A couple of weeks ago, on the same day Adrienne was writing her post based on a tip we received about a CPA exam taker’s missing FAR score, another tip came through the inbox:
My Big 4 firm is screwing me out of a hefty vacation carryover payout. I submitted my resignation 12/26, it was acknowledged, then I was told 1/3 that (due to new policy in place as of 4Q19) my carryover from 12/31 would not be paid out. HR refuses to retroact my resignation date and is not offering any concessions, despite my having been with the firm for almost 6 years.
I did a little investigative journalism (OK, I snooped on this person’s LinkedIn profile) and saw that they worked at EY. So I asked if EY was screwing everyone by silently putting this new policy in place without telling its employees, which we know accounting firms sometimes do. And accounting firms aren’t known for their transparency, especially around anything to do with pay. This person wrote back:
Up until 9/30/19, vacation was accrued from 10/1-9/30 (concurrent with the promotion year). At 10/1/19, however, vacation accrual was changed to follow the calendar year. This change was sent out via email and was mentioned during a broadcast, but there was no mention of impact on payout for those leaving the firm. My carryover was just under 200 hours.
Damn, that sucks.
On this person’s last day at EY, they sent a complaint letter to HR hoping to get the situation resolved. Here’s the letter (all names have been whitened out in the document):
Welp, unfortunately for the now-former EYer, the situation wasn’t resolved to their satisfaction. They told us:
I closed the loop with HR on Friday [Jan. 10] and they’ve taken no responsibility on failing to provide me complete communication. They took the position that as an employee, I should be aware of all HR policies (regardless of if/when they are relevant to me). I explained that if I had failed to provide a client such critical information, I’d be gone, and crickets.
So we were wondering, has anyone else who recently left EY been screwed over by not getting their vacation payout due to this new policy? And those of you who’ve made the switch from public accounting to industry, did you have any problems getting the money you were owed for the vacation time you accumulated at your firm before starting your new job? Leave any horror stories you have in the comments section.
UPDATE: Earlier this evening, I got a message from another ex-EYer who said they had a similar situation with PTO payout as the person featured in this article.
I contacted my People Consultant who did my exit interview in early January and told me on that day that I would be paid out. When we spoke later, [the People Consultant] stated that [they were] caught off guard about it as well and was powerless to do anything. In my case I agreed not to leave prior to Christmas and work over the holiday in order to help out my team with the understanding that I would be paid out for that PTO. The partner on that engagement said “well, that sucks for you” when I told them that I made that decision based on that information.
If you had asked me my opinion of the firm on the day I left I would have said “Great place to work, would recommend.” Now I would urge caution. It seems like a horrible play for EY to screw over people they want to call “alumni” and “network contacts” on a technicality they created, caught their own HR by surprise and is ultimately not much money for the firm but pretty big for us. That PTO is time we have up for the firm, time we will never get back. They can at least pay us for it.
If any other former EYers were affected by this new policy and weren’t paid for their unused vacation time, get a hold of us using the contact information below (all tips are anonymous) or let us know about your situation in the comments section.
Welcome back to another installment of … uh … we never did name this series, did we? My bad. Well whatever, welcome back to another installment of us interviewing folks around the accounting profession who have mastered the art of working smarter, not harder. This series is brought to you by our friends at Gusto; if our interview subjects are masters at working smarter not harder, then the folks at Gusto are PhDs, at least when it comes to payroll and employee onboarding. If your resolution for 2020 is to make the switch from traditional payroll and enjoy the ease of a killer alternative, give them a shout and they’ll be happy to help you.
Marcus Mire
Today, we’re sitting down with Marcus Mire, partner at Lafayette, LA-based CPA firm PRM CPAs + Advisors LLC, and by “sitting down” we mean “sharing a convo we had with him via email a few weeks back for the purposes of this article.” Just so everyone is clear. (Conversation edited and condensed for clarity.)
Going Concern:Let’s start with the basics, tell us about PRM. Most importantly, what services do you offer?
Marcus Mire: Tax compliance and planning, advisory/consulting, bookkeeping, and payroll.
GC:So a veritable smorgasbord. What about the culture at your firm? Everyone’s always talking about firm culture.
Mire: We have a fun culture comprised of a work hard, play hard mentality. We work as a team and have each other’s back.
GC: That’s important for sure. So what made you want to join your firm?
Mire: I joined PRM after being a sole proprietor for a few years to share resources with other like-minded professionals.
GC: Alright so you’re trapped in an elevator, and the person you’re in there with is starting to panic. In order to calm them down, you make small talk. They ask you what you do for work, how do you respond?
Mire: I help clients meet their goals. Anything I can do toward that end is a win in my book.
GC: So one thing that I absolutely need in order to get my work done is Slack so my colleague can pester me about getting my weekly newsletter column to him. What tools can you not live without at work?
Mire: Xero, Teamwork, Gusto, Excel.
GC: Bonus points for the Gusto mention, well played. How’d you first hear about them?
Mire: Colleagues from across the country that I met in XPAC (Xero Partner Advisory Council) sold me on Gusto. It was a great move.
GC: Even with a glowing recommendation, sometimes you can still be surprised once you pull the trigger. What’s been your biggest surprise about partnering with Gusto?
Mire: The ease of onboarding and the support from my rep, Griffin Kauvar. She has gone above and beyond to ensure a smooth transition for my clients.
GC: This might be a tough question because there are so many possible answers, but in your opinion, what’s the best perk of partnering with Gusto? Besides the referral bonuses, obvs.
Mire: The fact that they take tasks like payroll tax deposits and payroll tax returns off our plate and integrate with Xero.
GC: Alright, now some easy questions about YOU. What do you eat for breakfast?
Mire: I usually don’t eat breakfast.
GC: Me neither, unless coffee counts. How ’bout this: How do you relax after a stressful day?
Mire: Conversation with my wife over a glass of wine. She brings a thought process to my daily problems that is so different than mine.
GC: Lucky guy. Now tell me a fact about you that would surprise people to hear.
Mire: After watching my daughter perform in “Matilda,” I love musicals! My wife and I are going to see “Jersey Boys” soon.
There you have it, folks. If you missed our previous conversations, go ahead and catch up with Bruce Phillips of Aprio Cloud and Nayo Carter-Gray of 1st Step Accounting if you’re so inclined. So if you’re ever stuck in an elevator with either of them, you’ll be able to tell them you know a surprising fact about them that no one else could ever possibly guess. And while you’re in a click-happy mood, be sure to stop by and say hi to our friends at Gusto so you can say you were into headache-free payroll before it was cool.
PwC under growing scrutiny as scandal engulfs Isabel dos Santos [The Guardian] PwC, the global accounting firm battling to distance itself from a financial scandal engulfing Africa’s richest woman, Isabel dos Santos, was auditing the books of Angola’s state oil company during a period that is now under criminal investigation. Critics say PwC’s work for Sonangol, the government-owned oil group that underpins Angola’s economy, raises conflict of interest concerns because the firm appears to have been retained to check the company’s accounts while at the same time collecting fees to advise on a major restructure.
Heads could roll at PwC over Isabel dos Santos links, says chairman [The Guardian] BoMo says PwC will investigate whether any individuals at the partnership should lose leadership positions, have their bonuses docked, or lose their jobs.
“We’ll look at the individual behaviours, as to whether they come out of leadership roles or have compensation implications, or maybe even [come] out of jobs,” Bob Moritz said, on the sidelines of the World Economic Forum in Davos. “We’ll wait for the investigation, I don’t want to rush. But we need to move with speed to take action to regain confidence.”
PwC executive leaves firm after Dos Santos revelations [BBC] Jaime Esteves was the head of tax at PwC in charge of Portugal, Angola, and Cape Verde before leaving the firm. PwC helped Ms Dos Santos with auditing, consultancy, and tax advice for her companies.
KPMG is pursued over auditing of Goals Soccer Centres [The Times] KPMG is facing legal action over its auditing of Goals Soccer Centres, months after the chain collapsed following an accounting fraud going back almost a decade. Deloitte, which acted as administrator to Goals, is understood to be chasing KPMG over an alleged misdeclaration of the company’s VAT liabilities for several years.
EY holds ‘belonging’ workshops after discrimination claims [Financial Times] EY is sending staff to workshops on “belonging” after a string of complaints about discrimination and inappropriate behaviour at the accountancy group’s deals unit. Steve Ivermee, head of Transaction Advisory Services, urged employees to attend sessions “to hear your experience of our culture and to share and learn from each other’s experiences of belonging.”
Peterborough businesswoman Kathryn Windrem has passed away [kawarthaNOW] Windrem was a certified general accountant and partner at BDO LLP in Peterborough for more than 35 years. She was a past chair of the policy board at BDO Canada LLP.
Grant Thornton CEO Kevin Ladner Reappointed for Second Term [Grant Thornton Canada] In a unanimous decision, the Partnership Board of Grant Thornton LLP in Canada reappointed Kevin Ladner as executive partner and CEO for a second term of five years, effective April 1, 2021.
Pentagon Racks Up $35 Trillion in Accounting Changes in One Year [Bloomberg] The Pentagon made $35 trillion in accounting adjustments last year alone — a total that’s larger than the entire U.S. economy and underscores the Defense Department’s continuing difficulty in balancing its books. The Defense Department acknowledged that it failed its first-ever audit in 2018 and then again last year, when it reviewed $2.7 trillion in assets and $2.6 trillion in liabilities. While auditors found no evidence of fraud in the review of finances that Congress required, they flagged a laundry list of problems, including accounting adjustments.
Goodwill Sparks Deep Division, at Least on Balance Sheets [Wall Street Journal] A brewing battle over how to treat more than $5.5 trillion in assets on company books is pitting investors against businesses, investment advisers against academics and even banks against their own trade association.
How International Auditing Rules Are Shaping Standards in the U.S. [Wall Street Journal] A Q&A with International Auditing and Assurance Standards Board Chairman Tom Seidenstein, who said about audit firms not being required to care about IAASB standards:
It’s like the ultimate market test of the relevance of your standards if people want to adopt. And so it’s a privilege that we have. We have to convince people that it’s continually worth doing. I’m committed to the cause that global standards make sense set by an independent body, but that’s not always the international consensus, so we really have to earn our keep. There’s a number of issues in a number of jurisdictions today that are raised about the value of the audit. Our strategy really has to be focused on it.
Plus, a Las Vegas tax preparer pleaded guilty to filing bogus returns, and a New Jersey tax preparer pleaded guilty to tax evasion.
Naperville man convicted of theft 25 years ago charged again with swindling woman’s estate [Chicago Tribune]
Raymond Parcon, who went to federal prison 25 years ago for embezzling more than $1 million from Arthur Andersen, has been hit with new fraud charges accusing him of swindling a woman’s estate out of nearly $90,000.
Parcon, 67, was charged with wire fraud in U.S. District Court on Jan. 22. Here’s why Parcon is again in trouble with authorities:
Parcon operated a tax preparation business in Naperville [Illinois] and prepared returns for the victim’s estate after she died in 2015.
In April 2016, Parcon created a phony document claiming the estate owed about $66,000 in taxes to the Internal Revenue Service and gave it to the executor of the estate, who was the woman’s nephew.
Parcon told the executor he’d paid the tax bill through his accounting business, even though he hadn’t paid a penny because the bill was made up, the charges alleged. The executor then cut a check to Parcon for the $66,000, according to the charges.
Later that year, Parcon gave the executor a fabricated letter purporting to be from the Illinois Department of Revenue claiming the estate owed the state nearly $13,000 in additional taxes, according to the charge. Again, Parcon told the executor that he’d paid the outstanding bill, and in July 2016 he accepted a $12,944 check as reimbursement from the estate, according to the charge.
Parcon repeated the phony tax claims three more times in 2017 and 2018, collecting a total of about $10,300 in supposed back payments from the estate, the charge alleged.
Judge postpones sentencing for Nxivm accountant Kathy Russell indefinitely [New York Post] Kathy Russell was set to be sentenced in Brooklyn federal court this week after pleading guilty last April to visa fraud for her role in the cult-like upstate organization.
Kathy Russell
But her lawyers have asked to push it back to April 21 while waiting for the probation department to issue a recommendation for Russell’s sentence. Judge Nicholas Garaufis agreed to move it, but did not set a new date.
Russell, 62, was arrested alongside Nxivm leader Keith Raniere and a slew of other top members in 2018 following bombshell allegations that women in the purported self-help group were being kept as “slaves” and were forced to have sex with Raniere.
She ultimately admitted to the visa fraud charge for knowingly presenting phony documents to a consulate in Mexico to bring a Nxivm member into the U.S. under false pretenses.
Accountant must serve jail time, repay thousands embezzled from Roanoke companies [Roanoke Times]
Amanda Garrison, a bookkeeper who stole more than $26,000 from two passenger service companies in Roanoke, VA, will have to pay restitution and serve 30 days in jail.
Garrison, 40, pleaded guilty in September to one count of embezzlement, a charge that came about when she did accounting work for both Roanoke Airport Transportation Services and Yellow Cab of Roanoke, which share the same owners.
Authorities said on Jan. 21 that Garrison wrote 32 duplicate paychecks for herself, and one of the businesses’ co-owners claimed that during that period, he began getting notifications from the IRS that tax obligations hadn’t been met—payments Garrison reportedly told him she had submitted.
Las Vegas tax preparer pleads guilty to filing false tax returns [Justice Department]
Martha Williams pleaded guilty on Jan. 21 to two counts of aiding and assisting in the preparation and filing of a false tax return.
Williams owned MJW and Associated (formerly known as Across the Board Management), a tax preparation business in Las Vegas. Between 2009 and 2014, Williams prepared thousands of tax returns on behalf of clients of MJW and Associates. For more than 75% of her clients, Williams prepared a false tax return that inflated the taxpayer’s refund by including fictitious deductions related to businesses that did not actually exist.
To make these businesses appear legitimate, Williams used the IRS’s website to apply for and receive employer identification numbers for fictitious businesses. As a result of these fictitious tax returns, Williams caused at least $529,782 in tax losses by filing false returns on behalf of her clients.
North Brunswick tax preparer pleads guilty to tax evasion [Bridgewater Courier News]
Juan Solano, who owned J&C Solano Tax Service, a tax return preparation business in North Brunswick, NJ, pleaded guilty in federal court to income tax evasion on Jan. 22.
Solano, 45, pleaded guilty to one count of personal income tax evasion on his 2016 tax return.
According to authorities, Solano reported in 2016 that he earned $113,263 in gross receipts from the tax preparation business. In pleading guilty, Solano admitted that he failed to report an additional $318,228 in gross receipts that he earned from J&C during 2016. The total gross receipts from the business were $371,858.
In addition, Solano admitted that he filed false personal tax returns and evaded his taxes for the years 2013, 2014, and 2015.
Naugatuck tax preparer pleads guilty to filing false tax returns [Justice Department]
Ana Nunez, who owned Nunez MultiServices LLC, a tax return preparation service located in Naugatuck, CT, pleaded guilty to two counts of aiding and assisting the filing of a false tax return on Jan. 7.
From tax year 2011 and continuing at least through tax year 2014, Nunez, 48, also known as Ana Pagoaga, falsified information on tax returns she prepared for clients and caused the returns to be filed with the IRS. On the returns, Nunez routinely inflated income or created fictitious income, falsified expenses, including education and child care expenses, and falsified deductions, such as business mileage.
Coming off the heels of one of the worst tax seasons on record, the 2020 tax season can’t be any worse, can it?
Well #taxtwitter has been kinda quiet so far today, the first day of tax season 2020, so you guys have either been super busy right out of the gate or you’ve had nothing to complain about … yet.
I’ve noticed that lot of people are still reeling from the news of the helicopter crash in California yesterday that claimed the lives of Kobe Bryant, his 13-year-old daughter, Gianna, and seven other passengers:
If you need a laugh or a quick diversion from your work or life, be sure to check out our Busy Season Zen archive. We’ll be adding to it in the coming months.
We’ll also be doing some #busyseasonproblems posts this tax season. If you’ve got a busy season problem, shoot us an email at tips@goingconcern.com with “Busy Season Problems” in the subject line. This person has #busyseasonproblems:
I received 4 different W2s, from 1 payroll, but paid by 2 different companies with 1 word different in their names, 2 for the state of IL, 1 for MO, and 1 that specifically calls out St. Louis. ALL with different numbers! Pray for your favorite freelancers this #taxseason
How horrible have BDO’s inspection reports from the PCAOB been in recent years? Its most recent one, 2017, was the first time its audit deficiency rate was below 50% since 2011.
Now we’ve come to find out that BDO USA’s penchant for bad auditing has rubbed off on its colleagues to the north. This press release was sent out by the Ontario Securities Commission on Jan. 24:
A Panel of the Ontario Securities Commission (OSC) has approved a settlement agreement in which BDO Canada LLP (BDO) admitted that it failed to comply with generally accepted auditing standards in the audits of the 2014 and 2015 financial statements of two privately-offered investment funds.
As part of the settlement, BDO has paid the Commission a $3.5 million administrative penalty and $500,000 towards the cost of OSC Staff’s investigation. The settlement reflects that, since the audits at issue, BDO has enhanced its policies and procedures to prevent the re-occurrence of similar failures in the future.
“Investors rely on auditors to carry out their work with professional skepticism and proper oversight. When auditors fall short, investors lose confidence in the integrity of financial reporting, a cornerstone of our capital markets.” said Jeff Kehoe, Director of Enforcement at the OSC. “This settlement holds BDO accountable for failing to adequately carry out its role as a gatekeeper.”
“In the midst of audit season, this settlement is a timely reminder for auditing firms to review their audit policies and procedures to ensure they comply with professional auditing standards and achieve the highest level of audit quality,” added Cameron McInnis, Chief Accountant at the OSC.
BDO has entered into a separate settlement agreement with Grant Thornton Limited, the court-appointed receiver for Crystal Wealth and its funds. Upon court approval of that settlement, OSC Staff will recommend to the Commission that $2.5 million of the $3.5 million administrative penalty be allocated to Crystal Wealth investors.
BDO was the auditor of Crystal Wealth and its investment funds. In April 2017, the Ontario Superior Court of Justice put Crystal Wealth, its investment funds, and their directing mind, Clayton Smith, into receivership following an application by the Commission.
In June 2018, a Panel of the Commission approved a settlement agreement between Smith and Staff in which he admitted to defrauding investors in the funds whose financial statements BDO audited.
It remains to be seen whether this was a one-time screw-up by BDO Canada’s auditors and that they’ve learned from this experience or if BDO USA’s bad auditing bug has spread faster than the coronavirus.
So let me get this straight: The ideal “Super Leader” is a woman who has bloodshot eyes, probably because she barely got four hours of sleep last night due to either being an auditor or a tax professional at Deloitte during busy season. Got it.
When your accounting firm is hovering around the 50th largest in the U.S. and you lure someone away from a Big 4 firm like KPMG, not only will you get a write-up in Going Concern but that news might be big enough to be featured in a local business publication.
John Santamour
That’s what happened recently when Aprio sent out a press release announcing that the firm had expanded its tax services in Birmingham, AL, by hiring John Santamour as tax partner. The news caught the eye of the editors over at Birmingham Business Journal, which got a reporter to write an article about Aprio’s newest partner hire.
The article pretty much covers everything in the press release that Aprio put out, which went like this:
In 2017, Aprio combined with Yeager and Boyd in Birmingham, Alabama, a firm focused on serving national public housing authorities. While the Birmingham office will continue to serve as Aprio’s public housing authority center of excellence, Santamour will work closely with Aprio assurance partner, Rob Shirley who specializes in a variety of different industries, including manufacturing, retail, franchise & hospitality, construction and non-profits, to increase the firm’s footprint in the region.
Under Santamour’s leadership, Aprio will expand its tax services to small to mid-market technology, real estate and manufacturing businesses, as well as non-profit organizations. Aprio’s comprehensive specialty tax offerings include State and Local Tax, International Tax, Tax Credits and Incentives, including the Research & Development Tax Credit, and Trusts and Estates.
Santamour brings to Aprio a deep knowledge of tax provision work, as well as expertise in tax compliance and income tax accounting and reporting requirements related to business combinations, spinoffs and divestitures. Prior to joining Aprio, John worked in a national practice at KPMG serving large companies in manufacturing, financial services and insurance.
“We’re fortunate to have such a capable leader, like John, join Aprio,” said Frank Gudger, Aprio’s Birmingham office Managing Partner. “John will be instrumental in enabling us to achieve our growth objectives in the Birmingham market as we expand our services in this region to service new sets of clients.”
“I am excited about the opportunity to join Aprio and expand our service offerings not only in the Birmingham area but across Alabama,” said Santamour. “There is so much growth in our state right now and companies are facing many new tax and regulatory changes as well as additional reporting requirements. I look forward to helping clients navigate what’s next, implement efficient tax planning strategies and succeed in a rapidly evolving market.”
What the press release doesn’t mention is that Santamour had two go-arounds with KPMG. One was a four-year stint in the House of Klynveld’s tax practice and then a nearly three-year stint in Birmingham as a senior tax manager before leaving for Aprio, according to his LinkedIn profile.
Santamour also worked for several years as tax accounting and reporting manager at Blue Cross and Blue Shield of Alabama.
Unlike their American counterparts, none of the Queen’s Big 4 firms have ever had a woman in charge. It’s not going to happen anytime soon at PwC, as partners just re-elected Kevin Ellis for a second four-year term as chairman and senior partner. Richard Houston took over as Deloitte North West Europe and U.K. senior partner and CEO last June 1, and Bill Michael has somehow survived as chairman and senior partner at KPMG, despite the firm’s reputation being in the shitter the past couple of years. That just leaves EY.
Bridget Walsh
A couple of weeks ago, EY announced that Steve Varley, longtime U.K. chairman and U.K. & Ireland regional managing partner, would take over the newly created role of EY global vice chair of sustainability, reporting directly to EY Global Chairman and CEO Carmine Di Sibio, on July 1. So, who’s going to replace Varley as chairman, and could it be—gasp!—a woman?
The Times reported on Jan. 27 that at least six EY partners are expected to enter the race to be the firm’s next chairman/managing partner. Of the six potential candidates, sources told The Times that three are women:
Steve Wilkinson, senior client partner, oil and gas, who manages the firm’s relationship with BP
Hywel Ball, head of audit
Omar Ali, head of financial services
Bridget Walsh, head of tax in Europe
Lynn Rattigan, U.K. chief operating officer
Alison Duncan, an audit partner who manages the firm’s relationship with Vodafone
Lynn Rattigan
Given their job titles and the length of time they’ve spent working at EY (Walsh, 20+ years; Rattigan, 19 years; and Duncan, 25+ years), the three women have the bona fides to be the firm’s next leader.
Naming a woman as its next U.K. chairman/managing partner would be a step in the right direction for EY for a couple of reasons:
It would stop the endless “old white guy” march to the corner office at the Big 4 firms in the U.K.
EY put Julie Teigland, head of its European business, in charge of the process to elect Varley’s successor, so now is a good a time as any for a Big 4 firm like EY to elevate a woman to a position of power.
Intuit will be airing a 30-second ad on Sunday for TurboTax called “All People Are Tax People.” But for your viewing (dis)pleasure, it released an extended version of the ad you’ll see during the game. And it’s pretty bad. The J Lo/Shakira halftime performance won’t be this bad. And it’ll have better dancing.
2019 also saw the signing of the Mazars North America Alliance in July. The Mazars North America Alliance is a milestone agreement between Mazars and five leading firms in the United States and Canada – BKD, Dixon Hughes Goodman, Moss Adams, Plante Moran (U.S.) and MNP (Canada). The Mazars North America Alliance is a game changer for Mazars, allowing the firm to achieve extensive coverage in North America, and to provide its international clients with access to an additional 16,000 professionals in the region. Mazars now has 40,400 professionals serving clients around the globe (24,400 professionals in Mazars’ integrated partnership), and 318 offices across 91 countries and territories.
Here are some other revenue numbers, by region and by business line, for the 2019 financial year, according to the press release:
All regions enjoyed strong revenue growth in 2018/2019: 7.8% in Western Europe, 13.6% in Central & Eastern Europe, 12.1% in North America, 13.1% in Latin America, 9.4% in Africa & Middle East, with the strongest growth in Asia-Pacific (22.6%). Asia-Pacific now represents 15% of Mazars’ total revenues. In China, the firm has over 4,000 staff and over 30 offices; Mazars’ China operations now serve as many as 137 large listed companies and enjoyed a 19% growth in revenues last year. In Australia, Mazars grew by 100% in 2019, thanks to the integration of two local firms.
To support the evolving needs of its clients, Mazars has built a significant offering in advisory, tax and compliance services. Today, audit and accounting comprise 63% of total revenues, advisory 37%.
While expanding geographically, Mazars has enjoyed sustained growth across each of its business lines. Growth in 2018/2019 was: audit +8.5%, accounting and outsourcing services +8.2%, consulting +24.2%, tax +9.9%, legal +34.9% and financial advisory services +9.5%.
So I’ve been over here waiting patiently for the AICPA to update their website to reflect the final pass rates of 2019 but as yet, I’m still waiting. Gleim CPA Review claims pass rates have been released despite not appearing on the AICPA site, so we’ll go ahead and supplement this chart with what they posted. Cool?
Since CPA exam myths are as pervasive as West Virginian Mothman sightings, I feel it’s important to include this blurb from the AICPA about pass rates here:
When reviewing these pass rates, you should remember that candidates are evaluated against an established standard of competence, and that the Exam is scored and scaled so that scores are comparable across test forms and over time. The Exam is not harder or easier to pass at different times. An increase in pass rates simply means that candidates are better prepared.
In other words, the exam is the same year-round (well, ignoring twice-yearly changes to exam content). The only thing that changes is candidate preparedness. To sum things up: Mothman isn’t real and the exam isn’t harder in the fourth quarter.
As I mentioned above, the AICPA hasn’t updated 2019 numbers yet so let’s go with what Gleim has and update the AICPA’s chart with those numbers ourselves:
2019 Pass Rates
Section
Q1
Q2
Q3
Q4
Cumulative
AUD
48.56%
55.11%
51.94%
47.88%
51.01%
BEC
58.00%
59.74%
63.04%
58.61%
59.98%
FAR
44.43%
49.37%
50.29%
40.57%
46.31%
REG
50.23%
58.66%
58.41%
55.89%
56.34%
Comparing cumulative pass rate percentages from the end of Q3 to year-end at Q4, every single section dropped, the smallest change being in REG (down from 56.51% to 56.34%) and the largest in FAR (48.30% to 46.31%). This is pretty common, as candidate performance is historically pretty bad in the fourth quarter as that’s when everyone tries to rush and finish sections they put off all year. That’s mostly an observation gleaned from my years working in CPA review and then many more writing about it — I’m not going to pull actual numbers here. Stephanie at I Pass the CPA Exam has some more (actual) historical pass rate data if you’d like to take a look for yourself.
The year ahead promises to be interesting, as we may see behavior similar to that in 2010 when candidates rushed to take the exam ahead of sweeping changes. The AICPA acknowledges this trend when reporting actual candidate numbers (see the bottom of this report on CPA exam candidate numbers from 2006-2017); however, I’m not aware of any research on their part into a correlation, if any, with increased numbers of candidates due to exam changes and candidate performance. Anecdotally (again, based on my 13 years working with this stuff) I’d say panicked candidates make for bad performance, but I guess we’ll just have to wait and see.
Congrats to everyone who contributed to the pass rates above, and to those of you who weren’t able to add to those percentages, don’t feel bad, you’ve got four fresh quarters ahead of you in which to destroy that monster.
A Big 4 firm was fined by a regulator across the pond today, and for once, it wasn’t because of its lack of auditing prowess. BUT! It did involve running afoul of independence rules.
The administrators to collapsed electricals retailer Comet Group have been handed a record UK insolvency fine of £1m for failures related to their independence.
Deloitte and two of its former partners, Neville Kahn and Christopher Farrington, who both left the Big Four accountancy firm during a five-year investigation, did not ensure that they were objective as administrators, according to the findings of the Institute of Chartered Accountants in England and Wales.
The ICAEW, a professional body, said adequate steps were not taken to make sure that Deloitte’s previous work advising Comet’s owners did not present a conflict of interest in its role as administrator to the lossmaking electricals retailer. Its 2012 collapse left taxpayers footing a £44m bill and resulted in more than 6,000 staff losing their jobs.
Neville Khan
The ICAEW is more of an AICPAish-type of professional membership organization than a regulator, but it does have disciplinary power. Up until today’s fine of Deloitte, the largest insolvency fine doled out to a Big 4 firm by the ICAEW was £250,000 against EY in 2015 over work for failed Greek company Hellas Telecommunications II, according to FT.
When it comes to Big 4 fines, the ICAEW usually isn’t judge, jury, and executioner, but it oftentimes is the beneficiary, according to this article posted last May by the Daily Mail, which quoted one of our favorite Big 4 critics, Prem Sikka:
The Institute of Chartered Accountants in England and Wales (ICAEW) has collected more than £50 million in fines levied on firms that botched audits.
Its coffers were further bolstered yesterday when KPMG was fined £5 million for failing to spot a massive black hole that nearly destroyed the Co-op Bank.
The fines help fund the ICAEW’s work, including its opposition to some proposals to reform the Big Four aimed at improving the quality of audit work.
Critics said the rules are farcical, and mean the chief cheerleader for big auditors is using cash intended to punish them to campaign on their behalf.
Professor Prem Sikka, of the University of Sheffield, said: ‘The KPMG fine is another windfall for the ICAEW.
‘They use that money to reduce the fees that firms pay, and they are campaigning against even the modest reforms that have been proposed.
‘So KPMG know that all this is doing is giving money to a campaign designed to protect them and the rest of the Big Four. The whole situation is a farce. And it just shows how incompetent the accounting industry is.’
The fines are levied by the Financial Reporting Council, a watchdog which polices big accountants. For investigations started before 2016, the money must be paid to the ICAEW. Its accounts show it has been given more than £50 million in penalty payments since 2012.
Fines raised from audit investigations which begin after 2016 go to HM Revenue and Customs.
Christopher Farrington
Back to today’s wrist-slapping: Deloitte was ordered to pay a £925,000 fine, plus the ICAEW’s costs of £890,000, for failing to comply with the ICAEW’s code of ethics, notably to ensure that “accepting an appointment does not create any threats to compliance,” according to FT. The ICAEW also said Deloitte’s procedure for taking on new clients didn’t consider the risk of threats to its independence.
Deloitte has been slammed by Sikka and other Big 4 gadflies for pocketing more than £15 million in fees from the Comet insolvency. Sikka told AccountingWEB last January:
“Deloitte partners charged up to £1,125 per hour for insolvency work on Comet,” he said. “Insolvency began in 2012. Insolvency practitioners have incentives to take as long as they can to finalise liquidation as it pushes up their fees. This industry is out of control.”
Kahn was fined £50,000, and Farrington was fined £25,000.
What a difference a year makes. In 2018, Crowe Global hit and surpassed the $4 billion mark ($4.3 billion, to be exact) for the first time, thanks to massive revenue growth of 14% over the prior year.
And backs were being patted in all of Crowe’s offices around the world:
“The headline figures – in particular double-digit growth across the network – speak for themselves and should be celebrated,” said David Mellor, CEO of Crowe Global. “We are immensely proud of the work we have done throughout 2018 in a rapidly-evolving marketplace and are already building on those successes as 2019 gets underway.”
The second-last to report among the world’s ten biggest accounting and advisory networks, Crowe Global has posted 2019 financial year revenues of $4.4 billion, representing growth of 3.5 percent (excluding foreign exchange impact). The results see Crowe only just maintain its position as the eighth largest network of its kind, behind Grant Thornton (which recently lost its sixth spot to RSM) and ahead of Nexia – the latter which is quickly closing in with 2019 revenues of $4.3 billion.
“I am very pleased that we have continued to achieve growth over the last twelve months,” commented Crowe Global’s Chief Executive Officer David Mellor.
You know, it’s always interesting when people take a survey as an opportunity to spill their innermost thoughts with candor and honesty. That’s exactly what happened when INSIDE Public Accounting interviewed 70 managing partners to get their thoughts on “the frustrations, challenges, joys and rewards of the top job.” Not surprisingly, the published results were definitely heavy on the frustrations, light on the joys.
MPs’ biggest pain in the ass? Partners. “It’s like herding cats, and it’s very difficult to get all partners on the same page because not everybody has the same value proposition and not everyone is motivated by the same metrics,” said one exasperated MP. “Too many of our partners are cruisers. Some of these, though, think they are dynamos and they aren’t,” said another. Burn.
From the article:
Two themes – egos and complacency – immediately emerged from MP responses to this question. Some MPs say partners think their way is the only way. They fail to see the benefit of trying a different approach, close themselves off from other points of view, second-guess decisions (after failing to participate in the discussion), and stay in their comfort zone of client service without committing to professional development, marketing, timely billing and collections.
One MP said two or three partners are so negative “they’re like a cancer.” Some partners think they’re “too busy or too important to follow the rules,” says another.
Damn bro. Cancer. You might as well just kick a guy in the balls and slap his mother’s ass if you’re going to insult him like that.
The criticism continues. According to surveyed MPs, partners are annoying for a multitude of reasons, including but not limited to:
Self-centered thinking
Staying at the firm too long, hindering opportunities for younger staff
Lack of accountability
Failure to use time wisely
Hypocritical thinking, such as judging performance of others while not wanting their own to be judged
What’s the takeaway here? I guess that the little guys aren’t the only ones who think partners are the absolute worst.
As Tax Season Begins, Hackers Target Tax Pros and CPAs [CPA Practice Advisor] It’s not from the “mob” or street criminals. These criminals are likely sitting behind a desk, glued to computer monitors, chugging energy drinks and developing the most effective ways to steal today’s version of gold. As you know, this bounty is data and the criminal epidemic is known as cyber-crime.
Relevance is critical to the future value of audit [Accounting Today] Audit is losing value in the eyes of our clients. It’s becoming a commodity. That decline in value corresponds to a lack of relevance. Business moves fast today, so how relevant is a set of financials for Dec. 31, 2018, that was issued on May 24, 2019? Almost half the year is gone.
Why You Don’t Need to Be an Accountant to Be a CFO [Wall Street Journal] CFOs have traditionally emerged from the accounting ranks, with reputations as masters of cost management, corporate finance strategy, accounting standards and reporting requirements. But the role has morphed to the point that accounting expertise is often no longer required.
Taxes 2020: These two groups of taxpayers face the highest audit rates [USA Today] The tax agency is auditing fewer individual taxpayers not because we’re more honest, but because the IRS is working with fewer employees. The agency’s workforce has dropped from 94,000 workers in 2010 to roughly 78,000 in the most recent fiscal year, according to IRS data.
SEC proposes simplifying disclosure requirements [Journal of Accountancy] The SEC voted to propose amendments designed to simplify and enhance certain company financial disclosures and issued guidance on key performance indicators and metrics in management’s discussion and analysis (MD&A). Item 301 (selected financial data) and Item 302 (supplementary financial data) would be eliminated from Regulation S-K under the proposal.
Las Vegas tax preparer sentenced to 40 months in prison for fraud [Las Vegas Review-Journal] A Las Vegas tax return preparer has been sentenced to 40 months in prison for tax fraud, the Internal Revenue Service announced Friday. Michael A. Sandoval performed payroll and tax preparation services for individuals and companies through a business called Nevada Financial Solutions (NFS), the agency said in a news release. “When two of Sandoval’s clients provided NFS with $471,178 in payments to be forwarded to the Internal Revenue Service (IRS) as money due for their quarterly employment taxes, Sandoval did not provide those payments to the IRS, but instead spent the funds for his personal benefit,” it said.
Can CPA firms help with new revenue recognition standard? [Compliance Week] Accounting Standards Codification 606, Revenue from Contracts with Customers, took effect for non-public entities in 2019, and accountants faced with applying this standard for the first time are encountering significant challenges. If CPA firms are asked to help their attest clients, independence issues must be considered.
Letter: Why No CPA’s on the Audit Oversight Committee? [Laguna Beach Independent] At the last City Council meeting Michele Monda spoke on the need for CPAs on the Audit Oversight Committee. This committee oversees the audit of Laguna’s $100 million budget, our tax money, but not one CPA is to be found. Currently there is a writer, Deputy Chief of Police, real estate investor, etc. City Manager John Pietig appears to believe no CPAs, qualified experts or audit experience is necessary. City Council, elected to represent and protect residents, was alarmingly silent. None of them are CPAs, and they don’t know which rocks to look under either. If you don’t know where to look, you definitely won’t find anything. That’s why training and expertise are essential to the committee. In response to Ms. Monda, the city manager defended this lack of true oversight, stating the city’s outside auditors have CPAs. Yes, but this audit firm was hand-selected by the city manager and is paid by the city, a cozy multi-year relationship. Not one CPA on city staff either. City Treasurer Laura Parisi is a CPA, but she’s not allowed any input—why?
Super Bowl ads usually fall into one of five categories: ones that make you laugh, ones that get you in the feels, ones that elicit no feelings whatsoever, ones that make you think, and ones that make you cringe. (We’re looking at you, Intuit.) This ad from Coopers & Lybrand (one of PwC’s parental units), which aired during Super Bowl XXVII in 1993, definitely falls into the cringey column.
A tipster brought this ad to our attention on Friday:
Worst super bowl ad of all time. Coopers and Lybrand In 1993.
Black and white, old gray haired, white guy approaching a stage. No one knew what it meant. Such a downer.
Doesn’t get enough of the disrespect it deserves.
I couldn’t have said it any better myself.
The cost to air this 30-second ad on NBC during the Super Bowl: $850,000.
“The Street doesn’t care about accounting functions any longer. They don’t get into the nitty-gritty anymore.”
— Richard Bove, an analyst at Odeon Capital Group LLC, told the Wall Street Journal when asked why accounting expertise seems to be no longer required for the CFO role. According to data from Korn Ferry, only 36% of CFOs in the 1,000 biggest U.S. public companies last year were CPAs—a six-year low.
Plus, an Indiana accountant gets jail time for wire fraud, and an Arkansas church accountant is in police custody for allegedly stealing more than $70,000.
Berks County accountant allegedly victimizes the Mennonite and Amish communities in massive Ponzi scheme [Justice Department]
Philip Riehl was charged on Jan. 31 with conspiracy, securities fraud, and wire fraud, stemming from an investigation into a Ponzi scheme worth approximately $60 million that targeted members of the Mennonite and Amish religious communities in Pennsylvania and elsewhere. Authorities say it’s one of the largest Pennsylvania-based alleged Ponzi schemes in history.
Riehl, 68, is accused of fraudulently soliciting tens of millions of dollars in investments, from his accounting clients and others, into a bogus investment program that he operated:
Riehl diverted funds from the program to Trickling Springs Creamery, LLC, a Franklin County–based creamery of which he was the majority owner. Riehl also fraudulently solicited direct investments in Trickling Springs Creamery. The Information further alleges that Riehl made material misrepresentations about the safety and security of these investments in his program and about the performance of the program, as well as misrepresentations and omissions about the creamery’s business and financial condition. Trickling Springs Creamery announced it was ceasing operations in September 2019 and filed a bankruptcy petition in December 2019.
The allegations constitute what is sometimes referred to as “affinity fraud,” which typically involves investment scams that prey upon members of identifiable groups, such as religious or ethnic communities. These types of scams exploit the trust and friendship that exist in groups of people who share common interests or beliefs. The victims of Riehl’s alleged scheme were generally members of the Mennonite or Amish religious communities who wanted a safe and secure investment, operated within their community and in a manner consistent with their religious principles. The charges note that Riehl was a co-religionist in the Mennonite religious community.
If convicted, Riehl faces a maximum possible sentence of 45 years in prison, a $5,500,000 fine, a three-year term of supervised release, forfeiture, and mandatory restitution.
Vicki McGuar
Accounting services owner accused of exploiting elderly [WICS/WRSP]
Vicki McGuar, who has owned McGuar Accounting Services in Springfield, IL, for 39 years, was arrested on Jan. 24 on charges of financial exploitation of the elderly, a class 1 felony.
McGuar is accused of taking money from one of her clients.
Wisconsin accountant found guilty of conspiracy to obtain over $260 million in small business contracts [Justice Department]
Mark Spindler, a CPA with the firm Komisar & Spindler, was found guilty by a jury on Jan. 24 of conspiracy to commit wire and mail fraud for his role in a scheme to use front companies to obtain set-aside contracts intended for small businesses led by service-disabled veterans and disadvantaged individuals.
From the late 1990s to 2017, authorities say Spindler provided accounting services to Brian Ganos and Milwaukee-based construction companies Ganos controlled, including Sonag Co. Inc., Sonag Ready Mix LLC, Nuvo Construction Co. Inc., and C3T Inc.
The scheme involved three construction companies with straw owners who qualified as a disadvantaged individual or as a service-disabled veteran, but who didn’t actually control the companies. Ganos then fraudulently obtained small business program certifications to win government-funded contracts to which the companies weren’t entitled.
At trial, the government introduced evidence that Spindler participated in the conspiracy in several ways, including:
He wrote multiple letters to certifying agencies that contained false information and enabled the front companies to retain their certifications. For example, Spindler wrote a letter for the Department of Veterans Administration (VA) that claimed Telemachos Agoudemos was the highest-compensated employee of C3T, when in fact, multiple C3T employees were earning more than Agoudemos, the purported president of C3T.
He provided accounting advice to help Ganos and others conceal the profits they were moving out of the front companies. For example, Spindler provided accounting entries that charged “services” from Ganos’s Sonag Co. to the front companies, even though no services had been rendered, in order to justify millions of dollars that Ganos was taking from the front companies.
He lied to criminal investigators from the FBI and VA during an interview in June 2012, saying that Ganos had no influence over C3T and that the front companies had no affiliation with each other or Ganos’ Sonag Co. Partly as a result of Spindler’s false statements, the criminal investigation was closed and the scheme continued for four more years. Only after new information came to light several years later was a new investigation started, which eventually ended the scheme.
Ganos pleaded guilty to one count of wire fraud and one count of mail fraud, and was sentenced to 78 months in prison last December. Spindler is scheduled to be sentenced on May 6.
Converse man sentenced to prison and ordered to pay over $3 million in restitution [Justice Department]
Fredrick McCracken, who worked as an accountant for an industrial construction company in Marion, IN, was sentenced to 46 months in prison on Jan. 27 for wire fraud and making a false statement on an income tax return.
McCracken, 62, was also sentenced to two years of supervised release and was ordered to pay more than $3 million in restitution to his former employer and the IRS.
From October 2012 through July 2018, McCracken wrote more than 100 unauthorized checks drawn on the company’s business account and made payable to his personal business. And from March 2016 through July 2018, McCracken used the company’s bank accounts to pay his personal credit card obligations more than 50 times. To avoid detection, McCracken concealed his activities in the company’s accounting records system.
In total, his fraud scheme resulted in the theft of $2,440,490.46 from his employer. McCracken also caused $612,500 in tax losses to the IRS.
Church employee sought in theft of nearly $70,000 [Sentinel-Record]
Alisa Bynum, a former accountant for First Lutheran Church in Hot Springs, AR, sought on a felony warrant since early last year for allegedly stealing almost $70,000 from the church over a period of more than four years, turned herself in to authorities on Jan. 31.
Alisa Bynum
The theft was first reported on Jan. 12, 2018, by a church board member, with the amount stolen estimated at $69,625.88 over an unknown timeline by a known suspect, identified as Bynum, 46, according to authorities.
Bynum, who was employed as the church’s accountant between 2013 and 2017, is accused of making numerous unauthorized charges on the church’s credit cards. She was asked by a church official to produce the church’s files and receipts, but she refused to provide any documents and receipts in her possession and reportedly deleted several QuickBooks files on the church’s server.
Hamersville tax accountant pleads guilty to taking investors’ money for personal use [Cincinnati Enquirer]
Robert White, owner of Robert L. White and Associates Inc. in Cherry Grove, OH, pleaded guilty on Jan. 27 to six counts of securities fraud for using his tax accounting clients’ investments to pay off his own expenses.
Robert White
White, 72, solicited his clients, friends, and associates over the last several years to invest in Platinum Franchising LLC, and he promised the clients significant returns on the investment, authorities said.
Instead of investing the money, White converted the funds to his own personal spending. The money was used to pay back prior investors, and to pay for ongoing expenses of his business.
As has been tradition ’round these parts going back a few years, it’s officially time to break out the Busy Season Zen.
If you’re new, Busy Season Zen is a dose of distraction, whether that be cute little ducklings or 10 straight hours of paint drying. You never know what you’re going to get.
We know you’re stressed, so consider this our permission to hide in the bathroom stall with your phone to take a crying break.
Now that that’s out of the way, please allow us to introduce you to The Crusher.
Remember, kids, don’t try this at home — or rather at the office. Some of you may not be old enough to remember when a little aggressive shredding ended a certain defunct public accounting firm. So yeah, don’t do that.
