Archive for June, 2012


Miscellany — interesting items that caught my eye during the week.

Patty Keegan is spot on in her article for Marketing Magazine (Australia).  Her “The executive tweet – why CEOs should use social media,” is excellent.

Ed Ketz and Tony Catanach, the Grumpy Old Accountants, have an excellent piece in, “Who Really Cares About Auditor Rotation? Not Us!” They reason that “Any auditor’s report (the current or improved version) should be supplemented with a detailed “audit engagement” report that will allow investors to make up their own minds about the quality of a company’s audit.”

The Accounting Today has announced the inaugural winner of its contest for Accountant of the Month.  The winner is Darlene Finzer, a principal at the Ohio CPA firm Rea & Associates.  The purpose of the award is to recognize an accountant who is the polar opposite of dull and boring.  Finzer has two claims to fame.  First, she grows donkeys.  Second, she works on the pit crew for her nephew’s go-kart races.

Have you seen the latest video featuring Gwen Jorgensen?  Gwen Jorgensen is the Olympic accountant.

Lindsey Pollak writes for the LinkedIn Blog.  Her recent entry, “How to Showcase Your Personal Brand on LinkedIn: 8 Tips,” is a good reminder that LinkedIn is a terrific tool for presenting your personal/professional brand.  I need to tweak my LI profile.

Debit and credit – – David Albrecht

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Accounting Education is a British journal published by Taylor & Francis, a profit seeking company. It has just released its issue for June, 2012 (Vol. 21, No 3).  This issue is devoted to academic cheating by students (but not by faculty) and their sensitivity to ethical issues.  A few of the articles sound very interesting.  I would read the entire issue if not for the price.

There are six articles and one editorial.  The download fee is $36 USD per article/essay, or $275 for the entire issue.

Guest Editorial 

  • Academic Dishonesty, Cheating Behaviour and Other Forms of Inappropriate Conduct
    Kenneth J. Smith & Malcolm Smith

Original Articles

  • A Longitudinal Study of Accounting Students’ Ethical Judgement Making Ability
    Maisarah Mohamed Saat, Stacey Porter & Gordon Woodbine
  • The Impact of Honour Codes and Perceptions of Cheating on Academic Cheating Behaviours, Especially for MBA Bound Undergraduates
    Heather M. O’Neill & Christian A. Pfeiffer
  • Challenges to Academic Integrity: Identifying the Factors Associated With the Cheating Chain
    Richard A. Bernardi, Caitlin A. Banzhoff, Abigail M. Martino & Katelyn J. Savasta
  • To Cheat or Not to Cheat: Rationalizing Academic Impropriety
    Jason MacGregor & Martin Stuebs
  • Perceptions of Authorial Identity in Academic Writing among Undergraduate Accounting Students: Implications for Unintentional Plagiarism
    Joan Ballantine & Patricia McCourt Larres
  • Unethical and Deadly Symbiosis in Higher Education
    D. Larry Crumbley, Ronald Flinn & Kenneth J. Reichelt

$275 is a bit pricey for me.  I might pay $15 or $20 to read them all.  If subscribing for a firm, an academic unit or a library, the price is $1,349 USD per year (six issues per year).  And people wonder why no one ever reads a professor’s published academic article.

Truly, I would like to read some of these papers, but the price is simply too high.  I think something needs to be done with the financing model of academic publications.  In this age of the Internet, too many commentaries and research papers are available inexpensively.  Maintaining artificially high prices restricts reader access.  If accounting professors are business professors, why is it that we seem to be ignorant of the law of supply and demand.

Moreover, why is there no blog for this journal?  In a blog researchers could interpret their findings for the public.

Debit and credit – – David Albrecht

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I’ve been writing about the Spanish bank crisis (“Spanish Non Sequitur” and “Followup to the Spanish Non Sequitur“) because it is related to mainstream financial reporting and auditing.  How so?

The Spanish government recently hired all of the Big 4 (still don’t know from which countries) to tidy up the financial statements from many banks in the industry.  I’ve written about how this is a novel strategy to cleaning up faulty financial statements.

In addition, this is related to the push for global accounting standards.  If IFRS doesn’t work well in a mid-size European country, then how can it work as the primary tool for regulating banks world wide?

Nathalie Tadena, of the Wall Street Journal, wrote yesterday on “Moody’s Cuts Ratings on 28 Spanish Banks.”  Moody’s has downgraded bank ratings to one notch above junk.  Ouch.  In part, this is because of Spain’s sovereign debt crisis, and in part this is because “banks … have been hollowed out by a five-year property slump that has left them exposed to hundreds of billions of dollars in loans to builders and developers.”

The U.S. has experience in dealing with bank difficulties caused by economy shaking issues in real estate. The 1980s Savings & Loan Crisis and 2008 Subprime Financial Securities Crisis come to mind.  Both American crises showed that banks easily succumb to temptation in hiding losses from investors, and that auditors are loathe to alert investors to going concern difficulties.

Spain, welcome to the club.  It is dealing with its bank crisis by hiring Big 4 audit firms to clean up the financial statements of larger banks in its banking industry.  Undiscussed, though, is why Spain is hiring the same audit firms which previously had been a party to issuing unflagged misleading financial statements.

I’m glued to the newswire looking for the next development in this story.

Debit and credit – – David Albrecht

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The auditor disciplinary arm of the Financial Reporting Council (FRC) of the UK has concluded its investigation and on June 22, 2012 announced that Ernst & Young (EY) is not to be penalized for its audit of the November 30, 2007, financial statements of Lehman Brothers Holdings Inc (LBHI).

Executive Counsel considers that there is no realistic prospect that a Tribunal would make an adverse finding against Ernst & Young LLP in the UK or Members within that firm. The investigation will therefore be closed and no further action taken.

Coupled with an earlier announcement from the Securities and Exchange Commission (SEC) of the US that no legal proceedings are likely to be initiated against EY or its employees, this marks the end of one the darkest chapters in recent accounting and auditing history.

Although EY will not be penalized for failing to alert investors to LBHI’s sophisticated scheme to manipulate its financial statements, it has embarrassed itself and shamed all of us in the accounting and auditing industry.

EY has showed itself to be no better than Arthur Andersen.  Ernst & Young, shame on you. 

The FRC is the regulator and standard-setter in the UK responsible for corporate governance and financial reporting as well as the audit, accounting and actuarial professions.  It is not a governmental unit, but a private organization.  It operates in the public interest.

The FRC operates in a manner similar to the Financial Accounting Standards Board (FASB) and Public Company Accounting Oversight Board (PCAOB) of the US.

A unit of the FRC, Accountancy and Actuarial Discipline Board (“AADB”), has investigated Ernst & Young over the LBHI matter.  This is its summary of the investigation:

  1. On 10th June 2010 the Accountancy and Actuarial Discipline Board (“AADB”) considered the matter of Lehman Brothers (“Lehmans”) and decided, pursuant to paragraph 5(8) of the AADB Accountancy Scheme (“the Scheme”), that the matter should be investigated by the AADB.
  2. Lehman Brothers Holdings Inc. (“LBHI”) sought Chapter 11 protection in the United States of America on 15thSeptember 2008. The US Bankruptcy Court nominated an Examiner, Anton R. Valukas, who published his report into Lehmans’ collapse on 11th March 2010. The report made criticisms of Lehmans’ auditor, Ernst & Young, for failing to question and challenge improper or inadequate disclosures in Lehmans’ financial statements. The Examiner’s criticisms specifically related to the use by Lehmans of transactions known as Repo 105 and Repo 108 transactions. The report did not specify whether the criticisms related to the primary auditor of LBHI, which was Ernst & Young in New York, or Ernst & Young generally.
  3. Repo 105s and Repo 108s were used by Lehmans to raise short term funds and, by virtue of compliance with US Financial Accounting Standard 140 (“FAS140”) which requires certain transactions to be treated as sales instead of financing transactions, enabled Lehmans to reduce its balance sheet and leverage ratios. The Examiner found that whilst the use of Repo 105/ 108 transactions may not have been inherently improper its sole function as employed by Lehmans was balance sheet manipulation.
  4. The scope of the AADB investigation was as follows:“The conduct of Members and a Member Firm in relation to: (a) the preparation and audits of the financial statements of Lehman Brothers Holdings Inc.and UK operations including Lehman Brothers International (Europe) for the year ended 30th November 2007;and (b) the use and accounting treatment of transactions known as “Repo 105s” and “Repo 108s” by Lehman Brothers Holdings Inc. and UK operations including Lehman Brothers International (Europe).”
  1. The focus of the investigation was the audit by Ernst & Young LLP in the UK (“EYUK”) of Lehman Brothers International (Europe) (“LBIE”) and of Repo 105 and Repo 108 transactions which were conducted through LBIE.  EYUK audited the trial balance of LBIE prepared under US GAAP for consolidation into LBHI’s consolidated financial statements. The audit of LBIE’s trial balance formed the basis of a ‘Specific Scope Conclusion’ to Ernst & Young in New York.
  2. In the course of the investigation, the investigation team obtained and reviewed EYUK’s audit files; hard copy documentation; information from EYUK staff members’ laptops and emails, and information from other regulators. The team also interviewed EYUK audit team staff and former members of staff of Lehmans.

Debit and credit – – David Albrecht

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Miscellany — interesting items that caught my eye during the week.

Francine McKenna of @re: the Auditors was up to bat and she clobbered it out of the park in, “Big Four Auditors and Jury Trials: Not In The U.S.

A big part of the audit problem in the USA is not being able to sue audit firms.  The risk of legal loss seems to be the only thing that can keep them honest.  Because Francine explains their lack of legal loss, in my opinion they don’t stay all that honest.

Terri Eyden of the Accounting Web has a nice write-up of an interesting survey in, “Global Survey on Business Ethics.”  The survey was conducted by the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA),

Sue Shellenbarger writes about the explosion of bad grammar in office conversations, messages and reports in, “This Embarrasses You and I: Grammar Gaffes Invade the Office in an Age of Informal Email, Texting and Twitter.”  I agree that most people write in an embarrassingly poor manner.

Courtney Shelton Hunt, founder of Social Media in Organizations, has a must read article for everyone on Twitter.  In, “15 Twitter “Worst Practices” for Rookies (and Others) to Avoid,” Hunt lists mistakes that many make.  Even me.

Isabel Sales is co-author of one of the world’s top accounting blogs, Contabilidade Financeira. In English, it would be called Financial Accounting. Her co-authors are Cesar Tiburcio and Pedro.  Isabel lives and works in Brasilia, Brazil.

I have followed Contabilidade Financeira for years to gain insight into Brazilian world of accounting.

Her latest blog post is on a video about how Millenials differ from prior generations.  It is titled, “Você faz o que gosta?” (You do what you love?).  She writes, “Um vídeo que nos faz refletir, inspira e diverte. PERFEITO!” (A video that makes us reflect, inspire and entertain. PERFECT!).


Hint:  If you don’t speak Brazilian Portugese but want to surf Brazilian accounting sites, use Google Chrome.  It has an effective translation mechanism.

Debit and credit – – David Albrecht

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American Gwen Jorgensen, the Olympic Accountant, took first place (and the gold) at the 2012 Banyoles (Spain) ITU Triathlon World Cup.  This is her second World Cup championship.  She also won the 2011 World Cup gold.

Gwen Jorgensen in transition at Banyoles. Pic credit GwenJorgensen.com

Jorgensen finished in a time of 1 hour, 59 minutes, 39 seconds on the 1,500-meter swim, 40-kilometer bike, 10-kilometer run course.  The Olympic course in London is slightly longer, 1,500m/43km/10km.

Erin Greene of the Triathlon.org has a thorough write-up in “Jorgensen Jets to Banyoles World Cup Victory.”  This article also contains a video recap of the race.

After the race, Jorgensen said, ““It was a really great course. Those girls really made me work. There are some really good runners out there and when [Australian] Erin [Densham] took it out, I really tried to keep the distance.”

Gwen Jorgensen is called the Olympic Accountant because she is a tax specialist for Ernst & Young in its Milwaukee, WI, office.

Debit and credit – – David Albrecht

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James Kroeker

An hour ago, the SEC announced that James Kroeker, Chief Accoiuntant of the SEC, is stepping down.  Here is the complete text of the announcement.

06/20/2012 03:43 PM EDT


Washington, D.C., June 20, 2012 — The Securities and Exchange Commission today announced that Chief Accountant James L. Kroeker will leave the SEC in July to enter the private sector.

Mr. Kroeker came to the SEC in 2007 as Deputy Chief Accountant and has been the agency’s Chief Accountant since January 2009. In that role, he has guided the operations of the SEC’s Office of the Chief Accountant and counseled the Commission on a wide range of accounting and auditing issues.

“Jim has provided superb counsel on a range of accounting and auditing related matters and has always stressed the importance of accounting to our investor protection mission,” said Chairman Mary L. Schapiro.

Mr. Kroeker said, “It has been a unique privilege to be a member of the Commission’s staff during this truly unprecedented time and to have had the opportunity to work alongside the talented and dedicated individuals in the SEC’s Office of the Chief Accountant and across the Commission.”

At the SEC, Mr. Kroeker served as staff director of the agency’s study of fair value accounting standards, which was mandated by Congress in 2008, and led the efforts of the Office of the Chief Accountant to improve off-balance sheet accounting standards. He also guided the Commission’s efforts as it continues to consider convergence of U.S. and international accounting standards.

Before joining the SEC staff, Mr. Kroeker was partner at Deloitte & Touche LLP, most recently serving in the firm’s National Office Accounting Services Group. From 1999 to 2001, Mr. Kroeker served as a Practice Fellow at the Financial Accounting Standards Board.

Debit and credit – – David Albrecht

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Earlier this month I wrote, “Spanish Non Sequitur.”  Non sequitur is Latin for, “it does not follow.”

As is commonly reported, Spain is experiencing a sovereign debt crisis.  Sovereign debt is when a government borrows to finance spending in excess of tax collections.  A sovereign debt crisis comes about when said government cannot make timely payments to those from whom it has borrowed.

As Spanish banks have invested in Spanish sovereign debt, and Spanish banks are still not fully recovered from the financial crisis of the past few years, it is widely thought that many are in extreme financial distress.  How much financial distress is unknown, because it is widely thought that Spanish banks have been less than candid when issuing financial statements.

Earlier this month I wrote about a Spanish government announcement (actually, an authorized leak) about the first two parts of a three part plan to deal with the sovereign debt crisis.  First, two consultants had been hired to evaluate how close to insolvency are the banks.  Second, all of the Big 4 audit firms had been hired to perform audits to clean up the bank financial statements so that the government would have accurate information.  The third part of the plan was unveiled a few days later when Spain appealed for a large bailout to pay off debt about to come due.

The second part of the plan is a non sequitur because the large audit firms are part of the problem.  Previously, they had issued clean audit opinions for bank financial statements that didn’t deserve them.  There is no way for government officials to know for certain that the information provided this time by the audit firms is any better than their earlier audit opinions.  Unless, of course, the audit firms have been threatened with a return of the Spanish inquisition.

Earlier today two conflicting reports have appeared in the press.  First, David Roman of The Wall Street Journal writes in,Spain Delays Full Bank Audit Amid Rise in Yields, that, “The deadline for a group of auditors to present full reports on the capital needs of Spain’s financial sector has been postponed to September from July 31, a person close to the situation said Tuesday.”

Second, a Reuters report says,

A [Big 4] detailed audit of Spanish banks will remain on schedule and release its findings on July 31, a spokesman for Spain’s economy ministry said on Tuesday, denying an early report the assessment would be pushed back to September.

“There won’t be any delay in completing the audit of Spain’s banks,” the spokesman said.

Earlier, a source at the Bank of Spain had told Reuters the second audit would be delayed to September to give organizers more time to gather information on each bank’s loan books.

I don’t know for sure what is happening in Spain, because insufficient disclosures have been made public.  Therefore everything I say is a guess.  However, I think it is the most interesting development in years to arise in the accounting/auditing world.

Debit and credit – – David Albrecht

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Do you know that the AICPA has a video page called AICPA TV?  Judging by the hit count, you didn’t.  Neither did I.

Friend Barry Rice (retired, Loyola U) sent me an e-mail calling the latest entry inspirational.  What do you think about Evolution of a Profession?  Professor Rice thinks we should be showing this video to our students.

The speakers are Noel Abdur-Rahim, CPA, and Steve Beguhn, CPA.  You might recall Beguhn from his stint on American Idol.

The AICPA YouTube channel doesn’t contain all of the AICPA TV videos.  Too bad.

Debit and credit – – David Albrecht

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Gwen Jorgensen – EY tax accountant and Olympic triathlete. Pic credit: gwenjorgensen.com


Gwen Jorgensen, CPA, is like many young accountants aged 26. She majored in accounting on the way to receiving her bachelor degree. She interned with a Big 4 firm. She stayed in school, earning a masters degree in accounting. Then she took a job with the Big 4 firm.

Jorgensen’s degrees are from the University of Wisconsin at Madison. She has two years of experience with Ernst & Young in Milwaukee.

Most accounting majors, though, aren’t D1 athletes in two sports, or even one. Jorgensen competed for UW on the swimming, track and cross country teams. She started college as a walk on swimmer. After two years, she tried out for indoor/outdoor track. She excelled here, being the 2009 Big 10 champ in the 3,000 and 5,000. She earned All American status with three trips to the NCAAs. Wow!

She left school at age 22 to pursue a career in accounting. She has this to say about her experience, “I specialize in Taxation and love to read, research, and interpret the Tax Code/Law. I’ve been blessed to work for a great firm. I learn an incredible amount everyday at work and enjoy learning! It’s a great career.” She also says, “I love accounting.”

In an interview with NBC, she was asked, “How do your fellow CPAs feel when you tell them you’re striving to be an Olympian?” She responded,

They’ll Google me every once in a while. And they’ll be like, Gwen, did you see this? But I try to keep the two separate. I really enjoy going to work and just kind of being able to relax and get my mind off of training and be somewhere else. And I just really enjoy to have that second life.

Jorgensen was recruited to the sport by USA Triathlon because she was an elite collegiate athlete. Her rise from 2010 rookie triathlete to 2011 World Cup champion (18 months) has been meteoric.

Jorgensen’s event will take place on Saturday, August 4, at the 30th Olympic Summer Games in London. She will be one of 55 female triathletes competing for the gold. The Olympic triathlon consists of a 1,500m swim, a 43km bike ride and a 10km run. The race is completed from start to finish with no breaks. The transitions between the swim, the bike and the run are part of the race.

The race course is in Hyde Park. A map of the course shows that she will bicycle past Buckingham Palace.  NBC asked her about the Hyde Park course.

Going to London 2012, you’ve had a sense of what that Hyde Park course is. So does that give you an advantage or a leg up?

Yeah, being able to do the Hyde Course Park a year in advance is a huge advantage. I think all the big players were there, and everyone was able to see it, but just having a year now to prepare for that specific course, and to be able to visualize and do specific workouts towards that course- it’s a huge advantage.

How is the course set up for you? Does it play to your strengths?

The course does play to my strengths. I’m pretty lucky. It’s a relatively flat, non-technical course. There’s not a lot of hills, there’s not a lot of one-eighties. The corners are very sweeping corners, so it’s not a very difficult on the bike, technical-wise

Jorgen is also a social media savvy accountant. She has or is on:

I am embedding two videos that will teach you about the special accountant who is Gwen Jorgensen. The first, Accountant to Olympian, provides a good introduction to her.

The second video, from a series called Qualified, covers how she handles the stress and pressure of training for the olympics.

Some might consider her an Olympic favorite because of her world cup championship.  I consider her an Olympic favorite because she’s an accountant.

In the coming weeks, I hope to bring you much more about Gwen Jorgensen. Anyone want to start a fan club?

Debit and credit – – David Albrecht

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The Association for Accounting Marketing (AAM) has released a public announcement, “Thirty-eight Awards Distributed to Honor Top Marketing Firms.”  Although 20 firms received recognition, Freed Maxick, CPAs, PC, led the way with seven awards.  Congratulations.

Membership in AAM is too pricey for most accounting professors, and I am no exception.  Never-the-less, I do my best to follow it because marketing is such a key activity for any accounting or financial services firm.  The surest way to partner is to create, nurture and grow a sizable client list.  In addition, nine members of AAM made the Accounting Today Top 100 Most Influential People in Accounting for 2011.

WithumSmith + Brown, PC received an award for its blogs.  This is well deserved in my opinion.  It also received the award for small budget multimedia, presumably for its flash dance video.

Is it time for a category to be created for integrated social media campaigns?  How about for Tweeter of the Year?

Awards were issued in 11 categories:  branding, collateral, marketing campaigns, advertising, website, multimedia, internal programs, events, surveys, business development/lead generation and maverick marketing.  “This was the 18th year that the annual awards were presented. Recipients were announced at the 2012 AAM Summit in partnership with the AICPA Practitioners Symposium and TECH+ Conference, held in Las Vegas, NV on June 11, 2012.”

Debit and credit – – David Albrecht

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(c) BKA at CardinalAvenue.com

After hearing a sermon on Mother’s day 1910, Sonora Smart Dodd suggested to her Spokane pastor there should be a day for fathers.  There was, on June 19.  After decades of her promotional effort, observance became routine.

In 1966, President Johnson issued the first presidential proclamation honoring fathers, and in 1972 observing Father’s Day on the third Sunday in June became a national law.

I am a father, and I can speak with authority on this subject.  On Father’s Day, a hug or a phone call is much more appreciated than the gift of a tie or shirt.

If there is a father in your life, either your own or a friend’s, then you should call them up or reach out to hug them.

Debit and credit – – David Albrecht

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