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.
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Long Read
Corporate Self-Oversight [The American Prospect]
Four auditing firms examine the books of nearly every big U.S. company, in a process riddled with conflicts of interest. But federal monitoring is making a comeback under new leadership.
AI
Is your firm keeping pace? How AI is transforming audit [Thomson Reuters]
In the past, auditors have heavily relied on manual processes to uncover risks in financial statements and business operations. Although this approach has been somewhat effective, it is certainly time-consuming and susceptible to human error. The advent of AI is bringing about a transformation in auditing, empowering firms to leverage data analytics and machine learning for improved efficiency, accuracy, and profitability. How? AI algorithms can swiftly analyze extensive datasets and detect patterns, anomalies, and potential risks at an unprecedented speed. This allows auditors to shift attention to more complex and strategic work, like interpreting results and offering experience-based insights to clients.
KPMG’s U.S. CEO: ‘The ubiquity of GenAI and just how disruptive it will be is creating greater demand for our services’ [Fortune]
KPMG US CEO Paul Knopp wrote a little something for Fortune.
As GenAI continues to be pervasive in many different industries and areas, it will be critical for public and private sector actors to establish trusted AI programs with clear ethical guidelines and controls for GenAI use within the organization, emphasizing transparency, fairness, and accountability. However, companies that win the long game on AI will go further by equally prioritizing reliability, security, and safety, as well as data integrity. Indeed, trust is not built on mitigating risks alone. GenAI can and should be harnessed for good. Our survey found that consumers are most excited about its potential to improve mental and physical health by identifying health risks and reducing mundane tasks, identifying and protecting organizations from cybersecurity attacks, and creating new sustainability strategies for reducing carbon emissions.
News
Pride Toronto repaying over $505K after federal grant controversy [CBC]
Pride Toronto is repaying just over $505,000 in grant funding after an accounting firm found the organization could not prove that it completed several projects despite receiving $1.85 million from the federal government. In a statement sent to CBC News, Pride Toronto Executive Director Kojo Modeste said the organization is repaying $505,504 total to the federal department of Canadian heritage. This comes after KPMG, which was hired by the organization in 2021 to review its compliance with agreements for three federal grants, found that documentation was lacking. Pride “encountered challenges in locating supporting documents for certain expenditures spanning the years 2017 to 2021,” Modeste said in the statement.
‘€600k to pay off her overdraft’: aide lifts lid on Monaco royals’ lavish spending [The Guardian]
TLDR: Prince Albert II’s longtime accountant got fired, accountant released all the dirty laundry. To the media!
For more than two decades, Claude Palmero held the purse strings of the House of Grimaldi, hereditary rulers of the millionaire-packed Mediterranean principality of Monaco since the 13th century and among Europe’s glitziest royals. For 22 years as principal asset manager to the house’s current head, Prince Albert II, the bespectacled accountant handled its investments, oversaw its expenditures and – as best he could – balanced its books. Now he is spilling the beans, and in devastating fashion. Unceremoniously sacked last summer amid unverified allegations made on an anonymously run website of financial impropriety at the palace, Palmero, 67, is not only suing for €1m but is also, it seems, bent on doing more than mere pecuniary damage. Five black notebooks filled with details of the family’s dealings have found their way to the French media, and Palmero has spoken at length to Le Monde for a series of articles shocking even in a playground for the super-rich.
Ben Affleck to Shoot Sequel to ‘The Accountant’ This Year [Collider]
The original film revolves around the character Christian Wolff, portrayed by Affleck, who is a highly skilled accountant with a unique background and set of abilities. Wolff is a mathematical savant with a high-functioning form of autism. He has extraordinary numerical skills and a meticulous eye for detail, which he applies in his work — by day, appears to be a certified accountant running his own office, but in actual fact, serves as a forensic accountant for nefarious underworld organizations. The film was a commercial success. It grossed over $155 million worldwide against a budget of approximately $44 million when it was released, defying mixed reviews from critics, although Affleck’s performance was widely praised.
`The recession that wasn’t’: Why EY-Parthenon is sticking by a soft-landing view [MarketWatch]
A scenario in which the U.S. economy averts a downturn while inflation eases remains the most likely outcome this year in the minds of economists like Lydia Boussour at EY-Parthenon. In an email titled ‘The recession that wasn’t,” she wrote that she’s sticking by the soft-landing view “even if a collection of headwinds and risks means that recession odds are around 35%.”
Firm Watch
PCAOB Sanctions Haynie & Company and Four of Its Current and Former Partners for Audit and Quality Control Violations [PCAOB]
PCAOB imposes $590,000 in total fines, requires firm to engage independent consultant, bars engagement partners, and imposes practice limitations on engagement quality review partners.
Malcolm Gomersall steps up as new CEO of Grant Thornton [AccountancyAge]
Grant Thornton UK as confirmed the appointment of Malcolm Gomersall as its new Chief Executive Officer. Gomersall, who has been with the firm for over two decades, will take the helm following the departure of Dave Dunckley. Gomersall, a seasoned audit partner, has been with Grant Thornton for more than 20 years, serving in various leadership roles. His tenure includes positions as Head of London Audit and Tax, Head of People and Client Experience, and most recently, Chief Operating Officer since 2019. His appointment as CEO, subject to regulatory approval, marks the beginning of a new era for the firm. “I am immensely proud of the progress our firm has made over the past few years and I look forward to continuing this momentum in the years to come,” Gomersall stated.
Good Luck With That!
There’s a shortage of accountants in the U.S. Here’s what to do if you can’t find one for tax season [CNBC]
Accounting has a reputation of long work hours coupled with stressful deadlines, leading college students to opt for other lucrative roles in finance like investment banking, consulting or data analysis. The declining birth rate also plays a role into the low supply of accountants, according to Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs. “It is reflective of a declining population of individuals who are pursuing those degrees that would allow them to sit for the CPA exam, but that’s coupled with the fact that there’s less students in general,” Grzes said.
They actually said “good luck” twice in that article 😂
Good luck! pic.twitter.com/tJCOc7GgIA
— Blake Oliver (@BlakeTOliver) January 25, 2024
Practice
State of the Profession [The CPA Journal]
The ninth annual 2023 NYSSCPA-Rosenberg Survey identifies trends from the national 25th Annual Practice Management Survey and provides profitability and growth data of participating New York CPA firms. This survey reflects many of the challenges that professionals in CPA firms of all sizes are currently facing. “Our profession is experiencing unprecedented pressure from the economy, staffing shortages, technology, and competition,” noted Charles Hylan of the Growth Partnership and Rosenberg Survey (Rosenberg Survey, p. 2). These challenges include a continuing presence of the COVID-19, fewer college graduates entering the accounting workforce, and increased levels of employee turnover and severe staffing shortages, “resulting in people being stretched to their limits,” according to Hylan (p. 2). Additional challenges noted by the survey include how to manage a remote workforce, outsourcing workflow initiatives, technology integration, and the acquisition of professional accounting practices by private equity investors and special purpose acquisition companies (SPAC).
From the above CPA Journal piece tho…
❌!
— Going Concern (@going_concern) January 26, 2024
"[Remote work is] harmful to job satisfaction because people lack the person-to-person contact they crave." pic.twitter.com/e1Emebn404
IRS continues work on Employee Retention Credit; new IRS CI education sessions come as agency urges businesses to review VDP, withdrawal program for questionable claims [IRS]
The Internal Revenue Service renewed calls today for businesses to review their eligibility for the Employee Retention Credit as the agency’s law enforcement arm, Criminal Investigation (CI), begins a series of educational sessions for tax professionals. In the latest effort, CI special agents will host a series of educational sessions geared specifically to tax professionals about ERC at its field offices across the country. The sessions will take place in February and are part of a nationwide initiative to ensure that tax professionals have the latest information about ERC claims and understand ERC eligibility criteria.
What the Kids Are Doing
County Durham accountancy firm trainees become fully fledged accountants [East Durham News]
Every intern should get a photoshoot and article in the local news when they get hired on full-time.
North East accountancy firm Mullen Stoker is pleased to announce that two of its promising students have successfully passed their Association of Accounting Technicians (AAT) qualification with flying colours. Jon Burgon and Mat Daff have both completed all four levels of the qualification with excellent results in all 15 examinations. The next step for them is to complete additional training modules which enable them to secure ‘Chartered’ status – the benchmark for all accountants.
NU accounting students offering free tax prep help [Niagara Gazette]
Accounting students from Niagara University’s Holzschuh College of Business Administration and members of its Accounting Society and Beta Alpha Psi will again provide members of the Niagara Falls community free tax preparation assistance through the Internal Revenue Service’s Volunteer Income Tax Assistance program, which offers free tax help for low- to moderate-income families, persons with disabilities, the elderly and those with limited English proficiency.
Opinion
Editorial: Crisis at Chicago corporate heavyweight ADM rekindles bad memories of accounting scandals of yore [Chicago Tribune opinion]
Archer Daniels Midland may be just a vaguely familiar corporate name to a lot of Chicagoans but the commodities trader and food processor is the second largest publicly traded company based here — 35th overall on the Fortune 500 list — and it’s suddenly in trouble. In corporate America, the chief financial officer’s standing often is as important as that of the chief executive officer. The CFO is in charge of the books and what’s reported to the public, and whenever there are questions about improprieties in disclosure at big publicly traded companies, alarm bells ring. So shareholders didn’t wait to hear details before selling in droves when ADM on Sunday reported that it placed CFO Vikram Luthar on administrative leave and was investigating accounting practices in one of its key business units. The stock is down 25% since the news hit and is trading at levels last seen three years ago.
Talent
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- Certifications: EA
- Experience (years): 13 total, 7 in tax
- Work experience (highlight): Tax Accountant roles with public accounting firms
- Has reviewed 1040, 1065, 1120S and 990 returns; also worked with clients on more complex returns including investment portfolios, foreign income exclusion, rental properties, income generated while in other states – multi state returns, stock options, schedule C, and schedule F
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Accountants Behaving Badly
This accounting trick got a techie quietly working in porn charged with tax evasion [MarketWatch]
On the surface, David Erickson appeared to be an average tech entrepreneur who had long worked in developing and operating online-payment-processing businesses. But federal prosecutors say the Erickson, a certified public accountant by training, had quietly amassed a fortune through an overseas adult webcam business, and then evaded paying millions of dollars in taxes by claiming that the money he used to buy a mansion and a car worth nearly $200,000 was from loans and not income.
Cumberland County accountant whose office was raided last week faces 72 felony charges, police say [FOX43]
A Camp Hill accountant whose office was raided last Friday by local, state, and federal law enforcement agents has been charged with a total of 72 felonies, according to a criminal complaint affidavit filed by Camp Hill Police. Brian W. Wade, 43, of Mechanicsburg, was arrested on Thursday, six days after Camp Hill Police, East Pennsboro Police, and investigators with the Attorney General’s Office and the IRS served a search warrant at his Camp Hill office, located on the 3400 block of Trindle Road. Wade is accused of failing to perform the work he’d been paid for by multiple clients, which included bookkeeping, tax preparation and filing, payroll work, and more, according to police. He also allegedly applied for multiple credit cards in his wife’s name without her consent, ran up debts on them, and did not pay them off, police claim.
Former Kentucky accounting firm employee guilty in $363,657 theft from a client [Lexington Herald Leader]
A Central Kentucky woman has admitted stealing more than $300,000 from a client she worked for as a bookkeeper. Irene Michelle Fike pleaded guilty Tuesday in federal court to one charge each of wire fraud and aggravated identity theft. According to her plea document, Fike worked at an accounting firm in Winchester from 2016 to 2021, and as part of her job had access to financial information on a client identified in the document as J.M. Fike, of Winchester, did bookkeeping work for J.M. and her family. J.M. lived in Lexington at the time but later moved to South Carolina. After Fike left the accounting firm in the fall of 2021, J.M. hired her as an independent contractor to help with paying bills, bookkeeping and other matters, according to the court record. Fike used QuickBooks software to create and update financial records for J.M., the court record says.