Footnotes is a collection of stories from around the accounting profession curated by actual humans and published every Friday at 5pm Eastern. While you’re here, subscribe to our newsletter to get the week’s top stories in your inbox every Tuesday and Friday. See ya.
News
Obituary of Jerome A. Seidman [The Scarsdale Inquirer]
Jerome A. Seidman of Scarsdale died July 20 at age 91. Born and raised in Brooklyn, he attended Brooklyn Technical High School, a trip of more than an hour on the trains each way. According to his family, he originally had planned to become a chemical engineer but changed to accounting because of ongoing prejudice against Jews. He graduated summa cum laude in accounting from Baruch College with numerous other academic awards and a continuing passion for wrestling, Ping Pong and handball. Upon graduation, Mr. Seidman joined the accounting firm of Apfel and Englander and thereafter enrolled in night school at New York University, where he earned a law degree and served on the law review. He was drafted into the army in 1952 and returned to the accounting firm in 1954. He remained at that same firm for more than 60 years and was a consistent fixture in management as the firm grew larger and larger though mergers until it ultimately became BDO USA.
INSIDE Public Accounting Releases Its Annual Rankings and Analysis of the Nation’s Largest, Fast-Growing Public Accounting Firms [INSIDE Public Accounting]
“The labor shortage is a major driver behind the behavior of the IPA 100 firms,” says Charles Hylan, managing director at The Growth Partnership, IPA’s parent company. “The combination of too few professionals and high demand is pushing firm leaders to merge up, outsource tax work and hire non-CPAs, among other strategies. They seem to be working so far, as firms are growing fast and producing impressive financial results. The question now is whether year-over-year growth of 18% will continue next year.”
Sinéad O’Connor told her children to call an accountant before an ambulance when she died [Metro]
Sinéad O’Connor had specific instructions for her kids in the event of her death. In a chat with People magazine in 2021, she revealed her children were well aware of her wishes when she died, and that her priority was to protect her work and not be taken advantage of. She explained that, in the event of her death, her accountant should be called even before the emergency services – ‘because when the artists are dead, they’re much more valuable than when they’re alive.’
Agoura Hills Accountant Pleads Guilty to Lying to Federal Officials Investigating Illegal Gambling Operation [DOJ]
An entertainment industry accountant pleaded guilty today to a felony charge for lying to federal law enforcement officials about his role in laundering illicit proceeds from an illegal gambling operation run by a former minor-league baseball player and which involved professional athletes. William Eric Fulton, 59, of Agoura Hills, pleaded guilty to one count of making false statements. According to his plea agreement, Fulton and his company provided bookkeeping, accounting, and tax preparation services for Wayne Joseph Nix, 46, of Newport Coast, a former minor-league baseball player who for nearly 20 years ran an illegal bookmaking business. Beginning no later than 2011, Fulton was aware that Nix ran an illegal gambling business. Nonetheless, Fulton knowingly laundered Nix’s illegal gambling proceeds by continuing to provide financial services to Nix and providing access to the financial system.
Big 4
Deloitte joins fellow Big Four MOVEit victims PWC, EY [Cybernews]
The New York City-based global auditing and accounting firm appeared alongside 55 other MOVEit victims named by the Cl0p ransomware gang Wednesday, but Deloitte says the impact on its systems is limited. This makes Deloitte the third Big Four accounting firm to be claimed by the threat actors on its dark leak site. Pricewaterhouse Coopers (PWC) and Ernst & Young (EY) were named by the gang on June 23rd, leaving KPMG International as the only Big Four company seemingly unscathed in the massive hacking spree. “Immediately upon becoming aware of this zero-day vulnerability, Deloitte applied the vendor’s security updates and performed mitigating actions in accordance with the vendor’s guidance,” the company said in a statement sent to Cybernews Thursday. “Our analysis determined that our global network use of the vulnerable MOVEit Transfer software is limited. Having conducted our analysis, we have seen no evidence of impact on client data,” a Deloitte Global spokesperson said.
$20 an hour, clothing stipend, meals: How a Big Four firm is trying to get teens interested in accounting [CNBC]
By her own admission, Autumn Kimborough, 17, didn’t have a passion for accounting. But the rising high school senior from Flossmoor, Illinois, heard about a well-paid summer internship at KPMG, which included a $250 clothing stipend, and got excited. For the first time, the Big Four accounting firm organized a three-week session geared toward high schoolers with the specific goal of encouraging younger adults to consider a career in the field, according to Jennifer Flynn, KPMG’s community impact lead. Nearly 200 teenagers are participating in the summer internship program, which pays $20 or $22 an hour plus clothing and transportation stipends and meals, and includes a business etiquette class, among other skill-building tools. “I had some preconceived notions that it’s sitting at a desk,” Kimborough said, about being a CPA. “Now I’ve learned that with accounting you can travel and meet people and that drew me in.”
This week in tax: PwC Australia confirms ATO settlement [International Tax Review]
PwC Australia has confirmed that it reached a confidential settlement with the Australian Taxation Office as the tax leaks scandal was engulfing the firm, reported The Guardian on Wednesday, July 26. The firm has not divulged the details of the settlement. However, the agreement was reached in March 2023 just before the full extent of the confidentiality breaches at PwC were disclosed. Until June, PwC Australia claimed that the tax leaks were contained to one former partner, Peter-John Collins, who is under criminal investigation by the Australian Federal Police. Finally on June 5, the firm named 67 members of staff who appeared in emails linked to the leaks. Treasurer Jim Chalmers has said he was not aware of the settlement. “The specifics of that arrangement wasn’t part of our consideration – obviously it is now – and we will talk to the ATO about it,” he told the Australian Broadcasting Corporation.
PwC and a question of character [The Monthly]
A thorough telling of the PwC tax scandal timeline.
Here are excerpts from an email sent on January 6, 2016, in which a senior partner is reporting on the success of the “north American project”.
“We got this outcome because:
we identified US tech two years ago as representing a significant (at least for controversy!) upside sector for the Australian firm as the ATO reacted to problems it had with their structures, and [we] diligently built relationships with key offshore buyers.
we were aggressive in telling these relationships they needed to act early (heavily helped by the accuracy of the intelligence that Peter Collins was able to supply and our analysis of the politics).
we were first to them with innovative approaches to the problem. ([redacted] was critical in stimulating their thinking and presenting ideas no one else had, especially in relation to the first draft of the law).
… In total, we expect (based on fee estimates that we have agreed with clients) that revenue from this first stage of the MAAL projects will be approximately $2.5 million … Our work has been efficient and seamless – we have received some excellent client feedback as to responsiveness, the quality of our work and the dedication of the team. I hope I haven’t missed anyone who was part of this great effort.”
Tax
IRS Audit Processes Can Be Strengthened to Address a Growing Number of Large, Complex Partnerships [GAO]
More businesses have been organizing as partnerships. This allows them to pass income and losses to their partners instead of being taxed as corporations. Between 2002 and 2019, the number of large partnerships—with over $100 million in assets and 100 or more partners—increased almost 600%. The IRS audit rate for large partnerships has dropped to less than 0.5% since 2007. About 80% of audits conducted don’t find tax noncompliance. This may suggest that IRS isn’t choosing the riskiest returns to audit or doesn’t know how to find noncompliance in these businesses.
To combat fraud, IRS steps up ERC claim enforcement [Journal of Accountancy]
The IRS and Treasury are looking at new ways to fight rampant fraud in employee retention credit (ERC) claims, including possible congressional action to move up the claim filing deadline and stricter oversight of tax preparers, IRS Commissioner Danny Werfel said Tuesday at a special roundtable session of tax professionals in Atlanta. Werfel stated that, having cleared the backlog of valid ERC claims, the agency is intensifying compliance work and putting in place additional procedures to deal with fraud in the program. According to Werfel, the IRS has increased audit and criminal investigation work on these claims, looking into both promoters and businesses filing dubious claims. The IRS has trained auditors examining the claims that pose the greatest risk of fraud, and the IRS Criminal Investigation division is identifying promoters of fraudulent claims, he said. “The further we get from the pandemic, we believe the percentage of legitimate claims coming in is declining,” Werfel said. Instead, the IRS is receiving more and more questionable claims, which the IRS is addressing by intensifying its compliance work, he said.
At Work
Accounting profession must collaborate to keep up with tech developments, experts say [AccountancyAge]
UK accountancy bodies and firms must work together to continue supporting individuals’ professional development amid the “unprecedented” pace of technological advancements, according to Gail Boag, executive director of learning at ICAS. ICAS will undertake a major chartered accountant syllabus refresh in 2024, with ethics, sustainability, and technology becoming an even more prominent part of its offering. Boag says the refresh will mean ICAS keeps up with the pace of technology, data, and sustainability, introducing new courses like data risk and technology and data analytics and insights. “The speed of change in the industry is unprecedented, and it is a real challenge for any professional qualification to be future-proofed. I do think we and other bodies manage it well. “Let’s not forget, we can’t lose sight of the fact that as a professional qualification, we have to ensure that we will always cover that core technical knowledge and the skills that students need to understand.”
Passed over for another business opportunity? It may be because of your accent [CNBC]
Globally, nearly one in five workers say they’ve been passed over for business trips — not because of costs or lack of seniority, but because of the way they speak. In a survey of 3,850 business travelers in 25 markets, 18% of men and 16% of women said they felt they lacked equal opportunities for business trips because of their accents, according to a report published in June by SAP Concur. The results were most pronounced in Asia-Pacific, with the highest percentage of people saying their accents had affected their work travel coming from Australia/New Zealand (31%), Taiwan (26%) and Southeast Asia (25%). Overall, the survey showed more people felt their accents played a bigger role in their work travel opportunities than their physical appearance, ethnicity or sexual orientation.
Audit
The Potential Pitfalls of Purported Crypto “Assurance” Work [SEC Chief Accountant Paul Munter]
Following the recent waves of scandal and insolvency in the crypto industry, there has been a renewed focus on the firms, including accounting firms, that have been retained by companies in the crypto-asset space—in particular, crypto asset trading platforms. Certain crypto asset trading platforms, with others in the crypto industry, have marketed to investors their retention of third parties, sometimes accounting firms, to perform some sort of review of certain parts of their business, often presented as a purported “audit.” As accounting firms increasingly engage in this sort of non-audit work, their clients’ marketing and terminology risks misleadingly suggesting that these alternative, non-audit arrangements are at parity with, or even more “precise” than, a financial statement audit. Such suggestions are false. Non-audit arrangements are neither as rigorous nor as comprehensive as a financial statement audit, and may not provide any reasonable assurance to investors. The hazards to investors associated with such characterizations have been publicized by the Commission staff, PCAOB staff, and others. This statement is directed primarily to the accounting profession, including new entrants into non-audit service work for crypto asset clients. Accounting firms that choose to perform work in this space must keep several obligations and hazards front of mind.
AICPA debuts new practice aid for tech-enabled auditing [Journal of Accountancy]
The AICPA Auditing Standards Board’s Technology Working Group has developed a new practice aid, Use of Technology in an Audit of Financial Statements, that emphasizes how technology should be seen as a key enabler, elevating audit effectiveness and efficiency for the future. “This practice aid is a very important tool to help auditors, especially those in small- to medium-sized firms, make full use of technology to drive efficient, effective and high-quality audits,” said Samantha Bowling, CPA, CGMA, chair of the Auditing Standards Board Technology Working Group and managing partner of Garbelman Winslow CPAs in Upper Marlboro, Md. “The Auditing Standards Board encourages firms to optimize the use of technology and we believe that relevant examples like those in the practice aid can help firms do that.”
‘Audit considerations for digital assets can be extremely complex’ [CPA Canada]
PwC’s Ryan Leopold shares his views on the audit challenges presented by digital assets and the need for solid safeguards and controls in the area