via Which Big 4 Firm Is Getting Extra Anxious to Sign Off on Audit Reports? « Going Concern: Accounting News for Accountants & CFOs.

That makes up about 50% or more of the audits I’ve worked on – public (Big 4) or internal (corporate).  No surprises here.

“In January 2009, accounting giant KPMG unveiled its new Flexible Futures program for its 11,000 UK-based employees. The options include: a four-day workweek and a 20% reduction in base pay; a four- to twelve-week sabbatical at 30% base pay; a combination of the two options; or sticking with the status quo. “

That’s a pay cut, not flextime.  Flextime is letting people leave in the middle of the day for two hours.  Flextime is getting a day off occasionally without a pay cut.  This is simply a payroll reduction.  Thank you, Human Resources, I’ll enjoy my unpaid-day-off-that-will-require-4-10-hour-days-to-make-up.  Ugh.

from Flex Time: A Recession Triple Win

…e-mails are a given on vacation, but a leader needs to establish clear boundaries and expectations. Generally, I make it known that I work for about an hour in the morning and one hour in the evening. Throughout the day, I monitor emails on my PDA, but only respond if there’s an urgent need. Knowing things are under control allows me the freedom to truly enjoy my time away.

You have to assume that this means Barry doesn’t have any trusted lieutenants.  I understand that a leader may need to be available, but let’s face it – emails can be delegated.  My tip?  Give my #2 my cell phone, and everyone else the hotel number where they can leave a message.  When people have to pick up the phone and call, they hesitate.  Everyone is Chatty Cathy when it comes to emails.

My own experience was different.  Now, granted, I was just a senior manager in a multinational firm, but I did have multiple teams working around the globe for me.  I also always refused a PDA, even when available.  I had a cell phone, and I always had it on me (until I went to sleep).  I had a manager (several, actually) who I trusted to take care of all routine matters.  They knew how to reach me if it was an emergency:  pick up the phone.  I put an autoresponder on my email saying I was out, and they should contact Sally and John (the managers) if they needed to get in touch with me.    Sally and John told anyone who contact them what my phone number was, and you know what?  I seldom got more than a couple of calls per week.  If you make people pick up the phone twice, 90% of them will balk and take care of the problem themselves.

This is the core of the matter, though:  if you are accessible by email, people will pepper you all day long with “urgent” matters.  Even if Barry thinks he’s “vacationing” by restricting his replies to “urgent” emails, he’s still interrupting his day – and probably his family’s/friends’ day – by glancing at his PDA every 10 minutes when it buzzes.  I know he’d argue that a CEO who works two hours a day is doing a bare minimum.  Fine, you can get up before the kids/friends/spouse and take care of work, and you can squeeze in another hour while everyone showers up after the pool and gets ready for dinner.  OK.  But checking email constantly all day?  Vacation FAIL.

Trust me:  give out your phone number and people, knowing you are on vacation, will think LONG and hard about bothering you, particularly if they have to go through your #2 to get the number.

Richard H. Smith (the former vice chairman in charge of tax services at KPMG) once charged in the biggest tax fraud ever, owes his lawyers a debt of gratitude for getting him out of what could have been life in prison. He also owes them $1.3 million, they claim, alleging one of the more outrageous man-stiffs-lawyers stories.

Ann Woolner at Bloomberg makes my stomach roll over with her article.

Apparently his lawyers should have realized a guy who (allegedly) built his career hiding his client’s money from the government would have no qualms about hiding KPMG’s money from his lawyers.  I only say allegedly because his case never went to trial.  KPMG admitted guilt and paid almost half a billion dollars in fines, so draw your own conclusions.  His reason for holding back $1.3 million?  One of his attorneys was late to a meeting.  And it wasn’t even his own money – KPMG had given it to him specifically to pay his attorneys.

If you read this story, remember that this guy didn’t spend a day in jail, Donte Stallworth killed a guy while driving drunk and got 30 days in the clink, and Michael Vick served two years for organizing dogfights.  Nice justice system we have going here.

The Public Company Accounting Oversight Board said Wednesday it has fined a Deloitte & Touche partner $75,000 for allegedly helping Navistar International Corp. (NAV) and unit Navistar Financial Corp. avoid restating 2003 financial results.

This marks the second time the U.S. oversight board for public company auditors has ever assessed a civil money penalty against an individual accountant since it was created by Congress in 2002. The other fine was also against a Deloitte partner for signing off on Navistar’s erroneous 2003 financial results.

…

The PCAOB, which was created through the Sarbanes-Oxley Act following the major accounting scandals at Enron, Tyco and WorldCom, has only ever assessed three money penalties since it was formed. In addition to the two individual monetary penalties against the Deloitte partners, it also fined Deloitte & Touche $1 million in a separate, unrelated case.

from PCAOB Fines Ex-Deloitte Accountant Over Navistar Audit

What’s most suprising about the Navistar case is that in the entire history of PCAOB – around for approximately 7 years – they’ve only doled out $100,000 ($75,000 in this case and $25,000 in an earlier case) in fines. That’s against all audit firms that they’ve reviewed. In the past almost-a-decade there have only been two cases worth less than a senior manager’s annual salary combined?  It’s not even a slap on the wrist.  I’m sure these guys had to pass up on a round of golf or two to pay those fines, but it’s hardly creating the element of enforcement that you’d like to see from an oversight body like the PCAOB.  Fines are pointless.  Sanctions against these guys – prohibiting them from contact with clients or something along those lines – might serve better warnings.

“We’ve always had this expectation gap between what the auditor really can do and what the investing public wants the auditor to do, or wants the audit to represent.” – William Parrett, CEO, Deloitte

I think Parrett’s a bit disingenuous here – unsurprisingly. The gap is between what the Big 4 claim they do and what they actually do. If most people saw the deal-making that goes on in an audit, they’d be shocked. And time and time again, you’ll see an auditor who is overworked, managing a half-dozen projects, with little industry experience or knowledge trying to audit the transactions created by people with far more years of specific industry experience and huge vested stakes in making their short-term numbers look as good as possible. Too often you’ll see the auditors beaten down by lack of support from above when push comes to shove with clients.

But sure, the problem is that the public doesn’t understand what an audit represents.

from Investors expect too much: Deloitte CEO

There may be more to come. The S.E.C. said that its investigation of G.E. was over, but it did not say that about any of the accounting officials at the company, or any of the people at KPMG, G.E.’s longtime auditor. Link here (“Inside G.E., A Little Bit of Enron”)

Maybe I’m overreacting (and you know I’m not), but if I’m an executive I don’t like to see my company’s name and “Enron” mentioned in the same headline, unless it’s something like “G.E. is Not a Bit Like Enron.” A discouraging article about another company that is clearly too big to fail. And KPMG certainly doesn’t want to go down a la the late great Arthur Andersen. My theory is, though, that no other Big 4 firm will be allowed to collapse like Andersen did. If we slid down to the Big 3 or Big 2 the anti-trust concerns would be significant. I don’t know if any of the second-tier public accounting firms could slide into the gap if one of the Big 4 died, but since none of them made the step up when Andersen fell apart you have to assume that the “Bigs” are the only Big Firms we will have for the forseeable future.

So G.E. will not go anywhere, and I suspect the Big 4 all know that they won’t be going anywhere, no matter how badly they screw up – which is not the mindset you want your auditors to have.

““Over half of respondents are concerned with the bureaucracy which they believe contributes to government ineffectiveness in this area. Around a third are also concerned about short-term planning horizons, the neglect of existing infrastructure maintenance, project over-runs and perceived corruption in the selection of infrastructure providers. Put all this together and this does not look like a particularly harmonious relationship.”

Replace the word “government” with “the firm’s” and KPMG could be talking about any one of the Big 4. Lack of long-term planning? Project over-runs?

I know it’s a bit of a stretch, but having a Big 4 firm criticize government inefficiency and cronyism is a little bit of the pot and the kettle as far as I’m concerned.

From KPMG – Government bigger threat to infrastructure than lack of finance

But state regulatory filings offer a different picture. They show that A.I.G.’s individual insurance companies have been doing an unusual volume of business with each other for many years — investing in each other’s stocks; borrowing from each other’s investment portfolios; and guaranteeing each other’s insurance policies, even when they have lacked the means to make good. Insurance examiners working for the states have occasionally flagged these activities, to little effect.

Oh wait… the same auditors have been in place at AIG for over 30 years, back to the Coopers & Lybrand days.  Hard to see how they have much interest in disclosing their past mistakes.  I still believe that this country will DEEPLY regret not having allowed this firm to go ahead and fail, then dealing with the fallout and moving on.

via After Rescue, New Weakness Seen at A.I.G. – NYTimes.com.