Hiya! It’s pretty dead out there today. So feel free to review Friday’s Footnotes for a news fix because this one is going to be dry. You can also check out the weekend discussion, this week it was “Is Everybody Dumb Now?”
Getting right into it…
Morale is down at EY UK after a few rounds of layoffs:
Staff in EY’s UK deals business have hit out at the company’s management for the way recent job cuts were handled, saying “trust is broken” and that employees feel “deflated” as sales in the department slump.
In a survey, employees at a division of EY’s strategy and transactions business criticised bosses for a lack of transparency and for allegedly misleading comments about a recent redundancy round dubbed “Project Century”, according to an internal presentation seen by the Financial Times.
The survey results, which were presented at a meeting for 270 employees last week, pointed to low morale and discontent with how management at the division had handled the cuts. Asked how staff felt about the redundancies, respondents said they felt “shocked”, “deflated” and “insecure”.
Some staff accused managers of using messaging that lacked transparency, saying they were told that jobs were not “currently” at risk before the cuts were announced.
One respondent said: “Trust is broken and as soon as the market improves I would [sic] jump ship.” Another said: “Still in shock, lack of transparency resulting in [a] lack of trust, the floor looks disconnected.”
EY laid off 150 people three days before Christmas last year.
Minnesota’s proposal to add a second pathway to CPA licensure that doesn’t require 150 hours of education is moving forward in the MN Senate. We’ll be doing an article shortly, in the meantime here are some quotes from INSIDE Public Accounting:
Bob Cedergren, MNCPA board chair added, “I can tell you from my own experience, through conversations with colleagues throughout the country and the members of the MNCPA, that we have a significant shortage of CPAs. The work continues to grow but the supply of CPAs to do the work isn’t keeping up. … We need to move forward. The situation is critical.”
Pat Plamann, MP at St. Cloud, Minn.-based Schlenner Wenner & Co. (FY22 net revenue of $15.1 million), commented, “It’s been our experience that hiring students with 120 credit hours makes absolutely no difference in their performance versus hiring students with 150 credits. This bill is the pipeline for the life of our firm.”
The Star Tribune also ran an opinion piece on it with a poetic headline:
Minnesota accountants stare down the guardians of their industry
Certified public accountants normally work in the background. But they are stepping forward in Minnesota to challenge national organizations with a grip on their industry.
The contest, which began unfolding Thursday in a state Senate committee hearing in St. Paul, has implications for millions of professionals in dozens of occupations. Cosmetologists, barbers, preschool teachers, dental assistants and anyone else who needs state permission to earn an honest living ? more than one-fifth of U.S. workers ? should be rooting for the underdogs.
“Based on input from our membership, we knew we would get pushback,” says Geno Fragnito, director of government relations at the Minnesota Society of CPAs, the state group fighting for increased freedom. “We made the decision to move forward, knowing full well what was coming back at us.”
…
The American Institute of Certified Public Accountants, one of the organizations asserting itself in Minnesota, does not care. It prefers the status quo. But rather than defend the 150-hour rule on the merits, it uses scare tactics. A recent letter to lawmakers threatens Minnesota CPAs with the loss of their ability to work across state lines if the legislation passes.
The National Association of State Boards of Accountancy, another organization lined up against Minnesota CPAs, uses similar rhetoric. These threats are mostly bluster. States, not lobbying groups, set licensing requirements.
👀
This guy thinks he’s arguing in favor of 150 but really he’s only proving that experience is more important than 30 credits of underwater basket weaving which is the whole point of the Minnesota proposal requiring an additional year of experience for the second pathway.
He’s right on that last point tho.
New York Times wrote a piece on people who bet on the Oscars and included this bit:
Because the outcomes of sports games are unknown before the matches, allowing bets on them is considered less risky than bets on awards shows, whose results are decided in advance. PwC, an accounting firm formerly known as PricewaterhouseCoopers, tabulates the votes for the Academy Awards. According to the Academy’s website, only two partners of PwC know the results before they are announced during the Oscars ceremony. In general, employees that have access to confidential information are not supposed to use that information for personal gain, a PwC spokeswoman said.
PwC famously bungled the Oscars in 2017 when a partner erroneously handed presenter Warren Beatty an envelope for “La La Land” instead of “Moonlight” for Best Picture that year. We of course hammered the firm endlessly for #Envelopegate a whole year afterward. And still now.
- And the Award For Worst Oscars Gaffe Goes To… PwC (Feb. 27, 2017)
- Here Are Some of the Best Tweets Roasting PwC for #EnvelopeGate (Feb. 27, 2017)
- PwC’s Recruiting Will Take a Hit Over the Oscars Debacle (March 1, 2017)
- PwC Keeps the Oscars Gig (March 29, 2017)
- PwC Not Talking Up Its Role in the Academy Awards This Year, Obviously (Feb. 1, 2018)
- #Envelopegate Redux: PwC Failed to Predict the Worst-Case Scenario (March 1, 2018)
To this day, if you Google “PwC Oscars” it will suggest “mistake” to complete your search phrase. Thankfully everything went smoothly this year.
CPA Journal has recycled this story on the CPA exam gender gap (I wrote about it in 2022: If You Are Young, Male, and Taking the CPA Exam We Have Some Good News For You), since there are tumbleweeds blowing across the entire accounting category in Google News let’s revisit with them:
Previous research has established that women suffer from the impacts of the “gender gap” in the middle to late stages of their career. This gender gap manifests itself as reduced pay and reduced advancement opportunity for women relative to men, and it is likely driven by numerous issues. The authors posit that one significant factor driving the gender gap in the accounting profession originates with the Uniform CPA Examination. Successfully passing the CPA exam and earning the CPA designation is an essential step for members of the profession; CPAs are rewarded with better job placements, higher salaries, and more opportunities for advancement. Accordingly, a discrepancy in CPA exam success would indicate a gender gap that arises early in one’s career.
To investigate, the authors examined the pass rates of male and female candidates taking the CPA exam for the first time. Absent underlying biases or obstacles, there should be no difference in pass rates between women and men. However, we find that female candidates score significantly lower than male candidates, and that this discrepancy is remarkably consistent over time and across geographic regions.
Just a week after the Financial Times story on the messy election to replace Tim Ryan at PwC, The Times wrote a piece on PwC UK’s own election. It’s kind of funny to imagine the amount of hand-shaking — figurative and literal — that happens behind the scenes ahead of a big leadership appointment.
The race for the highest job in the land is well under way. Candidates are drafting their manifestos, assembling campaign teams and sounding out allies whose vote they can count on. Many are rehearsing their stump speeches ahead of a gruelling set of hustings that will see them travel across the country to be questioned by disgruntled voters.
But this is not the fight for No 10. Instead, this election will bring with it one of the most coveted jobs in audit land — the head of the UK arm of accountancy giant PwC, which has kicked off the process to find a successor to its current chief, Kevin Ellis.
Campaigning does not always come naturally to those who cut their teeth on spreadsheets and company filings. “It can be a great laugh,” said a UK Big Four veteran who had witnessed plenty of elections in his career. “You have these people who are normally very impressive at their day jobs who suddenly have to do something they are not used to doing — which is effectively political campaigning. So they can be stilted and out of their comfort zone.”
According to this Fortune headline, audit quality is the “accounting crisis everybody seems to ignore” and the PCAOB is fighting to fix it. Who’s everybody? We rag on it all the time.
Who watches the watchmen—or, in Fortune 500 terms, who audits the auditors?
Erica Williams wants the accounting industry to know that there’s a new sheriff in town, and she’s rolling up her sleeves to deal with what her organization has called a “completely unacceptable” rate of accounting errors.
Williams is an outsider brought in to police an audit industry that collects about $5.4 billion in fees from S&P 500 companies each year, and has historically been accustomed to being overseen by friendly insiders. But Williams has brought with her a much greater willingness to lay down the law than her predecessors: the former Obama adviser spent 12 years in enforcement at the Securities and Exchange Commission, where she dismantled Ponzi schemes and worked closely with the Department of Justice to bring forth civil and criminal charges.
Since 2022, Williams has been running the Public Company Accounting Oversight Board (PCAOB), the SEC subsidiary responsible for regulating the accounting and audit industry. For decades, observers have dismissed the PCAOB as inept; it’s been plagued by scandals and accusations that it’s been too deferential to the accounting firms it’s supposed to be policing.
But under Williams, the first Black woman to chair the organization, the new-look PCAOB has been ringing the alarm bell on what it calls a worrying trend of “unacceptable” accounting errors that continue to rise. Mistakes showed up in 40% of the roughly 800 audits it recently released inspection reports for.
An example of this renewed focus on enforcement:
Moving on. The Internal Audit Foundation released the results of The 2024 North American Pulse of Internal Audit Survey which found Chief Audit Executives (CAEs) more than twice as likely to have increased staff (26%) than to have decreased staff (9%). Additionally, after sharp cuts due to the COVID pandemic in 2020 and 2021, significantly more internal audit functions are now increasing their budgets (36%) than are decreasing them (13%).
The survey found internal audit teams place high priority on cybersecurity and IT audits, which combine for nearly 20% of audit plans. That’s compared to operational auditing (17%), compliance (14%), and financial reporting (14%).
“This year’s survey results revealed some very interesting takeaways, including increased investment in technology, growing gender parity in the profession, and generational differences in approaching remote work,” said said Anthony Pugliese, CIA, CPA, CGMA, CITP, President and CEO of the Institute of Internal Auditors (The IIA). “These results point to a dynamic and evolving profession.”
Here’s some high-level thinking for you smarties out there from Phys.org:
Analysis establishes a framework for fairness in accounting, auditing
Nearly 40 years ago, the esteemed accounting professor Yuji Ijiri suggested that fairness is one of the most essential concepts in accounting and asked how to ensure a fair information flow system. In a new analysis, researchers examine whether it is feasible to establish a fair accounting framework in a logically and mathematically rigorous manner and then propose a framework for doing so.
To do so, they looked into the ethical issues related to knowingly misrepresenting information in financial reports, especially when such misrepresentations are expected by those using the reports. The analysis, by researchers at Carnegie Mellon University, is published in Journal of Accounting, Economics and Law: A Convivium.
“Since the 1970s, researchers in accounting, particularly in the United States, have conveniently if not intentionally ignored the importance of Ijiri’s question, despite early calls for including fairness as a basic accounting principle,” explained Tae Wan Kim, Associate Professor of Business Ethics at Carnegie Mellon University’s Tepper School of Business, who led the analysis. “The fairness question was important in 1975 and remains relevant today.”
The researchers for this study brought their expertise in accounting, ethical theory, and operations research and collaboratively employed their diverse skill sets in an interdisciplinary approach to address Ijiri’s question.
Alright that’s all I’ve got and trust me, it wasn’t easy to gather up. PLEASE let me know if you see something interesting this week. Have a good one!