July 19, 2018

Confusion

Breaking: That Confusing Simulation Question on the CPA Exam Is Meant to Be Confusing

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(UPDATE) Layoff Watch ’11: McGladrey Causing Some Head Scratching

Hot off the grill from Mickey G’s:

Some people let go at McGladrey. Heard it was like 15 [UPDATE: SEE BELOW] from the corporate marketing department and a few others. Some head scratchers going on. Moved people around including a few changes that have people baffled. People who have no business being promoted promoted.

Earlier in the summer, we heard a rumor about layoffs in the Northern Plains region and at the time our tipster said that the firm “spread[s] the terminations over months instead of doing them all at once,” which has more or less become the norm. ANYWAY, we’re trying to get some more info from tipsters and the firm but in the meantime, drop your knowledge below or get in touch.

UPDATE: A McGladrey spokesperson has informed us that the firm did recently “announce a restructuring of our marketing department to better align with the organizational structure and business objectives outlined by our firms more than a year ago,” adding, “This resulted in the elimination of 11 positions within the marketing organization.”

The head scratching was not specifically addressed. Carry on.

*Dustin Bradford

If You’ve Got a Better Solution to Rhode Island’s Budget Crisis, Governor Lincoln Chafee Is All Ears

Over at Tax.com, David Brunori calls Rhode Island Governor Lincoln Chafee’s latest state sales tax proposal “awful.” You see, Governor Chafee wants to levy a tax on goods and services sold by Ocean State businesses. Examples of previous tax-exempt services include “data processing, landscaping, taxi fares, garbage collection, auto repairs and tickets to theaters and sporting events,” while it would also tax goods such as “agricultural products, boats, clothing, manufacturing machinery.”

Brunori writes that this idea is horrendous because it not only, “violates every notion of sound sales tax policy,” but because the Rhode Island rubes won’t even realize that the tax is ultimately being passed on to them:

In general, businesses should not pay sales tax on their purchases. When they do, the tax is passed on to consumers in the form of higher prices. The tax is often included in the final purchase price and taxed again. The funny thing is that citizens do not know they are being secretly taxed. Everyone knows this.

So wait…do the citizens know they are being taxed or does “everyone” simply mean tax policy wonks? Putting our confusion aside for a second, Governor Chafee has defied the haters like Brunori and Rhode Island businesses, standing by his proposal. But if you’ve got a better idea, he’s more than happy to hear your out:

Chafee said it’s up to his critics to suggest a better option. “Crisis calls for leadership,” Chafee, an independent, said at an impromptu press conference called after the rally. “If you don’t like my proposal, what’s the alternative? No politician likes to raise taxes. … We’re waiting for a better idea.”

Terrible Tax Idea of the Week [Tax.com]
Chafee firm as business groups protest tax plan [Tto10]

Apparently ‘The Purpose of Auditors Is Completely, Entirely, and Wholly’ to Look for Fraud and ‘Deloitte is the best. Period. End of Statement.’

Remember China MediaExpress? That’s the company whose CEO – Zheng Cheng – responded to the accusations of fraud by evoking ‘reputable and well-known’ Deloitte to get the haters off their back. Even though the company is still taking heat, Mr Cheng will be happy to know that he’s got someone in his corner: Glen Bradford, CEO of ARM Holdings LLC, a Hedge Fund Advisory Company. The thing is, Mr Bradford seems a little confused about what an auditor’s purpose is (for fun, I added some emphasis):

I have received tons of messages that can be summarized by the belief that auditors do not look for fraud and that all they do is make sure things line up in the reports. I can say that this is not true simply by being practical. If we didn’t have auditors to verify the claims that companies make, then companies could claim whatever they want to. The purpose of auditors is completely, entirely, and wholly to look for indications of fraudulant activity — and to do their best to remove all possible doubt that the company is misrepresenting itself on its financial statements.

You can make of that what you will but then Glen continues:

Then, if things are OK, they sign off on them. Some auditors are better than others. Deloitte is the best. Period. End of Statement.

Well then! I’m sure Deloitte appreciates the ringing endorsement regardless if it comes from someone who is under the impression that “The purpose of auditors is completely, entirely, and wholly to look for indications of fraudulant activity.” At the very least, this is debatable point, so if you have a difference of opinion with anything above, feel free to share below.

China MediaExpress Holdings: All Eyes on Deloitte [Seeking Alpha]

Oh, By the Way, There’s Still a New 1099 Reporting Requirement for 2012 in the Proposed Budget

As you know, the bane of small businesses across this great land, the 1099 reporting requirement, was repealed by the Senate earlier this month. Despite some maneuvering amongst Senators to be crowned the biggest champion of small business, it seems that everyone agreed that this little sliver of the healthcare reform bill needed to go.

Now the House has taken up the charge but The Hill reports on a portion of President Obama’s proposed budget that is already annoying the hell out of some:

President Obama’s fiscal year 2012 budget still contains a portion of the 1099 provision while eliminating the requirement for goods but retaining it for services. The proposal is expected to raise about $10 billion over 10 years.

The National Federation of Independent Business blasted the new 1099 proposal as a “bait and switch.”

“We are disappointed that the president has not clearly heard what small businesses are saying,” NFIB senior vice president of Federal Public Policy Susan Eckerly said in a statement. “We at NFIB remain committed to helping the president and Congress understand the needs of small business as the budget process moves forward.”

But before you get your panties in a bunch, the Office of Management and Budget can explain:

“The administration recognizes the burden that this expanded information reporting provision will put on small businesses and proposes to repeal the provision,” the document says. “Instead, the administration proposes that a business be required to file an information return for payments for services or for determinable gains aggregating to $600 or more in a calendar year to a corporation (except a tax-exempt corporation); information returns would not be required for payments for property.”

If you call that an explanation.

Ways and Means schedules mark up of 1099 provision [The Hill]

Attention, Attention! This Dude Passed the CPA Exam on the First Try

Forgive us for the fluff but it’s Friday. With busy season in full swing, it’s dead and you guys aren’t reaching out for sage or even somewhat useful advice so we’re sad to say this is the best we got.

Since when does passing the CPA exam warrant a whole article? We’re not against the idea, just wondering when that became the thing to do.

Don’t you wish your firm did something like this for you? Or that maybe your wife would have thought to take out a half page ad in the local paper when you finally got an 81 on BEC after four tries?

No, people, you’re setting the bar way too low. You need to be this guy.


Via the Central Michigan Morning Sun (by all accounts this is a totally legitimate newspaper):

M.C. Kostrzewa & Co. P.C. CPAs of Mt. Pleasant has announced that Gregory Erickson has passed all four parts of the CPA exam in his first sitting for the exams.

Nationwide only 4 percent of applicants pass the exams in their first attempt.

Erickson, a graduate of Grand Valley State University, resides in Mt. Pleasant with his wife, Bethany.

Since most of you probably didn’t get your own article when you passed (sorry, intentionally underachieving generally doesn’t warrant its own fanfare), you might think this is a freakish concept but actually we found another, this one for Oconomowoc CPA Jennifer Konieczka. Is this a midwestern thing? Is it akin to your parents publishing an engagement announcement if you actually land yourself a winner?

We’re baffled.

In a related note, however, because we would never want underachievers to be left out of feeling special, we have taken it upon ourselves to offer up space here on our site for special CPA exam announcements or congratulations along these same lines. Write us if you have an appropriate nomination and bonus points for endorsements such as “most Irish Car Bombs the weekend before REG without getting a 67” or “this person guessed 50% of their multiple choice problems and still got a 75.” Please leave your bragging about passing all four parts in 2 months to more reputable publications like the Morning Sun.

As Predicted, There’s a Battle Over Who Will Get Credit for the 1099 Repeal

The repeal of the 1099 provision in the healthcare reform law has been dogging Congress since the bill was signed into law last March. Because small businesses will no doubt lead the economic recovery, remove all the snow that has dumped on this great land and may just get the Egypt situation under control, every pol within a stone’s throw of the Potomac is trying to get their name on this thing. Nebraska’s Mike Johanns (R) and West Virginia’s Joe Manchin (D) seemed to have this locked up but as we surmised, other Democrats are trying to get in on some of this small business saving action.


The Hill’s On the Money blog has the latest:

Senate Republicans expressed some confusion and approval Wednesday that their push to repeal the unpopular 1099 provision from the healthcare law has been taken over by Democrats.

Sen. Debbie Stabenow (D-Mich.), who has signed onto a bipartisan bill sponsored by Sens. Mike Johanns (R-Neb.) and Joe Manchin (D-W.Va.) that has the support of 61 lawmakers, proposed her own amendment that adds five words to the Johanns-Manchin repeal measure ensuring that no “unobligated funds” are used from the Social Security Administration.

So Senator Stabenow’s little maneuver has her nicely positioned to lay claim as a champion of all the Mom and Pop shops out there and shockingly, Minority Leader Mitch McConnell is cool with it:

“It turns out Senator Johanns did such an outstanding job raising awareness about the 1099 requirement that Democrats took the idea and are now claiming it as their own,” Senate Minority Leader Mitch McConnell (R-Ky.) said. “Which is fine with us. It’s not a bad precedent actually. We’ve got a lot of other good ideas that we’d be happy to share.”

While Senator McConnell sounds like he’s fine with Stabenow semi-jacking the bill, a staffer was less impressed:

“Dems went from putting it in the bill, to opposing the fix, to sponsoring a different fix, to sponsoring the Republican bill,” one senior Republican aide told The Hill.

Gotta love politics.

Senate Republicans express confusion over 1099 amendment [On the Money/The Hill]

Area Man Under the Assumption That Firing an IRS Examiner Was Within His Powers as an American Citizen

Mining obscure tax court cases for blog posts during this slow time of year, Joe Kristan discovered this little gem:

In the April 4, 2008, letter petitioner stated that respondent [IRS] had repeatedly refused to answer his questions regarding Code sections that define income and property received as income and establish respondent’s “Delegated Constitutional and Legislated Lawful authority”. The letter contained meaningless language, for example: “I do hereby give you notice that you, and all you are, are Fired from any and all representation of my private affairs without recourse“.

There’s Still Some Confusion About the BDO/Grant Thornton Situation in Hong Kong

The Wall St. Journal’s China Real Time Report stumbled upon the BDO/Grant Thornton poaching exodus merger situation (some may say, “clusterfuck”) in Hong Kong and we have no choice but to take issue with it.

The headline reads, “Missed It? Hong Kong’s Big Accounting Merger” and they mention the original report from the South China Morning Post. They manage to tone down the narrative but more or less tell the same story, full with quotes from BDO Hong Kong’s CEO Albert Au Siu-cheung:

On Wednesday, about a month after the joint press release, the South China Morning Post featured a front-page article describing the merger as a mass poaching of staff by BDO, “the biggest such raid in the city’s accounting sector.”

“It’s a bit sensational,” Au said, adding there was no raid. “Poaching is I pick a few heads here and there,” he said. “What you’re seeing here is the whole firm, meaning the partners and staff, coming to join us in BDO.”

In other words, “Sure it sounded bad but really it was just people making a choice”:

“There is no goodwill payment of any kind,” Au said. “I like to think they are voting with their feet. By that, I mean they think they’re joining a platform they have commitment to and believe in.” Clients were informed of the change and had the option to find another accounting firm. All clients have stayed with Grant Thornton for this merger.

Of course if someone at the Journal had rang up Grant Thornton International they would have likely gotten the story that we reported on last Friday which is that GTI booted the affiliate firm in Hong Kong and that BDO is kinda, sorta misrepresenting the situation:

They did not choose to leave, they were told to leave…[I]t is disingenous, or possibly wishful thinking, on the part of BDO to suggest that Grant Thornton is pulling out of Hong Kong. Many partners and staff from the former Hong Kong firm have already contacted the new Grant Thornton firm and clients will, of course, decide for themselves whether to move to BDO, which operates in the region as a loose affiliation, or remain with the more integrated, ‘one firm’ approach of Grant Thornton.

And of course there are the opposing press releases. The joint one issued by the BDO/GT firm dated October 7th that states:

Leading accounting firms BDO and Grant Thornton are pleased to announce that their firms have agreed in principle to merge their businesses and practise in the name of BDO Limited.

And the one from GTI, also dated October 7th that states something quite different:

Grant Thornton International gave its Hong Kong member firm notice on 20 September to leave the global organisation by March 2011.

With that mandate and probably few options, it appears that GTHK ran into the arms of BDOHK. BDO is using the Journal to disseminate a story that makes them look proactive and ambitious when in reality, none of this would even be happening if GTI hadn’t told their HK firm to get lost. The Journal – like the South China Morning Post – doesn’t mention that. Some people might consider that a major piece of the story.

We’ve put out a warning in the past about wandering into our corner of the sandbox without knowing what the hell you’re doing (or at least checking with us first) and you can consider this a friendly reminder about that. We’re more than happy to help because this accounting/accounting firm stuff is tricky when you don’t spend every single day reading and writing about it.

Rest Easy: The IRS Is Preparing for IFRS

For the first times since we started paying attention, the TIGTA is simply putting everyone on notice that the IRS is on top of this IFRS thing. No “You suck at this IRS” or “Here’s a list of things you should considering doing if you are interested in not sucking any more, IRS.” Simply, “Here’s what they’re doing. Have a nice day.”

The IRS began developing plans for strategic and operational activities related to the adoption of the IFRS in 2009.

TIGTA found that the IRS: is training employees about IFRS concepts and potential issues; working with the tax preparer community to identify and outline IFRS implementation concerns; and developing procedures to address issues related to IFRS conversion efforts.

“The IRS is appropriately laying the groundwork for its increased oversight of international taxation by gaining an understanding of the International Financial Reporting Standards,” said J. Russell George, the Treasury Inspector General for Tax Administration.

TIGTA did not make any recommendations in this audit and the IRS did not provide any comments on a draft of the report.

Doesn’t quite feel right, does it?

The IRS Is Taking Action to Address the Impact That International Financial Reporting Standards Will Have on Tax Administration [TIGTA]