Attestation Update – A&A for CPAs. – Page 25 – Technical stuff for CPAs providing attestation services.

Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committee

Leave a Comment / Other stuff / Jim Ulvog

Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.

Before you tune in to the headlines generated by Senators striving for the best one-liner in hearings which will appear in the evening news, check out these background articles.

So far looks like there is stiff competition in the race for most outraged Senator. At the moment, Senator Warren is in the lead.

9/16 – CNN Money – Wells Fargo drumbeat grows louder. House launches investigation – The House Financial Service Committee will start hearings late in September. The Wells CEO has been called to testify.

The rhetorical trap already set by the minority chair of the Senate Banking Committee is that if senior management did not know this was going on then the bank is too big to manage. The choice, as she infers: senior management is complicit or the bank ought to be broken up.

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Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committeeRead More »

Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committee Read More »

Pondering on the Wells Fargo fiasco and more news

Leave a Comment / Audits, Other stuff, Pondering / Jim Ulvog

Original finish on mud wagon used by subcontractor to Wells Fargo on San Diego-Julian run in 1870s. Wagon is housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog. — Original finish is visible on mud wagon used by subcontractor to Wells Fargo on the San Diego-Julian run in 1870s. Lighter and cheaper than the Concord wagon, this was useful in desert and mountain areas. Wagon is housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog.

Here’s a few articles that were interesting to me in the last two days about the Wells Fargo fiasco, previously discussed here, here and here.

First, a digression into the ethics and audit issues of systemic faking of accounts and coding diesel engines to cheat.
Next, pondering whether there will be any clawback of the $124M bonuses from the senior executive who managed the retail banking area.
Finally, two articles describing the DoJ opening a preliminary investigation.

9/14 – Prof. Mike Shaub at Bottom Line Ethics – Plausible deniability and the insulation of upper management – Prof Shaub ponders two fiascos in the news for the deeper ethical issues. Both the Volkswagon diesel engine scheme and the Wells Fargo fake account fiasco reflect poorly not only on the companies and their culture, but the state of ethics in business and our society.

We, collectively, need to grapple with those issues.

The article raises unsettling issues for auditors. Let’s ponder for a moment…How can we detect corporate cultures and entity tone-at-the-top environments which allow building a cheating code into the core operation of a company’s software? How can we detect an environment that incentivizes staff to cheat customers or risk losing their jobs for not hitting sales targets? Those are sobering questions.

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Pondering on the Wells Fargo fiasco and more newsRead More »

Pondering on the Wells Fargo fiasco and more news Read More »

Ripple effects spread out from Wells Fargo fake account fiasco

Leave a Comment / Other stuff / Jim Ulvog

Concord stagecoach painted in Wells Fargo colors, housed at the Seeley Stable Museum Hazard Collection in Old Town San Diego Historic Park. April 2012 photo by James Ulvog. — Concord stagecoach painted in Wells Fargo colors, housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog.

Unlike nudging Libor or Forex rates, it is easy to grasp that it is wrong to open bank accounts without a customer’s permission. The ease of understanding the mess is why I think the Wells Fargo fiasco is growing rapidly.

Here’s my free tip of the day on how not to handle a crisis: don’t blame it on the employees who got fired for breaking the rules to meet sales quotes set by management. That is the current strategy of the CEO:

9/13 (in print edition on 9/14) – Emily Glazer (have seen her name a lot on this story) and Christina Rexrode at Wall Street Journal – Wells Fargo CEO Defends Bank Culture, Lays Blame With Bad Employees – In an interview with WSJ reporters on Tuesday, the CEO blamed the whole mess on misbehaving employees. He insisted there were not any incentives to improperly open accounts.

In the same interview, he indicated the bank will end its sales quotas for customer-facing staff.

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Ripple effects spread out from Wells Fargo fake account fiascoRead More »

Ripple effects spread out from Wells Fargo fake account fiasco Read More »

Followup on Wells Fargo opening accounts without customer permission

Leave a Comment / Other stuff / Jim Ulvog

When the leading article from the Wall Street Journal mentioned earlier was placed on the front page of the print edition, the headline of

Wells Fargo Fined for Sales Scam

was in type 0.4 inches tall. Yes, I measured it.

That is the largest font I recall seeing on the front page in a long time. Maybe I don’t pay enough attention to font size, but still, that is the largest headline I recall lately. Isn’t quite the way you want to get your name on the front page of the Journal.

Here’s another article from the WSJ and a discussion from Rumbi Bwerinofa. Also, a study that quantifies the damage caused to senior executives earnings from the stigma gained by having a scandal-tainted company on their resumes.

9/9 – Emily Glazer at Wall Street Journal – Next Test for Wells Fargo: Its Reputation – The fiasco of opening accounts in customers’ names without their permission is a story that could cause reputational damage. Article says analysts are concerned and bank execs are worried how much this will damage earnings.

Difference with this mess from other banking fiascos is that this one is easy to explain and easy to understand.

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Followup on Wells Fargo opening accounts without customer permission Read More »

Roman denarius

Leave a Comment / Other stuff / Jim Ulvog

Let’s take a look at the Roman Denarius. I’ve taken an interest in ancient currency and monetary issues lately, particularly as it give some insight into biblical times.

So, you can go along with me on the journey, if you wish. As a simple start, let’s look again at Wikipedia. Took a previous look at the Denarius here and here.

From about 200 BC until about 64 AD the Roman Denarius was about 3.9 grams, at 95% or 98% purity.

There is a comment that Tiberius slowly increased the fineness to 97.5% to 98%. Tiberius accumulated a hoard of 675 million denarii.

Nero, who reigned from 37 AD through 68 AD debased the gold aureus from 8.18 grams of gold to 7.27 grams.

Article says 25 silver denarii are equal to 1 gold aureus.

How much was a denarius worth?

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Roman denariusRead More »

Roman denarius Read More »

Yet another banking fiasco – Opening two million fake accounts to meet sales targets

1 Comment / Accounting, Fraud / Jim Ulvog

Deep sigh. Another banking fiasco hit the papers yesterday. The Wall Street Journal reported Wells Fargo to Pay $185 Million Fine Over Account Openings.

The bank will pay a mere $185M to settle claims brought by OCC, CFPB (Consumer Finance Protection Bureau, the new creation of the Dodd-Frank legislation), and LA city attorney.

This scheme involved customer-facing employees opening fake bank accounts in the name of existing customers without the customer’s permission. Another variation is opening a fake account in the name of a nonexistent customer. Article says sometimes money would be transferred from a customer’s account into the new, fake account with occasional NSF fees because there wasn’t enough money in the legitimate account to cover legitimate checks.

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Yet another banking fiasco – Opening two million fake accounts to meet sales targetsRead More »

Yet another banking fiasco – Opening two million fake accounts to meet sales targets Read More »

Yet another look at the big in the Big 4 – 2016 edition

3 Comments / Audits / Jim Ulvog

I am constantly amazed at how massively big the Big 4 firms are in terms of revenue. Inside Public Accounting published their list of the 100 biggest accounting firms for 2016. This is quite current, since many firms have a May or June 2016 fiscal year-end.

Here’s the income number for the 10 largest firms, in millions of dollars, along with comparable data from a year ago: …

Yet another look at the big in the Big 4 – 2016 editionRead More »

Yet another look at the big in the Big 4 – 2016 edition Read More »

Lots more information on the case settled by PwC

Leave a Comment / Audits, Pondering / Jim Ulvog

I stumbled across the website of the law firm that handled the lawsuit against PwC over their audit of Colonial Bank. The case has been settled for an undisclosed amount.

The firm has a section of their website that covers litigation news and settlements. The website is here, the news section is here.

Rare glimpse inside major audit

To put this into context, this is the biggest case against a CPA firm to actually get into court in a very long time. If I’m understanding the case correctly (a massive assumption!) after briefly browsing the articles, there were 12 days of testimony spread over either 3 or 4 weeks of in-court proceedings.

Phrased another way, this case provides lots of sworn testimony on the details of a major audit disaster. It is rare for outsiders to see the inner workings of an audit that did not go well.

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Lots more information on the case settled by PwCRead More »

Lots more information on the case settled by PwC Read More »

Total cost of Alexander’s rampage

Leave a Comment / Economics, Other stuff / Jim Ulvog

Tetradrachm from era of Alexander the Great. Image courtesy Adobe Stock.

This will be my final post on the finances of Alexander the Great.

Professor Frank Holt’s book The Treasures of Alexander the Great: How One Man’s Wealth Shaped the World explains the ancient record does not give us enough details to estimate the total expenses paid by Alexander as he rampaged around the world.

The total expenses based on identifiable items in historical narratives is aggregated by the professor in a formula as:

189( X) + 69,176 talents

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Total cost of Alexander’s rampageRead More »

Total cost of Alexander’s rampage Read More »

A few stray tidbits on the cost of Alexander’s military

Leave a Comment / Economics, Other stuff / Jim Ulvog

Ancient Greek coins. Image courtesy of Adobe Stock.

Professor Frank Holt’s book The Treasures of Alexander the Great: How One Man’s Wealth Shaped the World explains there is little in the historical record on the cost or size of Alexander’s military. Here are a few tidbits which are visible.

Navy

Alexander learned to appreciate the value of a Navy. One data point is that in 334 BC he had 200 ships operating in the Aegean sea. No quantification mentioned of naval forces elsewhere at that or any other time.

Army

Figuring out how much Alexander spent to field his military forces is a game of stringing together many wild guesses. The author accumulated his own long string of guesses and assumptions for small units. He also quotes several other studies.

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A few stray tidbits on the cost of Alexander’s militaryRead More »

A few stray tidbits on the cost of Alexander’s military Read More »

One of three major cases against PwC is settled.

Leave a Comment / Audits, Pondering / Jim Ulvog

Of the three lawsuits against PwC that are large enough to potentially be life threatening, one was settled by PwC after several weeks of the trial. I previously discussed Litigation cases that could possibly take down a Big 4 firm.

On 8/26, the Wall Street Journal reports PricewaterhouseCoopers Settles $5.5 Billion Crisis Era Lawsuit.

Francine McKenna has repeatedly pointed out on Twitter that this is the first major case in a long time against an accounting firm which actually got into court. There are a few weeks of testimony which will likely be a good source for researchers and journalists wanting to understand how audits of large companies can go sour.

Amount of settlement is confidential. This settlement still leaves a $1B suit by the FDIC over the failed bank that was audited by PwC.

Let me give a thumbnail picture of this suit. My simplification will obviously show my confusion. Yeah, my bias will probably be visible too.

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One of three major cases against PwC is settled.Read More »

One of three major cases against PwC is settled. Read More »

Good reads for accountants: Twelve minute CPE courses. Big data AI taking over audit work?

2 Comments / Accounting, Audits, Pondering / Jim Ulvog

In the near term, your CPE options will include twelve-minute courses.

In the long-term, ponder how much of your audit work could be replaced by artificial intelligence. I can grasp the idea of automating a large portion of detail testing. I can’t see the possibility of replacing the entire audit function. Stretch your brain with two articles from Jim Peterson.

8/11 – Journal of Accountancy – CPE standards update accommodates new forms of learning – It will be a while before you see this in a CPE class, but the AICPA and NASBA changed the CPE rules to allow for nano-learning and blended learning.

Nano-learning is a short course, say 12 minutes that will allow CPE credit in 0.2 hour increments. Picture a 24 or 36 minute course on how to conduct an inventory observation. Or a 12 minute class on how to prepare the planning materiality worksheet.

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Good reads for accountants: Twelve minute CPE courses. Big data AI taking over audit work?Read More »

Good reads for accountants: Twelve minute CPE courses. Big data AI taking over audit work? Read More »

Guest post: Overview of Changes to NFP Accounting Rules

Leave a Comment / Accounting / Jim Ulvog

Image courtesy of DollarPhotoClub before they merged into Adobe Stock.

(Cross-posted from my other blog, Nonprofit Update, since this discussion will be of interest to readers here.)

Gary L. Krausz, CPA, CFF, is an audit and accounting services partner in the Los Angeles accounting firm, Gursey | Schneider LLP. Mr. Krausz works with many not-for-profit agencies and private foundations in Southern California. The firm’s website is http://www.gursey.com. Mr. Krausz offers the following guest post as an overview to help the not-for-profit community understand the major changes about to take place in accounting and financial reporting for not-for-profit organizations.

By Gary L. Krausz, CPA, CFF

This past Thursday, August 18, 2016, the Financial Accounting Standards Board (FASB) approved the long-awaited first step in changes to the financial reporting model for not-for-profit organizations by releasing Accounting Standards Update No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. These changes, when effective, will result significant reporting improvements for most not-for-profit organizations including our clients with such diverse operations such as (1) schools, (2) community agencies, (3) private foundations, (4) associations, and (5) religious organizations. The proposed changes will be effective for years beginning after 12/15/2017 (which means calendar years ending on 12/31/2018 and fiscal years ending during the calendar year 2019). Early adoption is permitted.

To highlight just a few of the improvements in Phase I of FASB’s plan:

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Guest post: Overview of Changes to NFP Accounting Rules Read More »

FASB releases major change to nonprofit accounting rules: ASU 16-14

Leave a Comment / Accounting / Jim Ulvog

On 8/18, FASB published a massive overhaul to the accounting rules for not-for-profit organizations. The release is ASU No. 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, which you can find here.

(Cross-post from my other blog, Nonprofit Update.)

Effective date

ASU 16-14 will be effective for fiscal years beginning after December 15, 2017.

Let’s translate that… it will first be effective for calendar year December 31, 2018 financial statements. For NPOs with fiscal year ends, it will be effective for 6/30/19 or 9/30/19.

Since 6/30/16 audits are underway, for a rough ballpark figure three years from now for required implementation.

Early application is permitted.

Really fast intro

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FASB releases major change to nonprofit accounting rules: ASU 16-14Read More »

FASB releases major change to nonprofit accounting rules: ASU 16-14 Read More »

Litigation cases that could possibly take down a Big 4 firm

1 Comment / Audits, Fraud / Jim Ulvog

If a judgment at trial were big enough, it could mean the end of a large firm. Writing on August 13th at Market Watch, Francine McKenna explains PwC faces 3 major trials that threaten its business.

That threaten its business phrase in the headline actually means could take down the entire firm.

There are three major cases, each with a serious enough impact, that an adverse ruling in any one could take out the firm. One is in court now, another expected next February, with the final one in court within a year.

Work with me as I try to process through the cases. Here is the thumbnail version.

Two lawsuits over one client

Taylor Bean & Whitaker Mortgage Corp allegedly generated massive amounts of fraudulent loans, a large portion of which were sold to Colonial Bancgroup. Both companies failed during the financial crisis.

PwC audited Colonial Bank and allegedly did not discover the bad loans that their client, Colonial Bank, bought from PwC’s non-client Taylor Bean.

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Litigation cases that could possibly take down a Big 4 firmRead More »

Litigation cases that could possibly take down a Big 4 firm Read More »