Big 4
Big Four Lobby Congress on Accounting Pipeline, AI, Crypto [Bloomberg Tax]
PwC spent the most at $3.27 million, Deloitte the least at $1.75 million.
The Big Four firms targeted a portion of their millions in Capitol Hill spending last year on a pivotal problem facing the industry: shoring up a dwindling supply of qualified accountants. Deloitte LLP, Ernst & Young LLP, KPMG LLP, and PwC LLP spent a combined $9.4 million directly lobbying Congress in 2023, focusing on issues such as digital assets and immigration requirements. Three of the firms also joined industry efforts to designate accounting as a science, technology, engineering, and math—or STEM—field, according to federal lobbying disclosures.
My buddy from undergrad works office security at one of the Big 4 accounting firms in Midtown. Look at what he confiscated from one of the young associates as they tried entering the building this morning. pic.twitter.com/9eNPzTsVb9
— rosey🌹 (@thechosenberg) February 9, 2024
PwC’s Leader Confronts Tech Competition, Evolving Workforce [Bloomberg Tax]
PwC’s choice of Paul Griggs as its next senior partner is a nod both to the firm’s roots as a tax and accounting firm, and to its future as the Big Four firms grapple with the tech transformation of their businesses and demands of the incoming generation of workers. It also signals that most partners don’t want a top executive to shake up the firm. Meanwhile, young workers who fuel their businesses expect to spend fewer hours on the job and to reap higher pay and more rewarding assignments much sooner in their careers than earlier generations. “They’re putting somebody in charge who’s been through this, who’s been seeing what their staff and their people need to be able to upskill, to be able to actually get all that technology background and be able to apply it,” said Nicole Wright, associate accounting professor at James Madison University.
Australian authorities allege PwC is ‘deliberately hiding’ tax scandal report [Financial Times]
Australian authorities alleged in a senate inquiry into a PwC tax scandal that the accountancy firm is “deliberately hiding” a report detailing how leaked government information was used outside the country. The Australian government launched a senate inquiry into the scandal last year. In a hearing on Friday, the Australian Taxation Office (ATO) said it was frustrated it could not access an internal PwC report into the scandal that was completed by law firm Linklaters. In a summary of the report, Linklaters said six unidentified partners outside Australia should have asked where the tax information had come from and that disciplinary action had been taken against them. The full report has not been revealed.
PwC ‘thumb their noses’ at Australia over tax scandal [The Telegraph]
PwC has been accused of “thumbing their nose” at Australia’s parliament after refusing to hand over key documents relating to a tax leaks scandal. The Big Four accountant came under fire after refusing to name six partners who used leaked government secrets for commercial gain. PwC was urged by Australia’s Senate committee on Friday to hand over the report detailing the partners’ actions and the disciplinary action they faced. However, the professional services firm refused, after claiming the report contained privileged and confidential information.
Birthdays
A CPA Firm Celebrates a Century in Business [The CPA Journal]
In today’s climate of accounting firm mergers, it is worth recognizing when a CPA firm has managed to remain independent and partner-owned for 100 years. Anchin, Block & Anchin LLP was founded in 1923 by Max Anchin, Max Block, and David Anchin, three City College of New York (CC N Y) graduates working out of a one-room rented office in the Bronx, N.Y.
Tax
Betting on the Super Bowl? ‘You gotta pay the piper’ on your winnings, says tax expert [NBC10 Philadelphia]
All gambling winnings are considered taxable income by the Internal Revenue Service, even if you aren’t a professional gambler. “Win big? You gotta pay the piper,” Romeo Razi, a certified public accountant based in Las Vegas, tells CNBC Make It.
IRS warns tax professionals to be aware of EFIN scam email; special webinars offered next week [IRS]
The IRS warned that scammers are posing as tax software providers and requesting EFIN documents from tax professionals under the guise of a required verification to transmit tax returns. These thieves attempt to steal client data and tax preparers’ identities, creating the potential for them to file fraudulent tax returns for refunds. To help protect tax professionals against this emerging scam, the IRS is hosting a special series of educational webinars aimed at the tax community. The sessions will begin Feb. 12 and run each day next week. “With filing season underway, scammers use this time of year to target tax professionals as well as taxpayers in hopes of stealing information that can be used to try filing fraudulent tax returns,” said IRS Commissioner Danny Werfel.
Former IT worker alleges NBN and EY left him with penalties on almost $400,000 in tax debts [ABC News Australia]
Abhishek Mishra doesn’t sleep or eat much these days due to the anxiety and depression he says he faced when he was sacked by his former employer. The former IT worker says he was left with a tax bill worth hundreds of thousands of dollars which he alleges was incurred because government-owned company NBN Co and accounting firm EY, failed to pay his tax bills, despite withholding the money from his pay. “To be honest I’ve been on heavy medication for depression,” he tells ABC News. “I am unable to sleep and I’m having continuous anxiety.” Mr Mishra was employed with NBN Co from 2016 to 2021 in a Mumbai-based centre as a senior manager. He’s now taken his case to the Victorian Supreme Court, alleging that NBN Co and EY have breached their employment obligations to remit the taxes and provide him with “proper and independent” taxation advice.
Technology
Big Tech boosts profits by $10bn with accounting change to server life estimate [Financial Times]
Microsoft, Google, Meta and Amazon added almost $10bn to their profits in the past two years by extending the estimated working life of their servers, an accounting change that will help soften the blow of future costs such as developing generative artificial intelligence. It resulted in a $6bn boost to income at Google and Microsoft alone last year. Other groups, such as Amazon, have extended the estimated lifespan of their assets even further this month, which will mean more profits this year.
Artificial Intelligence: The long-awaited saving grace of the accounting profession [The Arkansas Traveler]
According to research by Chartered Accountants Worldwide, accountants are consistently rated among the most trusted professionals alongside doctors and nurses, with around 80% of people trusting them to navigate the business world. In contrast, a KPMG study found that only around40% of people worldwide are willing to trust AI.
Why AI, mergers and advisory add up to cautious optimism [Accountants Daily]
Research shows that while 82 per cent of accountants are intrigued or excited by AI, only 25 per cent are actively investing in AI training for their teams. This is reflective of the greater business market, where 85 per cent have no plan to use AI in the next six months. Despite these numbers, we forecast more than 50 per cent of firms will start to adopt AI in some form this year. The majority are now using automation for at least some of their operations and this will grow as tech becomes more user intuitive and available.
The Use Of AI By Financial Executives And Their Auditors [Forbes]
Artificial Intelligence (AI) is starting to have the capabilities to improve both financial reporting and auditing. However, both companies and audit firms will only realize the benefits of AI if their people are open to the information generated by the technology. A new study forthcoming at Review of Accounting Studies attempts to understand how financial executives perceive and respond to the use of AI in both financial reporting and auditing. In an article titled “How do Financial Executives Respond to the Use of Artificial Intelligence in Financial Reporting and Auditing?” researchers surveyed financial executives (e.g., CFOs, controllers) to assess their perceptions of AI use in their companies’ financial reporting process, as well as the use of AI by their financial statement auditor.
EY collaborates with Dell Technologies to launch EY Edge Technologies Lab to help accelerate the value of data [EY]
The EY organization will use Dell NativeEdge, an edge operations software platform, combined with edge computing technologies such as the Dell edge gateway, Dell PowerEdge servers and Dell OptiPlex desktops to provide for various industry use cases. In collaboration with Microsoft, PTC, GE Digital, Snowflake and others, the development work at Lab will help businesses operate more efficiently and better leverage edge technology. The Lab is fully supported by EY Technology Strategy & Transformation team members, providing virtual interactions with clients.
Accounting software startup Pennylane becomes France’s latest unicorn [TechCrunch]
Just like clockwork, Pennylane is raising another €40 million ($43 million at today’s exchange rate). This new funding round comes after the accounting startup raised €4 million in 2020, €15 million in 2021, another €15 million in 2021 again, €50 million in 2022 and €30 million in 2023. You might think that it’s quite a lot of money for a company working on . . . accounting software?
Law & Order
BDO, Workers Strike $2.25 Million Deal Over 401(k) Plan Lawsuit [Bloomberg Law]
BDO USA LLP reached a $2.25 million class settlement with workers who say the accounting firm mismanaged their $1.2 billion 401(k) plan. The deal, announced Tuesday in the US District Court for the Northern District of Illinois, is expected to benefit more than 11,289 people covered by the BDO plan since April 2016. It would resolve a two-year-old lawsuit saying BDO filled its 401(k) plan with expensive and poorly performing funds and forced workers to pay annual recordkeeping fees of nearly $86 per person, when a reasonable annual fee would be closer to $35 per person.
Ex-EY tax partner’s new evidence thrown out as ‘an abuse of process’ [Australian Financial Review]
A Federal Court judge has thrown out a former EY Australia partner’s last-minute attempts to rely on new evidence to keep his name secret as “an abuse of process”, following allegations he promoted tax exploitation schemes before being sacked by the big four firm. The ex-partner applied for his name and the names of his former firm and clients to be suppressed, on the basis that he would be embarrassed and distressed if he were identified facing allegations of promoting tax exploitation schemes. This application was rejected in the first instance following opposition from The Australian Financial Review and the commissioner in October last year.
M&A
Citrin Cooperman Increases Florida Presence with Acquisition of Keefe McCullough [INSIDE Public Accounting]
New York-based IPA 100 firm Citrin Cooperman (FY22 net revenue of $432.4 million) has announced the acquisition of Keefe McCullough & Co. (FY22 net revenue of $13.3 million) of Fort Lauderdale, Fla., a full-service tax, attest and business advisory firm, effective Feb. 1, 2024. This deal is latest of numerous acquisitions Citrin Cooperman has made since it received private equity funding in 2021 from New Mountain Capital.
CBIZ acquires Colorado firm Erickson, Brown & Kloster [Crain’s Cleveland Business]
CBIZ Inc. has announced the acquisition of Erickson, Brown & Kloster (EBK), an accounting and business consulting firm in Colorado Springs, Colorado, in its first M&A deal of 2024. Concurrent with that transaction, the company notes that Mayer Hoffman McCann P.C., an independent CPA firm that works closely with CBIZ through an alternative practice structure, has acquired the attest assets of EBK.
Survey Says
From traditional to tech-savvy – accounting firms plan increased technology investment over next two years according to Caseware study [PR Newswire]
Investing in technology is a key priority for accounting firms as they move into 2024, while mitigating the ongoing talent shortage and keeping pace with new laws continue to cause challenges for many within the profession. This is according to findings from the 2024 State of Accounting Firms Trends Report [PDF] released by Caseware International, a global leader in cloud-enabled audit, financial reporting and data analytics solutions. Meanwhile, Caseware’s 2024 State of Internal Audit Trends Report highlights the need for technology expertise amid ongoing issues around attracting and retaining top talent.
Grant Thornton survey: CFO confidence is on the rise [Business Wire]
Grant Thornton’s Q4 2023 CFO survey, which polled 241 senior finance executives, revealed that supply chain expectations made a significant upswing this past quarter: Two-thirds (67%) of CFOs said they were confident their business could meet supply chain needs. That’s an increase of 22 percentage points over the 45% who reported confidence in their supply chains last quarter. It’s also the highest mark reported since the survey began asking the question in the fourth quarter of 2021. CFOs were also asked about their labor needs heading into a new year. Fifty-seven percent said they are confident that they can meet their labor needs, up from 49% in the third quarter. This was also an all-time high since the question’s inception in Q4 of 2021.
Deloitte’s ‘2024 Global Human Capital Trends’ Report Identifies Trust and Human Sustainability as Top Issues [PR Newswire]
Human performance — the mutually reinforcing cycle of business and human outcomes — shows that instead of prioritizing business issues at the expense of human outcomes, organizations should take a human sustainability approach to improve outcomes for workers, customers, and society more broadly.
Most leaders understand that focusing on human performance is key to building thriving organizations, but they need to close the gap between knowing that issues should be addressed and doing enough to make meaningful progress.