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.
Comments are closed on Friday Footnotes and the Monday Morning Accounting News Brief by default. If you have something to say about any stories linked here you are welcome to contact the editor or hit us up on Twitter @going_concern. Footnotes stories are usually organized by topic, due to the holiday we’re lumping everything together today. Bye!
KPMG extends pay freeze to 12,000 UK staff [Financial Times]
Bosses at the Big Four accountancy firm told staff across its four divisions in recent weeks that they would not receive a pay rise this year unless they were promoted, according to people familiar with the matter. The move comes just weeks after KPMG — where UK partners last year earned on average £717,000 — launched a fresh round of job cuts and froze pay in its deals advisory arm following a prolonged slowdown in dealmaking. UK inflation stood at 4.6 per cent in October, meaning a freeze will result in real-term pay cuts. Bonuses will also be cut, with staff in KPMG’s 2,900-strong tax and legal arm receiving 55 per cent of the full amount that could have been paid, an insider said. The pay freeze will not affect the firm’s graduate and apprenticeship staff, according to the people familiar with the situation.
PricewaterhouseCoopers cuts Canadian jobs, faces legal challenge over severance [The Globe and Mail]
Global accounting giant PricewaterhouseCoopers LLP has become the latest major financial institution to reduce its Canadian work force – though many recently terminated PwC employees are unwilling to go quietly. Dozens have reached out to employment law firm Samfiru Tumarkin LLP in recent weeks claiming they were fired without adequate severance. The layoffs, which have not been announced publicly, have affected several teams and business units across Canada, according to two sources familiar with the matter. The Globe and Mail is not identifying the sources because they were not permitted to discuss the matter publicly.
EY in talks to abandon London headquarters [The Telegraph]
EY is in talks to abandon its London headquarters in the latest sign of an accelerating office slump as working from home transforms professional life. The Big Four accountant is understood to be examining its options after launching a property review of its More London office, near London Bridge. The 10-story building, located on the south bank of River Thames between London Bridge and Tower Bridge, has been the headquarters of EY’s UK and Ireland businesses since 2003 and hosts about 9,000 employees including its global executive team. The partnership is considering ditching its tower block as staff increasingly work remotely. EY moved to a hybrid work policy in 2021 “with the expectation that most of its people will normally spend at least two days a week working remotely”.
Accounting Education Disrupted [CPA Journal]
Although emerging technologies have disrupted the entire accounting ecosystem in recent years, the education realm has been one of the areas hardest hit. Declining enrollments and decreased numbers of CPA candidates have presented formidable challenges for institutions of higher learning. The authors give their perspective on the root causes underlying today’s negative trends and their recommendations on how the profession and its institutions can transform, adapt, and survive.
Tax Court Provides Evidentiary Lesson On Professional-Reliance Defense [Forbes]
Reasonable cause is a common defense to civil tax penalties. Generally, taxpayers fall within the contours of reasonable cause if they can show that they exercised ordinary business care and prudence—for example, with respect to a filing obligation or regarding an item claimed on a tax return. Taxpayers who use tax professionals can sometimes also show reasonable cause—i.e., ordinary business care and prudence—to the extent the taxpayer reasonably relied on the substantive tax advice of their tax professional. This professional-reliance defense can negate penalties, even if the advice ultimately proves wrong. But blind reliance on a tax professional to prepare a tax return is not sufficient to meet the reasonable cause standard. A recent Tax Court opinion demonstrates this point well.
What UK firms should learn from the US accountant shortage [AccountancyAge]
The reasons for the shortage are multifaceted. There is significant pay gap between accounting and other careers as one of the key deterrents for entering the profession. For instance, from 2017 to 2021, accountants aged 25-29 had a median salary of $56,000, compared to financial analysts who earned around $74,000. Furthermore, the perception of accounting as a tedious field, coupled with long working hours and a stressful environment, has contributed to the shortage. The shortage is also not limited to tax accountants but extends to those involved in financial planning, auditing, and other accounting tasks. Even large firms with substantial recruitment resources, such as PwC are finding it challenging to hire accountants. This situation is especially burdensome for middle-market companies, which rely heavily on accurate financial reporting and auditing. While the shortage has not get rippled across the Atlantic as severely, some of the challenges the US market are facing, are also being experienced among firms in the UK.
Boulder Valley CPAs and Accountability Services Announce Strategic Merger [EIN Presswire]
Ernie Villany, Founder and Managing Partner of Boulder Valley CPAs, remarked, “We’ve invested significantly to transition our business model to become the proactive strategic advisors our clients need. This merger is the next step in our evolution, bringing an even wider array of resources and services to our clients.” Lera Kooper, Firm Director and Co-owner of Accountability Services, echoed this sentiment, stating, “This merger represents an exciting expansion of expertise and resources, reaffirming our commitment to building strategies beyond financial statements for our clients.”
Wilko bosses and auditor to be quizzed by MPs over retailer’s collapse [Financial Times]
The former bosses and auditor of collapsed UK retail chain Wilko have been summoned to appear before MPs next week to explain why the 92-year-old company went bust. The Commons’ business and trade committee has written to Wilko’s former chief executive and chair, and representatives at accountancy firm EY, to ask about the shortfall in Wilko’s pension fund and dividend payments it made “when it was heavily indebted”. Wilko was one of the biggest retail casualties in the UK since the collapse of Sir Philip Green’s retail empire and department store chain Debenhams. It had 400 shops and employed about 12,000 staff before it disappeared from the high street.
‘7 out of 10 internal auditors shun professional bodies’ [Accountants Daily]
The Institute of Internal Auditors (IAA) has revealed that only one-third of the estimated 10,000 internal auditors belong to its association and that may be contributing to a decline in standards. IAA Australia chief executive Peter Jones said its members were required to abide by global standards and a code of ethics, but 70 per cent of auditors belonged to no professional body. “There are a lot of people out there practising as internal auditors and we know that they’re not members of ours,” he told a Parliamentary Joint Committee hearing on audit, assurance and the consulting industry. “Internal audit is not a mandated profession within Australia so the law does not require people who practice as internal auditors to be members of an association.” Mr Jones said it would be unsurprising if many of the professionals providing consultancy services to the government were not bound by professional codes.
PwC hires new chief risk officer, commits to stronger controls [Australian Financial Review]
PwC Australia has conceded its internal controls were “immature” and committed to stronger management of risks and conflicts as well as appointing an external chief risk officer as the firm seeks to re-establish its reputation after its tax leaks scandal. On Thursday, the Financial Review reported that PwC Australia will delay appointing new partners for the second time since the tax leaks scandal broke. Candidates will have to submit a new business case to justify becoming a partner in July 2024, instead of January. The firm has also managed to redeploy 37 staff originally earmarked for redundancy, bringing down the total number cut earlier in the month to about 300, or less than 4 per cent of its 8000-strong workforce.
