws not even the experts understand. The law “requires” a signature on the bottom of a tax filing; yet no one can say truthfully that they understand what they are signing; if that’s not “duress” than what is. If this is not the measure of a totalitarian regime, nothing is.

How did I get here?

My introduction to the real American nightmare starts back in the early ‘80s. Unfortunately after more than 16 years of school, somewhere along the line I picked up the absurd, pompous notion that I could read and understand plain English. Some friends introduced me to a group of people who were having ‘tax code’ readings and discussions. In particular, zeroed in on a section relating to the wonderful “exemptions” that make institutions like the vulgar, corrupt Catholic Church so incredibly wealthy. We carefully studied the law (with the help of some of the “best”, high-paid, experienced tax lawyers in the business), and then began to do exactly what the “big boys” were doing (except that we weren’t steeling from our congregation or lying to the government about our massive profits in the name of God). We took a great deal of care to make it all visible, following all of the rules, exactly the way the law said it was to be done.

The intent of this exercise and our efforts was to bring about a much-needed re-evaluation of the laws that allow the monsters of organized religion to make such a mockery of people who earn an honest living. However, this is where I learned that there are two “interpretations” for every law; one for the very rich, and one for the rest of us… Oh, and the monsters are the very ones making and enforcing the laws; the inquisition is still alive and well today in this country.

That little lesson in patriotism cost me $40,000+, 10 years of my life, and set my retirement plans back to 0. It made me realize for the first time that I live in a country with an ideology that is based on a total and complete lie. It also made me realize, not only how naive I had been, but also the incredible stupidity of the American public; that they buy, hook, line, and sinker, the crap about their “freedom”… and that they continue to do so with eyes closed in the face of overwhelming evidence and all that keeps happening in front of them.

Before even having to make a shaky recovery from the sting of the first lesson on what justice really means in this country (around 1984 after making my way through engineering school and still another five years of “paying my dues”), I felt I finally had to take a chance of launching my dream of becoming an independent engineer.

On the subjects of engineers and dreams of independence, I should digress somewhat to say that I’m sure that I inherited the fascination for creative problem solving from my father. I realized this at a very young age.

The significance of independence, however, came much later during my early years of college; at the age of 18 or 19 when I was living on my own as student in an apartment in Harrisburg, Pennsylvania. My neighbor was an elderly retired woman (80+ seemed ancient to me at that age) who was the widowed wife of a retired steel worker. Her husband had worked all his life in the steel mills of central Pennsylvania with promises from big business and the union that, for his 30 years of service, he would have a pension and medical care to look forward to in his retirement. Instead he was one of the thousands who got nothing because the incompetent mill management and corrupt union (not to mention the government) raided their pension funds and stole their retirement. All she had was social security to live on.

In retrospect, the situation was laughable because here I was living on peanut butter and bread (or Ritz crackers when I could afford to splurge) for months at a time. When I got to know this poor figure and heard her story I felt worse for her plight than for my own (I, after all, I thought I had everything to in front of me). I was genuinely appalled at one point, as we exchanged stories and commiserated with each other over our situations, when she in her grandmotherly fashion tried to convince me that I would be “healthier” eating cat food (like her) rather than trying to get all my substance from peanut butter and bread. I couldn’t quite go there, but the impression was made. I decided that I didn’t trust big business to take care of me, and that I would take responsibility for my own future and myself.

Return to the early ‘80s, and here I was off to a terrifying start as a ‘wet-behind-the-ears’ contract software engineer… and two years later, thanks to the fine backroom, midnight effort by the sleazy executives of Arthur Andersen (the very same folks who later brought us Enron and other such calamities) and an equally sleazy New York Senator (Patrick Moynihan), we saw the passage of 1986 tax reform act with its section 1706.

For you who are unfamiliar, here is the core text of the IRS Section 1706, defining the treatment of workers (such as contract engineers) for tax purposes. Visit this link for a conference committee report (http://www.synergistech.com/1706.shtml#ConferenceCommitteeReport) regarding the intended interpretation of Section 1706 and the relevant parts of Section 530, as amended. For information on how these laws affect technical services workers and their clients, read our discussion here (http://www.synergistech.com/ic-taxlaw.shtml).

SEC. 1706. TREATMENT OF CERTAIN TECHNICAL PERSONNEL.

(a) IN GENERAL – Section 530 of the Revenue Act of 1978 is amended by adding at the end thereof the following new subsection:

(d) EXCEPTION. – This section shall not apply in the case of an individual who pursuant to an arrangement between the taxpayer and another person, provides services for such other person as an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.

(b) EFFECTIVE DATE. – The amendment made by this section shall apply to remuneration paid and services rendered after December 31, 1986.

Note:
• “another person” is the client in the traditional job-shop relationship.
• “taxpayer” is the recruiter, broker, agency, or job shop.
• “individual”, “employee”, or “worker” is you.

Admittedly, you need to read the treatment to understand what it is saying but it’s not very complicated. The bottom line is that they may as well have put my name right in the text of section (d). Moreover, they could only have been more blunt if they would have came out and directly declared me a criminal and non-citizen slave. Twenty years later, I still can’t believe my eyes.

During 1987, I spent close to $5000 of my ‘pocket change’, and at least 1000 hours of my time writing, printing, and mailing to any senator, congressman, governor, or slug that might listen; none did, and they universally treated me as if I was wasting their time. I spent countless hours on the L.A. freeways driving to meetings and any and all of the disorganized professional groups who were attempting to mount a campaign against this atrocity. This, only to discover that our efforts were being easily derailed by a few moles from the brokers who were just beginning to enjoy the windfall from the new declaration of their “freedom”. Oh, and don’t forget, for all of the time I was spending on this, I was loosing income that I couldn’t bill clients.

After months of struggling it had clearly gotten to be a futile exercise. The best we could get for all of our trouble is a pronouncement from an IRS mouthpiece that they weren’t going to enforce that provision (read harass engineers and scientists). This immediately proved to be a lie, and the mere existence of the regulation began to have its impact on my bottom line; this, of course, was the intended effect.

Again, rewind my retirement plans back to 0 and shift them into idle. If I had any sense, I clearly should have left abandoned engineering and never looked back.

Instead I got busy working 100-hour workweeks. Then came the L.A. depression of the early 1990s. Our leaders decided that they didn’t need the all of those extra Air Force bases they had in Southern California, so they were closed; just like that. The result was economic devastation in the region that rivaled the widely publicized Texas S&L fiasco. However, because the government caused it, no one gave a shit about all of the young families who lost their homes or street after street of boarded up houses abandoned to the wealthy loan companies who received government funds to “shore up” their windfall. Again, I lost my retirement.

Years later, after weathering a divorce and the constant struggle trying to build some momentum with my business, I find myself once again beginning to finally pick up some speed. Then came the .COM bust and the 911 nightmare. Our leaders decided that all aircraft were grounded for what seemed like an eternity; and long after that, ‘special’ facilities like San Francisco were on security alert for months. This made access to my customers prohibitively expensive. Ironically, after what they had done the Government came to the aid of the airlines with billions of our tax dollars … as usual they left me to rot and die while they bailed out their rich, incompetent cronies WITH MY MONEY! After these events, there went my business but not quite yet all of my retirement and savings.

By this time, I’m thinking that it might be good for a change. Bye to California, I’ll try Austin for a while. So I moved, only to find out that this is a place with a highly inflated sense of self-importance and where damn little real engineering work is done. I’ve never experienced such a hard time finding work. The rates are 1/3 of what I was earning before the crash, because pay rates here are fixed by the three or four large companies in the area who are in collusion to drive down prices and wages… and this happens because the justice department is all on the take and doesn’t give a fuck about serving anyone or anything but themselves and their rich buddies.

To survive, I was forced to cannibalize my savings and retirement, the last of which was a small IRA. This came in a year with mammoth expenses and not a single dollar of income. I filed no return that year thinking that because I didn’t have any income there was no need. The sleazy government decided that they disagreed. But they didn’t notify me in time for me to launch a legal objection so when I attempted to get a protest filed with the court I was told I was no longer entitled to due process because the time to file ran out. Bend over for another $10,000 helping of justice.

So now we come to the present. After my experience with the CPA world, following the business crash I swore that I’d never enter another accountant’s office again. But here I am with a new marriage and a boatload of undocumented income, not to mention an expensive new business asset, a piano, which I had no idea how to handle. After considerable thought I decided that it would be irresponsible NOT to get professional help; a very big mistake.

When we received the forms back I was very optimistic that they were in order. I had taken all of the years information to Bill Ross, and he came back with results very similar to what I was expecting. Except that he had neglected to include the contents of Sheryl’s unreported income; $12,700 worth of it. To make matters worse, Ross knew all along this was missing and I didn’t have a clue until he pointed it out in the middle of the audit. By that time it had become brutally evident that he was representing himself and not me.

This left me stuck in the middle of this disaster trying to defend transactions that have no relationship to anything tax-related (at least the tax-related transactions were poorly documented). Things I never knew anything about and things my wife had no clue would ever matter to anyone. The end result is… well, just look around.

I remember reading about the stock market crash before the “great” depression and how there were wealthy bankers and businessmen jumping out of windows when they realized they screwed up and lost everything. Isn’t it ironic how far we’ve come in 60 years in this country that they now know how to fix that little economic problem; they just steal from the middle class (who doesn’t have any say in it, elections are a joke) to cover their asses and it’s “business-as-usual”. Now when the wealthy fuck up, the poor get to die for the mistakes… isn’t that a clever, tidy solution.

As government agencies go, the FAA is often justifiably referred to as a tombstone agency, though they are hardly alone. The recent presidential puppet GW Bush and his cronies in their eight years certainly reinforced for all of us that this criticism rings equally true for all of the government. Nothing changes unless there is a body count (unless it is in the interest of the wealthy sows at the government trough). In a government full of hypocrites from top to bottom, life is as cheap as their lies and their self-serving laws.

I know I’m hardly the first one to decide I have had all I can stand. It has always been a myth that people have stopped dying for their freedom in this country, and it isn’t limited to the blacks, and poor immigrants. I know there have been countless before me and there are sure to be as many after. But I also know that by not adding my body to the count, I insure nothing will change. I choose to not keep looking over my shoulder at “big brother” while he strips my carcass, I choose not to ignore what is going on all around me, I choose not to pretend that business as usual won’t continue; I have just had enough.

I can only hope that the numbers quickly get too big to be white washed and ignored that the American zombies wake up and revolt; it will take nothing less. I would only hope that by striking a nerve that stimulates the inevitable double standard, knee-jerk government reaction that results in more stupid draconian restrictions people wake up and begin to see the pompous political thugs and their mindless minions for what they are. Sadly, though I spent my entire life trying to believe it wasn’t so, but violence not only is the answer, it is the only answer. The cruel joke is that the really big chunks of shit at the top have known this all along and have been laughing, at and using this awareness against, fools like me all along.

I saw it written once that the definition of insanity is repeating the same process over and over and expecting the outcome to suddenly be different. I am finally ready to stop this insanity. Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.

The communist creed: From each according to his ability, to each according to his need.

The capitalist creed: From each according to his gullibility, to each according to his greed.

Joe Stack (1956-2010)
02/18/2010

Another Top Ten Diversity Ranking for the Big 4; This Time for a Price

Diversity Inc. ran a post this week highlighting Ernst & Young’s recruiting efforts with regards to increasing its diversity numbers. Specifically touching on EY’s Discover Tax Program, the essence behind Diversity’s article revolved around how EY (like its competitors) have established programs in place to both actively recruit Black and Latino students as well as break the stigma oftentimes placed on accountants by the media and society (i.e. nerdy white guys). What it ignored was the money these programs are costing firms.

It’s no secret that the Big 4 are out to recruit the best and brightest. Caleb has hit home the fact that the same firms are ranking whores as well. But why do the firms have separate programs aimed directly at minority-represented societal cross sections?

Because the numbers are abysmal.


Latino in America cut through recent U.S. Census data to realize that, although roughly one in three Americans is a minority, only 8% of the CPA profession is represented by minorities:

• 4% Asian/Pacific Islander
• 3% Latino
• 1% African American

Increasing diversity from the campus level is an uphill battle. Internal programs and recruitment efforts can can only reach so far (and they’re expensive). For the sake of not sacrificing quality workmanship, the reality is there are simply not enough minority accounting students in the market. Supply and demand, people.

In steps INROADS.

INROADS is, for all intents and purposes, a global internship placement company for minority students. Companies pay a premium for an opportunity to hire the candidates that the INROADS organization hand selects. Their website states the following:

There are three keys to success for INROADS students: Selection, Education & Training, and Performance. For over three decades, INROADS has helped businesses gain greater access to diverse talent through continuous leadership development of outstanding ethnically diverse students and placement of those students in internships at many of North America’s top corporations, firms and organizations.

A quick glance at their top ten client listing and four very familiar names will jump out to you. According to the website, the Big 4 are the current employers of more than 375 INROADS interns. These are not staggering numbers by any means, but it is clear that the firms are in fact shelling out money to make the workplace more diverse.

You might even be asking yourself, “What’s a few thousand dollars to recruit two additional minority students to my office?” Well, after an increase in an office’s diversity percentage, it most likely results in someone’s personal payday come performance review season. Oh, and the firm looks great on paper.

(UPDATE 2) Alleged Suicide Pilot Blames IRS in Manifesto

~ The manifesto has been pulled from embeddedart.com. You can see the note in its entirety at the Smoking Gun.

~ UPDATE, 5:11 pm: Statement from the IRS

By now you’ve probably heard about the plane crashing into a building in Austin, Texas that housed around 200 IRS employees. So far reports are that the IRS is still trying to account for all the employees (see statement below). We left a message with the IRS that hasn’t been returned yet.

Everything is “preliminary” of course but apparently the alleged pilot, Joseph Stack sfire, stole the plane and flew it into the building:

Stack was upset about the Tax Reform Act of 1986. So much so, he wrote a 3,200 word suicide note. that can be read in its entirety at embeddedart.com.

Here’s an excerpt:

Return to the early ‘80s, and here I was off to a terrifying start as a ‘wet-behind-the-ears’ contract software engineer… and two years later, thanks to the fine backroom, midnight effort by the sleazy executives of Arthur Andersen (the very same folks who later brought us Enron and other such calamities) and an equally sleazy New York Senator (Patrick Moynihan), we saw the passage of 1986 tax reform act with its section 1706.


For you who are unfamiliar, here is the core text of the IRS Section 1706, defining the treatment of workers (such as contract engineers) for tax purposes. Visit this link for a conference committee report (http://www.synergistech.com/1706.shtml#ConferenceCommitteeReport) regarding the intended interpretation of Section 1706 and the relevant parts of Section 530, as amended. For information on how these laws affect technical services workers and their clients, read our discussion here (http://www.synergistech.com/ic-taxlaw.shtml).

SEC. 1706. TREATMENT OF CERTAIN TECHNICAL PERSONNEL.

(a) IN GENERAL – Section 530 of the Revenue Act of 1978 is amended by adding at the end thereof the following new subsection:

(d) EXCEPTION. – This section shall not apply in the case of an individual who pursuant to an arrangement between the taxpayer and another person, provides services for such other person as an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work.

(b) EFFECTIVE DATE. – The amendment made by this section shall apply to remuneration paid and services rendered after December 31, 1986.

Note:
• “another person” is the client in the traditional job-shop relationship.

• “taxpayer” is the recruiter, broker, agency, or job shop.

• “individual”, “employee”, or “worker” is you.

Admittedly, you need to read the treatment to understand what it is saying but it’s not very complicated. The bottom line is that they may as well have put my name right in the text of section (d). Moreover, they could only have been more blunt if they would have came out and directly declared me a criminal and non-citizen slave. Twenty years later, I still can’t believe my eyes.

The note goes on to rail against CPAs:

After my experience with the CPA world, following the business crash I swore that I’d never enter another accountant’s office again. But here I am with a new marriage and a boatload of undocumented income, not to mention an expensive new business asset, a piano, which I had no idea how to handle. After considerable thought I decided that it would be irresponsible NOT to get professional help; a very big mistake.

It appears that Stack was being audited by the IRS and that things had take a turn for the worse, “To make matters worse, [my accountant] knew all along this was missing and I didn’t have a clue until he pointed it out in the middle of the audit. By that time it had become brutally evident that he was representing himself and not me. This left me stuck in the middle of this disaster trying to defend transactions that have no relationship to anything tax-related (at least the tax-related transactions were poorly documented).”

His ominous sign off leaves little doubt about his own demise, “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.”

IRS Statement:

We can confirm that a small plane hit a building in Austin, Texas that includes IRS offices. This is the Echelon 1 Building, which houses about 190 IRS employees. We are still in the process of accounting for all of our employees. We will be providing updates as more information becomes available.

Job of the Day: A Houston Power & Gas Provider Needs You for a CFO Support Role

Michael Page Executive Search has a a premier power & gas provider client with physical & wholesale trading operations globally. They participate in commodities markets worldwide. They are seeking a strong middle office individual with expertise in energy.

The position requires a minimum of 10 years experience and would serve as lead support to the CFO.

Get more details after the jump.


Recruiter: Michael Page Executive Search

Title: Lead Financial Officer

Location: Houston, TX

Minimum experience: 10 years

Responsibilities: Serving as the lead support to the CFO of the business, other responsibilites include: Analyze, explain, and validate daily and monthly p&l; responsible for oversight and maintenance of daily p&l reporting and month end close; Manage ad hoc requests from front office, risk, finance teams; Responsible for balance sheet review and control; Manage new business products approval process and reviews on complex products; Support new product roll-out; Supervise team of analysts supporting energy trading desks

Qualifications: Specialized degree in accounting/finance; minimum 10 years of relevant experience; previous experience in middle office trading P&L preparation/analysis or product control positions specifically within energy sector.

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

The IRS’ Most Important Step Ever Has Been to Require Preparer Registration

That’s one man’s opinion anyway! The IRS Oversight Board put out its annual Taxpayer Attitude Survey and while the survey indicates that most people are down with some regulation around preparers, the Oversight Board’s Chairma Paul Cherecwich sees it as being far bigger than that:

“Requiring tax preparers to register and verify their competency may be one of the most important steps the IRS has made in the tax system in our lifetimes,” said IRS Oversight Board Chairman Paul Cherecwich in a statement. “A tax return prepared improperly or fraudulently can have negative ramifications for years for an unsuspecting taxpayer — and it’s clear from the board’s survey that Americans know that.”


Now maybe we’re overstating this a little bit but to say that forcing tax preparers to “register and verify their competency may be one of the most important steps the IRS has made in the tax system in our lifetimes” is um, well, ludicrous. Say it’s an important step, say it’s a good step, whatever but one of the most important things the IRS has done in our f—ing lifetime? Creating additional layers of bureaucracy is not an accomplishment.

Breathe…Since we’re directly affected by this, we thought we should get a practitioner’s point of view. We dialed up our contributor Joe Kristan who is in the throes of tax season for his opinion:

All “issue” polls like that are useless because they never include costs. For example, they never follow up: “would you still support it if it drove 20% of the preparers out of the market and raised your costs by 20%?” They assume that there is no hitch between the regulators cup and your lip, and that all regulators work well. As if.

The regulations will increase costs and do little or nothing to improve tax compliance. Only a better tax law can really do that.

That’s our emphasis but Joe would probably agree with it.

Taxpayers Cheer Move to Regulate Tax Preparers [Web CPA]

Busy Season Interns: Don’t Waste Their Time

Continuing with the busy season theme, let’s touch on everyone’s favorite coffee jockeys, the interns. This isn’t prime season for interns at accounting firms but we know there are a few lucky (?) teams out there that have an extra set of hands on deck.

Getting serious for two, this time of year, everyone is under pressure to get things done and if you happen to have an intern on your team, they either make your job infinitely easier or they are the bane of your existence. If you fall into the latter category, why is this the case?

It’s pretty easy for you to conclude that the blade of grass tapping you on the shoulder every ten minutes is the person at fault but a lot of times, interns get thrown into bad situations where they end up working for seniors or managers that are so swamped (or helpless) that they can only think about their own workload while there’s a 21 year old that needs something to do (besides looking through menus and making copies).


Since accounting firms put so much effort into recruiting the next wave you’d think that this enthusiasm would spread to teams like the Plague. Unfortch, there are many that see interns as an annoyance during this time of year because, “I have so much work to do and I don’t have time to handhold interns” and we think that’s bullshit.

We’re not saying that there aren’t bad interns out there. And we’re not saying you’re not busy. We know better. But if you gave that intern something meaningful to do instead of whining about how busy you are, they might make your life a speck (or a few) easier.

And interns need hand holding because they’re interns. Don’t forget that up until this point, they’ve been wearing sweats 24/7 and that you used to be just like them. Experienced team members should take this time to utilize them in a meaningful way and not as gofers. If you’re one of those teams that needs a gofer, at least squeeze some meaningful work somewhere so they can learn something and they probably won’t mind the gofering as much.

Yeah, it might take some effort on your part but it’s definitely worth your time to mentor these future associates. If you give them some challenging work now and show them a little bit of appreciation for their efforts, they’ll run through walls for you later.

Grant Thornton’s Valentine to Employees Did Not Consist of Heart Candy

It’s the middle of February and many of you are somewhere between completely exhausted and death warmed up. This is not lost on blogger extraordinaire Steve Chipman. SC’s weekly info session has been crucial to your survival (even though it’s not meant for all of you). Knowing that his soothing words will only get you so far, he’s taken a different approach this week.

Since it was St. Val’s on Sunday, Chip figured he would mark the day for lovers by boosting your spirits by using the words of GTers less CEO-y than himself.

Today I’d like to offer some inspiration to help us push through busy season. The last year and a half have required so much more from everyone that it’s hard to imagine we can work even harder, but it’s evident that we are everywhere I look.

So what keeps us going? That’s what I was looking for when I reviewed the “I am Grant Thornton” interviews we conducted last fall. We asked a variety of people in different roles, in different offices and at different levels if they felt they made a difference, and, if so, how.

It is hard to imagine that you can work harder, isn’t it? Your spreadsheets are bleeding through your monitors, you’ve ingested far more MSG than is recommended, and your cube farm neighbor (who ordinarily smells funny) is looking hot .

And we weren’t aware of this “I am G to the T” exercise but it sounds stupendous. Who knew your personal experiences would be used at this most crucial time of year? Bet you would have really put some thought into if if you had known your words could possibly have been immortalized on Steve-o’s blog.

Here are some carefully selected examples from SC’s list and our thoughts on each:

When a client calls me and says, “Can I pick your brain?” it’s so great because (1) they recognize I have a brain” – We agree that it’s nice when your client recognizes that you are of the same species.

“I had a client tell me recently, and I’m quoting, ‘We hire Grant Thornton because you get [stuff] done.’” – That’s Stephen’s edit. This is a family blog, people.

“I make a difference every day because I work here.” – And because my mother said so.

“Every day is a great achievement.” – We agree. Crawling out of bed is tough.

“How do I make a difference? . . . You know, I’m happy.” – God, you’re one of those happy people.

“I’ve worked at the big firms. We are not bigger by any means, but it’s a question of caliber. I knew it from my first day on the job here. We’re just a different caliber of firm.” – We’re not size queens at GT.

Steve-o’s send-off has us begging for more and also causes us to wonder A) who is this homecoming queen? and B) is Chip a Bass or a Tenor?

I’m also proud to say that among our great people are a former homecoming queen and a professional make-up artist. Of equal wonder, one of you found the most surprising thing about coming to Grant Thornton was “that all the partners have great singing voices.”

There’s more where that came from, but this is the firm’s Valentine to you.

Thanks for you!
Stephen

You could do back-to-back busy season now, couldn’t you?

Breaking: Professor Explains Tax Theory, Accused of Being a Communist

Our favorite TaxProf that we never had was quoted in a Wall St. Journal explaining how not only the winnings of Olympic athletes are taxable but also how the fair value of their medals could theoretically be taxable.

Someone read this and took immediate action:

Whether or not TaxProf Caron has a picture of V.I. Lenin in his office is not known but based on where he stands in comparison to our contributor Joe Kristan, we’d say the writer of the letter is misguided. Or Glenn Beck.

Koss Investors Lining Up for Litigation; Will Grant Thornton Join the Party?

Investors in Koss Corporation are lining up in the pending litigation against the company and a press release from law firm Carney Williams, announced this morning that those interested in as lead plaintiff have until March 12th to make their desires known.

Form the press release, “The Company and certain key executives are alleged to have violated federal securities laws by issuing false financial statements and failing to maintain adequate internal and financial controls.”

Many, like Tracy Coenen, have argued that the internal controls are management’s responsibility and Grant Thornton was not engaged to audit these controls but does that mean that GT will dodge these investor lawsuits?


We spoke with Randy Pulliam, a partner at Carney Williams on the case if he expected Grant Thornton to be named in the litigation, “the lead plaintff will ultimately decide as to who will be named in the litigation, including the accountants.”

There’s nearly a month until the deadline so it’s far too early to tell who will decide whether Grant Thornton needs to be included but we’ll go on record saying that we’d be shocked(!) if GT manages to get forgotten in this whole matter. Regardless of your feelings on the firm’s responsibility (i.e. GT should have discovered the fraud or not) the fact that Sue Sachdeva is accused of embezzling $31 million over a period of five years while Grant Thornton was auditing Koss will not be lost on the investors or their attorneys.

“This is a five year class period so many investors are eligible to participate,” Mr. Pulliam told us. Plenty of investors out there would like to see someone make things right. Grant Thornton seems like a decent candidate especially since their pockets are far deeper than Koss’. So if you asked us to put a wild-ass guess on the odds of Grant Thornton being named in the lawsuit, we’d put it somewhere in the nabe of 10-1. Not Mine that Bird territory but not Secretariat either.

We left a message at Koss and dropped an email to Grant Thornton seeking comment and neither have gotten back to us at this time. We’ll continue to update you on the developments, shopping addictions and otherwise.

Accounting News Roundup: Is the IASB Giving Up on the FASB?; Wake Forest Grads Crush the CPA Exam; NFL Looking at Rams Buyer’s BDO Tax Shelter Connection | 02.16.10

IASB softens stance on convergence [FT]
We’re not jumping to any conclusions but yesterday the IASB made the statement that it “would no longer pursue convergence with its US peer as ‘an objective in itself'”. Now we’re not entirely sure what “an objective in itself” means but it kinda, sorta sounds like “to hell with you FASB, we’ve got our own plans.”

This revelation was part of “constitution review” in order for the IASB “to justify its public accountability” to its critics. In this review the IASB seemed to be changing its tone on just what convergence is:

In a review of its constitution published on Monday the IASB’s oversight board addressed this concern over the convergence project and said it would “emphasise that convergence is a strategy aimed at promoting and facilitating the adoption of IFRS, but it is not an objective by itself”.

So just spreading the good word about IFRS without any stated objective? Does that sound about right? It sounds a little like financial reporting evangelism.


Wake graduates get highest passing rates on CPA exam [Winston Salem-Journal]
This is in no way presented to make you feel bad about yourself. Here are the 2008 (the most recent data available) passing rates at WF: 93% on FAR; 87.5% on Audit; 83.22% on regulation; 93.7% on BEC. The overall passing rate was 89.7%. The University has had the highest scores five years running.

If you need to go cry in the bathroom, you may do so now.

Rams buyer’s $85 million battle with IRS [Chicago Tribune]
Shahid Khan announced last week that he was buying 60% of the St. Louis Rams. Great news right? Ordinarily, yes but now the NFL is looking into his association with a BDO tax partner that was convicted of helping clients avoid taxes through shelters.

The IRS said in court papers that the Khans hired the Chicago-based BDO Seidman accounting firm and met with tax partner Robert Greisman. The Khans engaged in at least five questionable tax shelters, with names like Son-of-Boss and Dad, and paid BDO $8.5 million in fees, about 10 percent of the alleged tax savings, according to court documents.

Yet when the revenue agency questioned Khan about his returns, he was unable to identify what services BDO provided, an IRS agent said in court documents. In April 2007, the IRS made formal requests for information to Greisman and one of his partners in Michigan in connection with its investigation of the Khans.

Greisman pleaded guilty last July to conspiracy charges related to the creation of the shelters and BDO is currently being sued by Khan for negligence and malpractice. The NFL may have saved them themselves the trouble by letting Rush Limbaugh own part of the team…

Stephen Chipman Is Slightly Annoyed by the Non-Grant Thornton People Reading His Blog

We didn’t get the third installment of Stephen Chipman’s blog until late last week and apparently while the Grant Thornton CEO seems to be keeping up his promise to come at you once a week, he’s going to be a bit more reserved going forward.

Last week SC shared a few insights from his readers, however we warned that he wouldn’t be sharing the most intimate details (e.g. ragers in Atlanta):

Because large portions of my blog are finding their way to external Web sites, I will answer some sensitive or strategic questions via internal e-mail and send my responses directly to the person who posed them.


Well, shucks. We’re not sure what “external websites” SC is referring to but as far as our humble posts are concerned, we merely provide snapshots that certainly don’t qualify as “large portions”. If you guys are aware of someone reposting the posts in full, get in touch with us and we’ll let them know at GTHQ.

We’re also curious as to what will qualify as “sensitive or strategic questions”. Is SC getting prodded with nosy questions about Sue Sachdeva? If so, he could at least give us a diagnosis on her supposed shopaholic tendencies. That doesn’t seem too sensitive. It’s most certainly not strategic.

We’d also like to hear his thoughts on Grant Thornton being vindicated in the Overstock.com circus. Patrick Bryne said some pretty nasty things about Steve’s beloved firm. This is the perfect opportunity for Steve-o to throw it in Patsy’s face via an all-out blog-off. Does he take it? So far, no. Sensitive? Absolutely not. This is justice. Strategic? Not really. Chip must get enough satisfaction knowing that the firm clear of the whole thing and doesn’t see the need for gloating. We’ve got two words for that: MISSED. OPPORTUNITY.

Because of this new cautious approach, we don’t have any parties or white whales to share this week but SC did mention that he got a little face time with SEC Chief Accountant James Kroeker. And don’t think that just anyone was invited to this little sit-down, “I was honored to be included in this very small group, which also included the CEOs of two large competitors.”

Well! We’re assuming Chip is referring to two B-I-G-F-O-U-R competitors and only since only two of them were there, this is pretty H-U-G-E opportunity for Steve. SC won’t turn down a little glad-handing with the Chief Accountant, no sir. Unfortch, he didn’t really get into what was said at the meeting but we’re sure it was a stimulating convo: Olympic fever. St. Val’s gifts for the wives. Maybe some talk about the nonexistent SEC roadmap on IFRS? Here’s to hoping that he’ll open up more this week.

Comment of the Day | 02.12.10

We’ll dispense with quote of the day today in favor of the words from awwyea.

This is type of comment you should be striving for my friends.

We’ll be on a light posting schedule for the holiday on Monday. Have a great weekend and try to see your sweetheart on Sunday rather than sexting them (especially the PwC peeps).

Texas Stripper Tax Will Survive One More Valentine’s Day

If you’re a resident of the Lone Star State and you happen to frequent the peelers, you’re probably familiar with the $5 charge that you pay to enjoy a little bit of entertainment.

Well good news! The Texas Supreme Court has agreed to hear the case and determine if that $5 violates the First Amendment right to free expression and maybe this travesty can be put to bed once and for all.


The Texas Court of Appeals ruled the law was discriminatory against establishments that served alcohol since as Kay Bell explained then, “a play involving nudity did not trigger the tax…that meant that, had the law stood, the touring company of…Hair could have come to Texas.”

If you simply wanted to go to Treasures in Houston and have a beer and appreciate some artistic impression to Bon Jovi, Skid Row, Def Leppard, etc. then the tax applied. The $12 million that the state collected while the law was in effect is still being held in an account while they sort this out. What’s not clear is if that money will be returned to the patrons or simply given to employees of the clubs where the money was going to end up anyway.

Texas stripper ‘pole tax’ to get review [Don’t Mess With Taxes]

Five Questions with Jim Peterson of Re:Balance

We’re going to be frank; Jim Peterson is a cerebral guy. When you read his posts over at Re:Balance you never get the impression that he just rolls out of bed after a night in Wrigleyville and pounds out a post. His blogging can turn your head in knots and we think that’s a good thing.

Jim is an attorney that has spent “thirty-five years on complex multi-national matters involving corporate financial information.” He spent 19 years as in-house counsel and partner at a national accounting firm working on policy and risk management strategies.

He also spent five-plus years penning “Balance Sheet” a column for the International Herald Tribune. He now spends his time teaching risk management to MBA candidates at DePaul University in Chicago and ISEG in Paris.


Are you a CPA – Y/N?:
I am not a CPA – frequently mistaken for one, but only by those who miss the evidence that a “words guy” is on the loose in a numbers business.

If someone had to read just one post of yours which one would it be?
From May 17, 2009: “Which Accounting Firm Will Be ‘Next to Fail?’ It’s the Wrong Question” – an attempt to capture in a single post my central theme, which is the threatened survivability of the large-firm assurance franchise, the perilous condition of the Big Four business model, and the absence of real dialog on achievable solutions short of their catastrophic disintegration.

Bloggers on accounting are…
By and large driven by an instinct for the capillary. I happily give respect to those focused on the technical and operational minutia – although they are mainly keeping the deck chairs neatly arrayed on the deck of a sinking ship.

Favorite non-accounting blog…
The Soay Sheep Chronicles – by a retired couple, a big-city lawyer and an academic, who rescued and now operate a sheep farm in Oregon. Writes rings around Verlyn Klinkenborg’s pastorals in the NY Times, and teaches those of us ignorant of the subject about the opportunities for personal life-change and renewal. Full disclosure: the author is my sister.

Best accounting firm we’ve never heard of…
Financial Reporting Advisors, LLC – A Chicago boutique — alumni of the Arthur Andersen professional standards group – with a business model beautifully adapted to the hazards of today’s practice. They do no audit work, and issue no opinions. They advise global-scale companies on the intricacies of accounting standards, literature and requirements – while leaving ultimate decision-making to reside with their clients.

So they deliver wisdom and value, with virtually no litigation exposure. Their practice is one example of the available ways the profession might re-engineer its way out of the presently untenable survivability tensions in which it is entangled.

Infuriating Problem of the Day: Accountants Quitting During Busy Season

Seriously people. For most of you, this isn’t a problem. You gird up your loins, duck your head and bulldoze your way through this time of year just like you’ve done in years past. Busy season sucks. We all know that.

Who in their right mind interviews with the Big 4 et al. and is thinking, “The hours won’t be that bad,” or “I probably won’t have to travel” OR “Big 4 salaries are good enough for me”?


The Big 4 Exodus is something that has been discussed at length here but until we’ve yet to discuss this particular topic.

Yes, the trend of accounting firm layoffs is demoralizing and yes, merit increases were mostly frozen, and there were virtually no bonuses> Hell, you may working your ass off knowing that your staff makes more than you but if you’re working in mid-February, what ton of bricks hits you that causes you to conclude that bailing out on your team is the best option?

All the people we’ve had the pleasure of working with, despite all of them having multiple “F— THIS!” moments, pull it together because they have a job to do. Why the hell didn’t you quit prior to busy season? You really felt like sticking it to everyone?

Fine. Perhaps your desire for sweet, sweet revenge against your senior/manager/partner/firm is more powerful than any shred of integrity you may have but for crissakes, that makes you a very bitter person. More so than the average accountant.

Seriously? It couldn’t wait? There isn’t that much time left in busy season. And besides, if you’re patient, they may pay you to leave.

Quote of the Day: Auditors in Love | 02.10.10

“[If I Were An Auditor] tells the story of two auditors (would-be auditors) in love, who view their relationship through the lens of accounting and auditing.”

~ Edith Orenstein, editor of the FEI Financial Reporting Blog on the rom com created by her and many others in Second Life (just in time for St. Val’s).

Quote of the Day: Hank Paulson Tells No Lies | 02.09.10

“We will get every penny we put into the banks back. I think when you look at all the other programs, we may be surprised at what we get back.”

~ Hank Paulson, to Warren Buffet on TARP.

Ex-PwC Associate Sues NYU to Get His MBA Back

So waaaay back in the early to mid Aughts when Ayal Rosenthal was slumming over at 300 Madison, he got a little entrepreneurial (P. Dubs auditors don’t make shit, you know) with his Dad, two brothers and a host of others. They made a little bit of extra dough ($3.7 million) by running an insider trading scheme based on various tips, some of which were related to clients that Ayal worked on at PwC.

By the grace of God, the SEC caught on to the shenanigans and busted the gang in early 2007 (was this the reason they missed Madoff, Stanford?).


For this little stunt, NYU revoked AR’s MBA after the SEC brought the charges against him. He’s now suing the University because, “the university was ‘excessive and unfair,’ and that the proceedings violated his right to a ‘fair and timely hearing’ because NYU took nearly seven months before considering his case in September 2007.”

First of all, if an academic institution gets back to you in seven months, we’d say that’s a pretty decent response time. Second, “unfair” doesn’t work on anyone.

Having said that, we know full well how hard the young lad must have worked to get that MBA, so we’re not surprised that he wants the prestigious degree back.

If NYU really wanted an airtight reason for taking his degree they should have cited his inability to dupe the SEC for less than five years. Open and shut.

NYU sued for revoked MBA [NYP]
Insider Trader Ex-Con Sues NYU For His MBA [TBI]

‘Subversive’ Organizations Must Register in South Carolina; Terrorist Tax to Follow?

Do you have a client thinking of starting a subversive organization in South Carolina? Are they looking to expand their network of businesses to include one with the expressed mission of overthrowing the U.S. government? Thought so!

Just so you know, they are required by law to register with Secretary of State and declare their intentions or they will be subject to a $25,000 fine and 10 years in prison. Let’s keep the ship tight people.

The Subversive Activities Registration Act was passed last year by the Palmetto State legislature and is now officially on the books. Oh! And there is a $5 filing fee (we attached for the form below for your convenience).


If you’re not sure if the new entity will qualify, the law defines subversive organization:

(1) “Subversive organization” means every corporation, society, association, camp, group, bund, political party, assembly, body or organization, composed of two or more persons, which directly or indirectly advocates, advises, teaches or practices the duty, necessity or propriety of controlling, conducting, seizing or overthrowing the government of the United States, of this State or of any political subdivision thereof by force or violence or other unlawful means

South Carolina, clearly not satisfied with the job being done at DHS, obviously enacted this little gem of legislation to exploit these organizations’ propensity for full disclosure. What’s the point of organizing a business with such an important purpose if everything isn’t going to be on the up and up?

The Raw Story reports that enacting redundant legislation is the norm for the Palmetto State as “[it] is among those states which require drug dealers to declare their illegal income, or face additional criminal penalties on top of the already established penalties for buying, possessing and selling drugs.”

We can only assume that the SC pols will now get to work on a new “Terrorist Tax” that will be known as the Super-Anti-American Business Sucks Act. It seems like a natural progression of the legislation there.

No joke: South Carolina now requires ’subversives’ to register [The Raw Story]
Terrorists Must Register With SC Secretary Of State [Fits News]
[h/t Joe Kristan and Russ Fox of Taxable Talk]
SubversiveAgentForm

Ex-KPMG Associate Sets New Bar for Expense Reimbursement Abuse

We meant to get to this on Friday but as you recall, our plans we’re slightly derailed by forces beyond our control. We’re sharing it now because there are lessons here for all the newbies out there. Pay attention, this could one of you.

During busy season the temptation to get a little aggressive with the expense reimbursement comes naturally to just about everyone. If you deny this particular bit of weakness then you are either A) lying through your coffee-stained teeth or B) in the wrong profession; join the clergy.


It should be noted that the abuse of reimbursement policy has relative levels of ridiculousness. Partners can rationalize and get away with more extravagant abuse than a mere associate so keep that in mind here.

So maybe every once in awhile you and some team members slip out for a three martini lunch that falls on the expensive side and you ram it through on your expense report because you figure you deserve it. Totally natch.

It gets overboard when you have the tendency to place some wagers and because you’re a degenerate loser, you start submitting expenses to fund this little gambling hobby.

Vikas Gupta was employed by KPMG until he couldn’t pass his “accountancy exams” aaaaannnnddd it was discovered that he claimed expenses of £25,000 to fund his gambling and to pay off debt. Gupta claims that he hit “various internal charge codes” to charge the expenses; which, we hear, is a typical methodology.

Gupta also claims that he suffered from depression (losing streaks will do that), is now in Gamblers Anonymous and is employed by a new firm, so he’s back on the straight and narrow.

This didn’t impress a tribunal of the Institute of Chartered Accountants for England and Wales (the AICPA of E&W), who has recommended that Gupta be banned from having provisional membership for 12 months and to be “severely reprimanded.” Since he has no means to pay fines (he entered an individual voluntary agreement), one can assume that the reprimand will consist of 30 lashes, a marathon of technical accounting trainings, or both.

Ex-KPMG trainee admits £25,000 expenses fraud [Accountancy Age]

Winners and Losers in the Overstock Restatement

With Overstock.com announcing last week that they would be restating their financial statements for the the last three quarters and their 2008 consolidated financial statements, it marked another open-mouth-insert-foot moment for Patrick Byrne and his Company.

This will be the third restatement in the last three years. We understand that financial reporting can be tricky but this doesn’t make for a very good pattern.

Winners:

Steve Cohen, Michael Milliken, Sam Antar, Joe Nocera, Gary Weiss, Roddy Boyd, Barry Ritholtz, Felix Salmon, Henry Blodget, John Carney, Joe Wisenthal, et al. – Anyone and everyone vilified by Patrick Byrne because they questioned either him, his Company, or both. Patrick Byrne has always maintained that these people were part of large conspiracy of short sellers and financial bloggers and journalists. The restatement simply proves that whatever suspicions they had about Overstock, they were right. Plus all their friends and family on Facebook were violated by creepazoid and Deep Capture hatchet-man, Judd Bagley. That’s just not cool.


Grant Thornton – Not sure if GT realized it at the time, but getting fired by Overstock is looking pretty good right now. So they changed their minds on the accounting; BFD, right? It happens and clients typically get over it. Pat Byrne decided that it was unacceptable and that LOUDLY crucifying GT in SEC filings, the press, and on conference calls would convince everyone that the auditors were idiots and Overstock and he would triumph over this injustice. Grant Thornton did not hesitate in chanting “liar, liar pants on fire” to Patsy’s face (nothing to lose, they were already fired) and now they’re clear of this three ring circus.

Losers:

PricewaterhouseCoopers – PwC was the auditor for Overstoc prior to Grant Thornton and had always signed off on the company’s financial statements (excellent service in PB’s mind). Now that the restatement has occurred, PwC gets dragged back into the fray to explain what they did, why they did it, and how they got it wrong. A) That just sucks and B) who the hell is going to remember what the hell they did four years ago?

Overstock shareholders – Any Company that restates their financial statements with any regularity whatsoever should be avoided like a group of lepers. If you’re still currently long in Overstock, you have the chance to make the right the decision: sell while the shares are worth something. Your humble servant Patrick Byrne has failed you.

Jury is out:

KPMG: For some reason, Klyneveld Salt Lake City decided that despite Overstock’s dubious past, they were willing to roll the dice. The firm now has the pleasure of guiding the firm through this restatement and somehow pulling the audit for fiscal year 2009 together. The whole exercise reeks of futility. Anyone that happened to be assigned to this engagement and a shred of sanity would have given their notice on the spot. For the time being, the firm seems to be sticking it out but time will tell if the firm changes their mind about their risky new client.

SEC: Everyone knows that the Commission doesn’t have the best track record of late. They have managed to be the laughingstock of the entire bureaucracy and despite a lot of huffing and puffing about new divisions and putting together a dream team of enforcement and financial experts, we haven’t seen much for results. Overstock may be a chance to show everyone that they’re done taking shit and that they are going to start smacking companies around.

This Man Hates Taxes More Than He Loves His Family

Well, he doesn’t come right out and say that but actions speak louder than words, amiright?

This is Guy Hands, Founder, Chairman and Chief Investment Officer of Terra Firma a private equity firm with locations in London, Frankfurt, and Guernsey where he currently resides.

He moved there last April from Kent, a county in Southeast England, to “protest at higher income and capital gains tax rates,” and that “he has ‘never visited’ his school age children since he left the [the United Kingdom]. They have remained with his wife at their former family home in Kent and they now have to travel to Guernsey to see him.”


Guy “Father Knows Best” Hands also doesn’t visit his parents any more “and would not do so except in an emergency,” so he’s not much of a son either.

The devoted family man is an “‘outspoken’ critic of UK tax levels,” so this level of commitment to avoid paying taxes shouldn’t be a surprise. Non-resident tax status is at stake here; he won’t set foot in a UK airport even to transfer.

GH’s shrewd sensibilities were revealed in court papers last week as the venue for his dispute with Citigroup over Terra Firma’s purchase of music group EMI is being decided. If the proceedings are moved to London, Hands’ tax planning could be completely thwarted and — gasp — he might see his children in the UK (if time permits of course).

I save tax by never visiting my family, says tycoon Guy Hands [Guardian]

Five Things That Make Busy Season Suck

Here it is the second week of February and we’re concerned that many of you are working too hard. We’re guessing that many of you are already having nightmares about your senior/manager/partner putting condiments all over your work and then eating them while you watch in horror.

However your busy season is going, we here at GC decided to put our heads together to give you a list of some of the things about busy season that make it such a bitch; not to remind you of them but to let you know that we feel your pain. These appear in no particular order and were created by our own sick minds so if anything is missing you’ll have to point out the omissions.

Gaining weight – Unless you’re a die-hard gym rat, your exercise regiment has probably been paired back significantly. Combine that with the all the cheap soda and takeout you’re eating on a nightly basis, that button on your pants is hanging on for dear life.


Losing sleep – As we mentioned, work dreams seem to be part of many accountant’s busy season routine. Maybe it isn’t dreams for you; maybe you just wake up at 3 am thinking about the meeting you have coming up that day and you can’t get back to sleep so you throw on the business casual uniform and get to the office at 4 am to start your day. OR maybe you’re just working so many hours that the time between your departure and arrival times at work have shortened precipitously.

Your busy season plan has been completely shot to hell – There’s a some saying about a road, intentions and Hell or something that we can’t remember but it basically means however good your plans were they probably hit a snag somewhere along the way and now you’re scrambling. When we asked our Tweeps about their busy seasons we got one response “it’s all about planning and execution.” Right. That execution is the tricky part.

You’ve somehow ended up in an unexpected relationship – The busy season bitch if you will. Let’s not pretend it’s not happening people. One of you made an awkward advance and now you’ve got a situation on your hands. Whether it’s someone on your team or a client contact, more often than not, this ends badly. A band aid breakup is needed.

Hours – Face it; this is the cause of all your pain. Regardless of what your teams do to make things bearable, the hours are just a bitch. Sitting on your ass, in front of that computer, listening to the person next to attempting to burp quietly while sucking down five sodas a day is about to drive you postal. Of course there are the sickos out there that somehow gear up every day to put in another 14 hours but those demented bastards plug in when they go home.