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. See ya.
Dumpster Fires
PwC’s head of reputation quits as firm’s horror show continues [WAtoday]
The public relations department of embattled consulting giant PwC has not been a happy place of late. And as the horror show surrounding the firm’s misuse of confidential tax data refuses to go away, the team will now have to manage without its leader. PwC’s head of reputation Rory Grant told colleagues on Thursday afternoon that he was calling it quits after three years in the role.
PwC’s tax scandal victims pile up [Australian Financial Review]
It was Wednesday evening when the full cost of PwC Australia’s position began to dawn on the firm’s senior employees – the kernel of true believers on the brink of realising their life ambition to become partners at Australia’s biggest accounting firm.
PwC’s brand had already taken another drubbing earlier in the day at the Senate consultants inquiry. And two days earlier, acting chief executive Kristin Stubbins had revealed the names of four former partners who appeared in the internal emails that triggered the crisis that has devastated the firm, and flagged that 63 more former and current PwC people also were in the messages.
The decision to name the four former partners – none of whom had been warned of Stubbins’ move – gave the announcement an air of casual brutality, conjuring an image more like throwing chum from a shark boat.
But it was only on Wednesday evening, as the clock ticked past 6pm, that the almost 50 senior staff waiting to be confirmed as partners realised the depth of what they must have seen as betrayal and that their dream might be denied.
Originally, they had been told that the list of new partners was due for approval by the board on Tuesday before a formal announcement would be made by close of business Wednesday.
What they instead received as the night wore on were hastily arranged calendar bookings for the following day when they would be formally told that the promotion round was being delayed.
It raised a basic issue: with the financial payouts the firm is facing as partners including former CEO Tom Seymour leave, together with lost government and corporate business, can PwC afford new partners?
Big 4
Should scandal plagued PwC take the lead and split its advisory unit off from auditing? [Herald Sun]
PwC’s global boss Bob Moritz, insisted that keeping both the auditing business and the advisory division – which gives deal and tax advice, and consulting services – gave it a competitive advantage. Last year, when unveiling record revenue of close to $US50bn, Mr Moritz said having both auditing and advisory helped the firm attract staff, which was a greater challenge than managing conflicts. “Our bet is basically that we feel comfortable about managing those risks,” Moritz told The Financial Times.
Shockingly, the PwC global chairman would have – or at least should have – known about the tax leak scandal in Australia at the time of that interview – even if the public didn’t. Now, the odds may have changed.
How Deloitte uses staff debates on the firm’s most controversial decisions [Quartz]
A look inside conflict resolution at Deloitte Consulting.
Fear of conflict at Deloitte has been drastically reduced simply by hashing things out, says Deloitte Consulting CEO Dan Helfrich. Now he’s much more likely to see employees acknowledging that decisions are difficult instead of begrudging them. Helfrich hopes other companies normalize talking through the tough issues and is excited to share his firm’s learnings.
KPMG’s new TV commercial: We See You [via AdAge]
Revealed: Labour taking free staff from scandal-hit consulting firms [openDemocracy]
UK’s Labour party went cap-in-hand to two scandal-hit consultancy firms that its own shadow chancellor said should be broken up, openDemocracy can reveal. The party has quietly accepted more than £230,000 worth of free staff from ‘big four’ accounting firms PricewaterhouseCoopers (PwC) and Ernst & Young (EY) since Keir Starmer took over as leader in 2020.
EY CEO Sees Revisiting Potential Spin-Off in a Few Years [Bloomberg News]
EY Global Chairman and CEO Carmine Di Sibio says the firm’s abandoned spin off of its global consulting business still makes sense and will likely be revisited “in a few years.” He speaks on “Bloomberg Markets Europe.”
Tax
The IRS is cracking down on a popular small business tax break that could lead to a costly audit [CNBC]
A cottage industry of specialist firms has sprung up to help business owners claim the Employee Retention Credit (ERC), a governmental tax incentive intended for companies stressed by the pandemic. But businesses need to be careful not to get hoodwinked. There are strict eligibility requirements for the ERC — one way it can be claimed is for wages paid during pandemic periods when gross receipts declined — and many owners may not really understand the criteria. This means they could inadvertently gloss over the opportunity and lose out on credit of up to $26,000 per employee. Or, they could easily be duped by dodgy providers into improperly seeking money they aren’t entitled to — with a hefty fee attached, of course — and likely ramifications down the road. The problem is particularly pervasive given how easy it is to file for the credit and dupe small businesses in the process, said Donald N. Hoffman, a partner with Eisner Advisory Group. “Every business owner is getting dozens of emails and mail and being bombarded by television ads,” he said.
Hosing Bautista: Why the CRA is going after former Blue Jays for millions in taxes [National Post]
Although the facts differ in their battles with the CRA, they share a common issue that experts say could have a chilling effect on Canadian sports teams’ ability to attract top international athletes: How non-resident high earners can protect their income and mitigate Canada’s high taxes. Specifically, the tax agency is challenging how much income the players can deduct from their taxes through contributions to a form of pension plan through an employer called a Retirement Compensation Agreement (RCA). None of the allegations have yet been tested in court. Pensions, especially for pro athletes with short careers, are a crucial benefit. RCAs are commonly used by high-earning athletes and top executives recruited by Canadian organizations. It defers tax payments and isn’t subject to strict contribution limits like an RRSP. The taxpayer is allowed to contribute a “reasonable” amount to their RCA every year, but the CRA withholds half of it in a fund that cannot be invested.
Firm Watch
Moss Adams Appoints Jen Wyne as Chief Talent Officer [Moss Adams]
She will be Moss Adams’ first Chief Talent Officer, serving as director and executive director of human resources prior to her promotion to the newly-created position of CTO
Wyne brings over 30 years of people management experience to the new C-level role at Moss Adams. More is being asked of accountants, auditors and financial service providers than ever before. Ever-changing tax legislation and standards add ongoing complexity to the profession. These factors, combined with a competitive landscape, decreasing talent pipeline and technological disruption, heighten the need for the CTO role at Moss Adams.
Technology
What AI threat? Most U.S. white-collar workers welcome the technology, survey finds. [MarketWatch]
While most workers don’t consider generative AI an immediate threat to their jobs, they do want to learn how to use the technology, according to a survey KPMG conducted with 1,035 white-collar professionals in April and May and released Thursday. Among those surveyed, 57% don’t think generative AI poses an immediate threat to their jobs, and only 19% are “highly concerned” the technology will make their role “irrelevant.” Meanwhile, 40% feel that they have more than a year before AI endangers their job. Most Americans are eager to learn AI skills on the job, though just 42% rate their company as doing a good or excellent job, KPMG said. “People are generally optimistic and looking for more upskilling on AI,” Sandy Torchia, KPMG’s vice chair of talent and culture, said in an interview. “They want more training to create content, conduct research and generate code more easily.”
Microsoft partners with PwC and EY to promote AI safety [CFO Dive]
Microsoft is partnering with PwC and EY to help mutual customers deploy responsible AI systems using the two consulting firms’ comprehensive best practices, Microsoft announced Thursday. As part of a broader effort around AI guardrails, Microsoft has committed to sharing knowledge about developing and deploying AI responsibly; creating an AI assurance program; and giving support for responsible implementation. “We know that these commitments are only the start, and we will have to build on them as both the technology and regulatory conditions evolve,” Antony Cook, corporate VP and deputy general counsel at Microsoft, said in the announcement.
CPA.com Launches Multi-part Generative AI Initiative [PR Newswire]
CPA.com has initiated a series of thought leadership activities aimed at accelerating the profession’s understanding of generative AI, including how it works with specific use cases within tax, audit, client advisory services (CAS), finance, practice management and marketing. With that insight, CPA.com is also developing practical tools and resources—as it’s done with other emerging technologies and categories including the cloud, blockchain and ESG—to empower firms to assess the potential of generative AI in their practices.
Audit
PCAOB amends auditor requirements for reporting noncompliance [Journal of Accountancy]
The PCAOB on Tuesday issued an amendment designed to strengthen auditor requirements to identify, evaluate, and communicate noncompliance with laws and regulations. Comments on the proposal will be accepted through Aug. 7. “By catching and communicating noncompliance sooner, auditors can help companies course-correct and better protect investors from risk,” PCAOB Chair Erica Williams said in a news release. The proposal would amend Auditing Standard (AS) 2110, Identifying and Assessing Risks of Material Misstatement, and other auditing and related professional practice standards. The proposal also would replace AS 2405, Illegal Acts by Clients, and retitle the standard A Company’s Noncompliance With Laws and Regulations.
The future of audit technology, part 3: larger firms [ICAEW]
As audited companies become increasingly data rich, new technologies are helping larger audit firms to hone the quality, accuracy and insight of their audits.
Law and Order
Paisley business owner accused of stealing data from previous employer [Renfrewshire Gazette]
A manager at an accountancy firm allegedly swiped data from his employers after setting up a new business. Liam McCreath is claimed to have taken details of clients belonging to Nicolson Accountancy in Glasgow on September 15, 2020. Co-founder Susan Nicholson stated that McCreath worked his way up the company and was appointed a tax manager. She said: “Anything that would be said would go through Liam, he was thought to be our number two. Susan stated that McCreath’s work ethic slowed down during the pandemic after being tasked to complete tax returns for clients. She said: “Until that point, we didn’t have trust issues with him, we thought he was working for the good of the business. He pushed me a couple of times for me to furlough him and we said no as we felt we needed him to get in contact with the clients and do the tax returns.”
SEC Mix-Up Leads It to Drop Cases Tied to KPMG Cheating, Cochran [Bloomberg Tax]
The SEC dismissed enforcement actions involving several high-profile securities cases, including those involving two people at the center of KPMG’s cheating scandal and several cases that wound up before the Supreme Court. All 42 dropped cases, which involved the agency’s administrative law judges, were caught up in a server issue that allowed enforcement staff access to information meant for adjudication staff, according to an order [PDF] the Securities and Exchange Commission posted Friday.
Talent
Va. Board of Accountancy elects next chair [Virginia Business]
Wendy P. Lewis, a partner in KPMG LLP’s audit practice, will become chair of the Virginia Board of Accountancy on July 1. Lewis is currently the board’s vice chair; her term as chair will end on June 30, 2024. “I’m honored to step into the role of chair. … As the first Black woman to serve as chair since VBOA became an independent agency in 2001, I am excited about the important work of opening doors to the CPA profession for people from a variety of backgrounds, as well as leading the board through the overall transformation and evolution of the accounting profession,” Lewis said in a statement.
UK Sustainability Leaders Warn Lack of Climate Talent at All Levels Could Stall Net Zero Progress [EY]
Sustainability leaders at some of the UK’s largest companies have warned that the scarcity of climate change talent at both operations and board level will be one of the largest barriers to achieving their Net Zero targets, according to new research from the EY Global Sustainable Value Survey.
Talent attraction and retention main concern for Irish CFOs, Deloitte survey [Silicon Republic]
More than two-thirds (67 percent) of Irish chief financial officers say workforce skills is the biggest obstacle preventing their organisation’s progress towards digital finance transformation. While the Irish sample size was only 75 CFOs, it was part of a larger survey by Deloitte of 1,366 CFOs in 16 European countries.
Wholesome
Am I a jerk for quitting right before busy season?
by u/throwaway456a93 in Accounting
