Friday Footnotes: Accounting’s Big Lie; BDO Poaching; EY partners get whipped | 10.07.22

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The big accounting lie – and how to fix it [Project on Government Oversight] A colossal conflict of interest compromises the auditing of public companies and the financial security of all who depend on them. The Government Oversight Project is planning a conference on what to do about it. The following is intended to serve as a starting point for discussion. It provides background information on the issue and options for potential reform.

Big 4

EY launches ‘whipped operation’ to pass vote on company split [Financial News]
EY has held focus groups to gauge the sentiment of its partners in a “whipping operation” ahead of an upcoming vote on its breakup proposal, according to insiders. “Partner listening forums” have taken place in recent weeks for all 700 partners at EY’s UK firm, according to two partners at the firm. The focus groups are part of a “whipping operation” aimed at building support for the break within the partnership, identifying partners likely to vote against the proposals in order to persuade them to change their minds, according to a person close to the file. company strategy.

The Big 4 accounting firms reap record revenues [The Korea Times]
Korea’s Big Four accounting firms posted unprecedented annual revenues last year, mainly due to double-digit year-on-year growth rates in mergers and acquisitions and advisory services. According to data available from the electronic disclosure system operated by the Financial Surveillance Service (FSS), the combined annual revenues of the four largest accounting firms―Samil PwC, Samjong KPMG, EY Korea and Deloitte Korea― amounted to 3.18 trillion won ($2.24 billion). ) in 2021, an increase of 21.8% from 2.61 trillion won in the previous year. This is the first time that the total annual revenue of companies has exceeded the 3 trillion won mark.

Global CEOs see a ‘mild and short’ recession, but are optimistic about the global economy over a 3-year horizon [KPMG]
The KPMG 2022 CEO Outlook, which polled more than 1,300 CEOs of the world’s largest companies on their strategies and outlook, reveals that 58% of executives expect a recession to be mild and short. Fourteen percent of senior executives identify a recession among the most pressing concerns today – up slightly from the start of 2022 (9%), while pandemic fatigue tops the list (15%).

Firm watch

​FRC investigates Mazars audit of Studio Retail Group [Compliance Week] The Financial Reporting Council (FRC) of the United Kingdom announced Thursday the opening of an investigation into the accounting firm Mazars concerning its audit of the financial statements of Studio Retail Group. The investigation will focus on the audit of Mazars for the period ended March 26, 2021 and only concerns the company for the moment, the FRC acknowledged in a press release. The decision to open an investigation was taken at a September meeting of the regulator’s conduct committee.

Accounting firm’s infringement claim fails in similarly named lawsuit [Bloomberg Law]
An accounting firm lost its infringement claim against a rival with a nearly identical name by failing to show that the other firm intended to negotiate on its goodwill, a federal court has ruled. Cohen & Cohen Ltd. failed to adequately allege that Cohen & Cohen Inc. copied and used its trademark with intent to induce consumers to purchase infringing services, the U.S. District Court for the Eastern District of Pennsylvania has heard. Plaintiff’s interpretation of the definition of infringement confused it with counterfeiting by saying that it only required the use of another’s mark without permission, the court said.

Accounting Firm Expands Palm Beach Gardens Headquarters [Commercial Observer]
Accounting firm Ellrich, Neal, Smith & Stohlman moves and expands its headquarters in Palm Beach Gardens, Florida. The company signed a 10-year lease for 10,500 square feet at 3300 PGA Boulevard, according to CBRE, which represented the landlords.

BDO recruits three partners away from its rivals [Accountants Daily] Newcomers from Melbourne and Sydney bring experience from EY, KPMG and Pitcher Partners.

financial directors

What CFOs need to consider about ESG reporting [The CPA Journal]
CFOs have seen their job descriptions expand over the years to include broader responsibilities and more reporting requirements, such as those imposed by Sarbanes-Oxley (SOX) and Dodd-Frank. There is no doubt that CFOs play a vital role in the financial reporting and other information communicated to the investment community on behalf of the company. Today, most CFOs also have the task of reporting on ESG measures. As with any other disclosed information, CFOs must rely on other functional managers in the business for information and data. And this data must be clear, reliable and verifiable.

CFOs of private companies grapple with new lease accounting [CFO Dive]
Basically, under the new standards, the Financial Accounting Standards Board (FASB) wants all companies to record operating leases over one year on their balance sheets as both an asset and a liability, the same way capital leases have always been. checked in. It is no longer permitted to recognize only operating lease expenses in the income statement and to disclose future operating lease obligations in the notes to the financial statements. Users of financial statements have long believed that operating leases give rise to assets and liabilities for tenants, so logic dictates that actually recording them on a company’s balance sheet is a good thing for some parties. stakeholders. A complicating factor is that the Financial Accounting Standards Board (FASB) is about to make another attempt to update a small portion of the existing lease guidance related to lease accounting, which would clarify how a parent and subsidiary should determine if a lease even exists that needs to be considered.

A few more things

Minority Accounting Students Wanted for Internship Preparation Program [Illinois CPA Society]
Students from Illinois-based racial and ethnic minority colleges who wish to pursue careers in accounting and finance are encouraged to apply.

“As CPAs, we need to think beyond the numbers in decision-making” [CPA Canada]
While big data is changing the face of many industries, there is one asset that cannot be replaced by technology: human skills. In fact, human-centered values ​​are becoming increasingly valuable in the accountancy profession as the social pillar of environment, social and governance (ESG) becomes an increasingly powerful force in the accounting profession. how business is run. “The ability to think critically, approach problem solving holistically, and communicate personally with clients is becoming essential for CPAs in all fields,” says FCPA Mapping Task Force Chair Tim Jackson. of Skills and President and CEO of SHAD Canada. “When we make decisions today, people expect us to think about more than just numbers.”

A pioneering CPA looks back on a 50-year journey [Journal of Accountancy podcast]
Gil Vasquez, CPA, founder of the Association of Latino Professionals for America (ALPFA), joins the Journal of Accountancy podcast to discuss the history of ALPFA and how it has evolved over the years.

City accountants are trying to clean up their books so now San Francisco is sending people 30-year-old tax bills [SFist]
In an effort to resolve tens of thousands of unpaid tax bills, some dating back to 1993, the City of San Francisco recently sent out a series of notices to people who owe long-overdue taxes – and some of those bills may seem ridiculous.

Graham, Washington, man pleads guilty to tax evasion and aiding and abetting false tax returns [Department of Justice]
A 53-year-old Graham, Washington resident pleaded guilty in US District Court in Tacoma yesterday to tax evasion and aiding and abetting false tax returns, US Attorney Nick Brown said. According to the plea agreement, between 2012 and 2019, Mbowamba operated a tax preparation business. An analysis of returns filed by Mbowamba revealed that he had falsely claimed tax deductions and credits on behalf of several of his clients. Most of the clients were immigrants from Africa who had been referred to Mbowamba by other members of the immigrant community.

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