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Municipal Dumpster Fires
Woonsocket city council respond to auditors abruptly quitting [WLNE Providence]
Shout-out Mary Sahady who finally had enough of this bullshit and told this messy client to get bent.
Woonsocket officials are hoping city auditors will change their mind, after they abruptly quit this past week. Woonsocket City auditors officially ended their contract with the city during budget season, citing the “lost confidence in the integrity of City Management.” In a letter dated May 28, Hague Sahady & Co., a certified public accounting company, wrote that the company reached the decision reluctantly and after substantial deliberation. In the letter, Engagement Principal for the Firm Mary Sahady wrote that the city has only provided 43 of the 110 total funds in the fiscal year June 30 2022 audit.
Horseheads Village audit uncovers several money/deposit/accounting issues [WETM New York]
An audit of the Village of Horseheads’ finances done by the New York State Comptroller’s Office shows several issues with the way the Village accounts for or deposits funds, including cash. The audit cites that Villages in New York are, by law, supposed to be audited every year, but The Village of Horseheads hadn’t had one since 2018.
Workplace
Gen Z really are the hardest to work with—even managers of their own generation say they’re difficult. Instead bosses plan to hire more of their millennial counterparts [Fortune via Yahoo! Finance] Resume Genius asked 625 U.S. hiring managers which generation is the most challenging to work with, and 45% pointed to Gen Z. What’s more, 50% of Gen Z hiring managers admitted that their own generation is the most difficult to manage. While just 4% of the hiring managers surveyed expect to hire baby boomers in the year ahead, a third admitted they will probably end up hiring Gen Zers. Despite being the most difficult generation to work with, Gen Z are the second most likely-to-be-hired job candidate of choice. The most popular? Their slightly more seasoned millennial peers (45%). In comparison, only 14% of the hiring managers surveyed expect to hire Gen X workers in the year ahead.
ConvergenceCoaching®, LLC Launches Its 7th Anytime, Anywhere Work™ Survey [ConvergenceCoaching]
Whether you’re a managing partner or just a grunt, you’re invited — and encouraged — to take CC’s Anytime, Anywhere Work Survey. We’ll remind you a few more times.
Originally released in 2014, the ConvergenceCoaching Anytime, Anywhere Work™ Survey has provided a platform for firms to elevate their flexible benefits and change firm culture. The Firm Leadership portion of the survey is designed for completion by one person from each accounting and consulting firm — usually the Managing Partner or a top HR professional. Those leaders are asked to provide information about their firm’s remote and flex work practices. The Team Member survey is open to anyone currently working in an accounting and consulting firm and multiple team member responses per firm are welcome.
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News
EY’s PR nightmare: A ‘secret drinking club’, misconduct allegations and resignations [Stuff]
It began in February with the departure of EY NZ’s chair over an “historical behavioural matter”, and continues. Earlier in May, Stuff revealed EY had launched a new investigation into misconduct allegations. Last week, two senior staff resigned under a cloud. So what is going on at EY, and why does it matter? Stuff is aware of three complaints against one senior male employee, and that there were EY partner-level discussions about him, but ultimately he was kept on. Another senior male staff member is the subject of multiple concerns voiced to Stuff, covering a range of levels of seriousness. At the lower end, a former female employee described keeping a folder of “inappropriate messages from [the man], usually ‘complimentary’ comments on my appearance, requests to join for drinks or comments along the lines of ‘I’d have more fun if you were here’”. She said she didn’t lodge a formal complaint about him, but felt her folder was “another example of females having to take action to safeguard against actions of their male senior leadership”. Another described the man as “a predator. [He] is just disgusting.”
Former PwC partner sues firm for allegedly linking him to tax scandal [Financial Review]
A former PwC Australia partner alleges people have shunned and avoided him after being incorrectly and publicly linked to the firm’s notorious tax leaks scandal. Richard Gregg, who successfully sued the firm last year for failing to follow proper process in its attempt to fire him, has filed a new claim of defamation and breach of contract against PwC and former acting chief executive Kristin Stubbins. The claim, filed on Wednesday against PwC and Ms Stubbins, stems from its response to the tax leaks scandal. As part of the fallout, the firm named Mr Gregg, a research and development incentive tax specialist, as one of eight partners who had left or were in the process of being removed from the firm’s partnership. Mr Gregg alleges the PwC statements have seriously harmed his reputation, caused him “substantial distress, embarrassment and hurt”, and economic loss. He is suing for aggravated damages and economic loss for allegedly being defamed.
Guidehouse claims the Defense Department did not conduct an adequate investigation into claims that a DOD official had a potential conflict-of-interest. [Washington Technology]
Guidehouse has renewed its protest over an $80 million Defense Department contract for audit remediation and sustainment services that went to Deloitte. A previous protest succeeded after Guidehouse raised issues around potential conflicts of interest. The Defense Department agreed to rethink the choice of Deloitte. Now Guidehouse has resurrected its protest after Deloitte won the contract for a second time. Here again, Guidehouse is raising issues about a conflict-of-interest because the chair of the technical evaluation board was a former Deloitte employee. In the first protest, the Government Accountability Office found that DOD did not conduct an independent investigation into Guidehouse’s allegations.
Audit
A prescription to curb corporate failures [Financial Times Opinion]
“Professional judgment is a critical feature of any audit,” according to the UK watchdog, the Financial Reporting Council, which in 2022 urged auditors to sharpen their scepticism. An independent mindset is particularly important when it comes to assessing whether a business is a “going concern”. Alongside internal controls and the potential for fraud, deciding whether a company risks going bankrupt is a critical focus for auditors. It is here, according to new research, that UK firms are falling short. It is understandable that auditors sometimes hesitate to pull the trigger on going concern warnings. Assessing future threats to a business is hard, as the unforeseen impact of pandemic and war has shown in recent years. Fraud — another area where auditors could be more alert — sometimes undermines their attempts to root out the truth. Conflicts of interest with more lucrative non-audit opportunities are a potential distraction for big firms.
China Vows Further Probes on Parties in Evergrande Fraud [Bloomberg]
The China Securities Regulatory Commission on Friday formally announced it will impose a 4.18 billion yuan ($577 million) fine on Evergrande’s onshore unit Hengda. Authorities are also poised to impose a fine of at least 1 billion yuan on PricewaterhouseCoopers LLP, which acted as an auditor for Evergrande, Bloomberg reported earlier this week. The Ministry of Finance may announce the penalties on PwC as soon as this week, people familiar said, asking not to be identified discussing a private matter.
AI
Deloitte: Enterprise Gen AI Moving Fast, but Change is Key [Technology Magazine]
According to the research, organisations with high levels of Gen AI expertise are leading the charge when it comes to scaling adoption across their operations. A full 73% of highly skilled AI firms report moving quickly to adopt Gen AI tools and systems across business functions. This group is doubling down by investing heavily in technology infrastructure and providing their workforces with extensive access to Gen AI capabilities. The most advanced firms understand that unlocking maximum value hinges on seamlessly integrating the technology throughout their processes and empowering employees to leverage it.
Banks could lose $40 billion from fraud with the help of AI, Deloitte predicts [Quartz]
As the banking sector continues to funnel resources into building up its artificial intelligence capabilities and offerings, scammers are leveraging the same technology to carry out fraud. U.S. banking losses from fraud could total $40 billion by 2027, up from $12.3 billion in 2023 — a massive sum enabled by widespread scams powered by generative AI, Deloitte said in its 2024 Financial Services Industry Predictions published Thursday. Generative AI uses data to create original content, like text, images, music, audio, and videos. Using the technology, bad actors can carry out mass fraud ranging from email and phone “phishing” scams, to using AI deepfake audios and videos to impersonate both clients and banks. The Deloitte Center for Financial Services estimated that generative AI email fraud losses alone could total approximately $11.5 billion in just four years in the case of “aggressive” adoption.
Deloitte’s report: Generative AI is expected to magnify the risk of deepfakes and other fraud in banking
EY Finds CEOs Prioritise AI Investments Over Sustainability [Technology Magazine]
EY has found that technology investments, including AI, remain a crucial strategic priority. The company’s Outlook Pulse survey confirms that UK-based CEOs in particular are feeling more optimistic about their immediate prospects, leading them to favour AI investments. This, according to EY, is so that they can gain a competitive advantage within the global business landscape. However, the survey also confirms that AI is being prioritised over sustainability targets. Nearly half (47%) of CEOs have confirmed that they are struggling to present a strong business case for sustainability investments.
Tax
Michael Jackson’s Heirs Have Not Received Any Money Amid Estate’s IRS Dispute [Rolling Stone]
The beneficiaries of Michael Jackson’s trust — specifically the King of Pop’s children and Jackson’s mother, Katherine — have not received any money amid a three-year dispute between the IRS and the late singer’s estate. According to Entertainment Tonight, Jackson estate co-executors John Branca and John McClain rejected a bid by the beneficiaries to have some funds released, with the executors citing the ongoing audit by the IRS. Back in 2021, the IRS issued a note of deficiency, claiming that the Jackson estate “undervalued its assets” and owed “an additional $700 million in taxes and penalties.” The estate and the IRS have volleyed about the audit over the past three years, with the situation exacerbated by legal in-fighting between 93-year-old Katherine Jackson and Michael’s youngest son, Bigi “Blanket” Jackson.
IRS announces tax relief for taxpayers impacted by severe storms and flooding in Massachusetts; various deadlines postponed to July 31 [IRS]
The tax relief postpones various tax filing and payment deadlines that occurred from Sept. 11, 2023, through July 31, 2024 (postponement period). As a result, affected individuals and businesses will have until July 31, 2024, to file returns and pay any taxes that were originally due during this period.
United States v. Eaton: IRS Summons Power Overrides EU Privacy Laws [National Law Review]
A US federal district court judge recently endorsed the broad investigative powers of the Internal Revenue Service (IRS) in United States v. Eaton Corp., No. 1:23-mc-00037, May 16, 2024 (N.D. Ohio). During its audit of Eaton’s transfer pricing of a royalty arrangement with Eaton’s Irish affiliate, the IRS sought performance evaluations of certain employees of the affiliate. Eaton declined to provide the evaluations citing relevancy and legal objections based on EU privacy laws. The IRS subsequently served Eaton with an administrative summons seeking the evaluations. In the ensuing summons enforcement action, Eaton initially prevailed before a magistrate judge on both grounds. However, the IRS persuaded the district court judge to reject the magistrate’s recommendation and enforce the summons.
Private Equity in the Profession
Grant Thornton Is Now the Biggest Accounting Firm to Get Private-Equity Backing [Wall Street Journal]
Yeah this surely will end well.
The New Mountain-led group’s investment constitutes a 60% stake in Grant Thornton’s U.S. unit and centers on the nonaudit business, people familiar with the matter said. But the new majority owners will also have a contractual relationship with the audit business through a management services agreement between the two entities, the people said. The sale will allow the firm to grow through acquisitions and investments in tech and personnel, likely at a faster pace and with less risk than it otherwise would have, said Seth Siegel, Grant Thornton’s U.S. chief executive. The firm aspires to be a more attractive acquirer of companies as it looks to expand its share among middle-market corporate clients, typically ranging from $100 million to $10 billion in annual revenue, he said.
What’s going on at Grant Thornton? [Accountancy Age]
You know it’s bad when sites that are normally way less negative than we are call things out.
Grant Thornton has announced the layoff of 350 employees, equating to approximately 3.5% of its U.S. workforce. This latest round of job cuts comes on the heels of two previous rounds in 2023, where the firm let go of 300 and 200 employees, respectively. The latest reductions span across the firm’s advisory, audit, and tax practices, up to the level of managing director. However, the timing of these layoffs, coinciding with the firm’s impending private equity deal, has raised eyebrows within the industry.
Bain Capital put 250 million dollars into Sikich for a minority position.
— Mike Sylvester, CPA (@MikeSyl36625988) May 30, 2024
I actually worked for a company Bain Capital bought called GST Steel. It went bankrupt.
Private Equity is getting into more and more public accounting firms.
It will not end well for public accounting.
