Friday Footnotes: PwC’s Loss is Deloitte and EY’s Gain; PCAOB Thinks Your Form AP Game Sucks; More Layoffs Coming?? | 3.14.25
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Audit
Empowering auditors: A key to protecting investments [Phys.org]
Many investors have wondered at some point whether businesses are doing what they promised with their money, or whether they are just saying one thing and doing another. Reconsidering norms on audits could help enhance audit findings, according to a study published in Accounting Horizons by a team including Christine Sims Nielson, an assistant professor of accountancy at the University of Mississippi. Nielson worked on the project with Ashley Austin, of the University of Richmond, and Tina Carpenter and Margaret Christ, both of the University of Georgia. The researchers found that when auditors feel more control over their schedules and the freedom to work independently, they are more likely to spot subtle indicators of fraud that might be overlooked if they only performed prespecified audit steps.
Investigation regarding an audit by Ernst & Young LLP [Financial Reporting Council]
The Financial Reporting Council has commenced an investigation into the audits conducted by Ernst & Young LLP of the consolidated financial statements of a Public Interest Entity (as defined in the Audit Enforcement Procedure) and a related non-PIE entity for the years ended 31 December 2021 and 2022.
PCAOB Looking Busy
PCAOB fines KPMG units $3.4M, PwC Singapore $1.5M for audit, independence violations [Compliance Week]
KPMG subsidiaries in Brazil, Canada, Italy, Israel, the U.K., Mexico, South Korea, Switzerland, and Australia agreed to pay the collective penalty for failing to “accurately disclose who performed audits” and other alleged misconduct, the Public Company Accounting Oversight Board (PCAOB) said in a press release Tuesday. In a separate enforcement action, PwC Singapore agreed to pay $1.5 million for its alleged failure to have appropriate policies and procedures related to its Personal Independence Compliance Testing (PICT) process and to foster an appropriate ethical culture within its independence office.
New PCAOB Publication Aims To Help Auditors Get Form AP Right [PCAOB]
PCAOB staff continues to identify a large number of deficiencies related to auditors’ Form AP filings. The deficiencies include, among others, inaccurately reporting whether another accounting firm contributed 5% or more of total audit hours, omitting or incorrectly reporting the percentage of total audit hours contributed by a firm, or providing the incorrect date of the audit report.
PCAOB Staff to Provide Briefing on Latest Quality Control Implementation Efforts at March 19 Open Meeting [PCAOB]
Public Company Accounting Oversight Board (PCAOB) staff will provide the Board with an overview of the latest implementation efforts related to QC 1000, A Firm’s System of Quality Control, with a specific focus on the monitoring and remediation process. The open meeting will take place on Wednesday, March 19, 2025, at 2:00 p.m. ET.
Small Firms
Solo practitioners taking shelter [Long Island Press]
About one quarter of accounting firm partners were older than 60, according to a 2024 study by The CPA Journal. “The takeaway is that one-quarter of accounting firm partners are near or past many of the mandatory retirement age provisions,” according to the Journal.
Harris & Co to hike up prices for accounting [The Blackshear Times (Georgia)]
In an official communication bearing the company’s letterhead, Harris and Company notified the city their new fee for “governmental consulting and bookkeeping services” would be $3,900 a month, effective Jan 1, 2025. Per public comments from Blackshear Mayor Keith Brooks at the March 4 city council work session, the fee had previously been $2,200 a month, making this a steep increase.
Big 4
PwC cuts record number of UK partners and halts tech apprenticeship scheme [Financial Times]
A record number of PwC’s UK partners exited the business in 2024 while the Big Four firm has also halted one of its apprenticeship programmes, making cuts to its top and bottom ranks as it strains to protect profitability. PwC has stopped recruiting for one of its apprenticeship schemes and has broken with its previous practice by declining to offer permanent jobs to some of the cohort due to graduate from the programme this year, according to people familiar with the matter.
PwC parted ways with 76 UK partners on New Year’s Eve [Business Insider]
PwC’s UK division closed out 2024 by parting ways with more than 70 partners as the consulting giant worked to weather a slowdown in the sector. The Big Four firm cut 76 partners from its ranks in a single day on December 31, 2024, according to Business Insider’s analysis of publicly available data. The end-of-year departures topped off a year that had already seen a larger than usual number of partners depart. A total of 124 partners left the firm in 2024, according to records at the UK’s Companies House.
Job culls at the Big Four may not be over [The Times]
Britain’s Big Four accounting and consulting firms have shed close to 3,000 roles over the past two years, and there are fears that more could be in the pipeline, with President Trump being partly to blame. Between them, Deloitte, EY, KPMG and PwC have made at least 2,800 people redundant at their UK offices, although the actual figure is likely to be higher, given the “silent layoffs” that have also been taking place. Deloitte has been, by some distance, the most aggressive, cutting about 1,300 jobs over 2023 and 2024. KPMG has let go of an estimated 550 of its staff, while EY’s layoffs over the period total about 350.
PwC’s Consulting Ban From Saudi Fund Has Rivals Hunting for Work [Bloomberg]
Rival consultants to PwC are gearing up for the chance to make deeper inroads into the lucrative market of Saudi Arabia in the aftermath of the Public Investment Fund’s decision to ban the company from advisory work for a year. Managers at Deloitte and Ernst & Young have instructed staffers to prepare for more work in the kingdom, according to people familiar with their thinking.
Talent
Austin accounting firms grow CPA headcounts despite national shortage [Austin Business Journal]
Overall, the top 30 firms on the Austin Business Journal’s latest list of accounting firms reported a total of 962 local CPAs this year, and four firms reported CPA counts over 100 for the first time. It’s representative of how the region’s economic growth supports a new generation of professional services firms and employees. PwC ranked No. 1 on the list with 140 CPAs.
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Tax
Do ‘sin taxes’ curb harmful behavior? [University of Cincinnati]
Michael Jones, PhD, associate professor of economics at UC, was quoted in the Ohio Capital Journal and offers additional thoughts about ‘sin taxes.’ “Tobacco taxes alone won’t eliminate smoking, but they are a critical tool in a larger strategy that includes prohibitions on smoking in public places and increasing education on the dangers of smoking,” says Jones. “One of the reasons sin taxes work is that younger smokers are somewhat price-sensitive—when cigarettes cost more, they’re less likely to start or continue smoking.”
N.J. school district owes IRS money in penalties. But it won’t say how much. [NJ.com]
A Union County school district owes the Internal Revenue Service money after it failed to properly file its taxes. But district officials have not specified the outstanding balance. During its Feb. 24 meeting, the Roselle Board of Education voted to accept an audit from the Fair Lawn-based accounting firm Lerch, Vinci & Bliss for the 2023-24 school year. The board also voted to accept a corrective action plan that included ways to fix the tax problem.
Dr. Mehmet Oz may have underpaid Medicare and Social Security taxes, Senate Democratic memo finds [NBC News]
During a meeting with Oz and his accountant, Democratic committee staffers said they asked Oz to amend his tax returns to include income from Oz Property Holdings LLC in his SECA tax calculation, according to the memo. Oz argued that he was not liable for the tax because he was a “limited partner” in Oz Property Holdings LLC. Democratic committee staff members asserted that he was “actively involved” in the company and should pay more in self-employment taxes.
Trump threatens 200% tariff on European wine and Champagne after EU proposes American whiskey tax [AP via PBS]
President Donald Trump on Thursday threatened a 200% tariff on European wine, Champagne and spirits if the European Union goes forward with a planned tariff on American whiskey. The European import tax, which was unveiled in response to steel and aluminum tariffs by the U.S. administration, is expected to go into effect on April 1, just ahead of separate reciprocal tariffs that Trump plans to place on the EU.
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