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.
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Private Equity
Private Equity and the Ethics of a Profession [CPA Journal]
Writes Richard H. Kravitz, MBA, CPA:
The recent multibillion-dollar investment by private equity in a major CPA firm reminded me of the concerns that I raised in an article that I wrote 15 years ago in the November 2009 CPA Journal (years before I joined our editorial team), called “Socially Responsible Accounting: A Call for Reform of the Profession” (https://www.nysscpa.org/0911-rk)…Having worked for two private equity firms during my career, I can say that our objective was to restructure the acquired organization, eliminate investments that would not be realized in the short term, cut marketing and new product development spend, reduce technology investment, optically dress up the company, and then sell it to another PE company. Might consolidation result in fewer independent audit firms and fewer auditors? Might this result in even more adverse audit assessments? Furthermore, who will protect the investing public if there are fewer independent auditors? Who will audit the financials of publicly traded corporations? Even today, “A lack of trained accounting staff was cited as a control issue in 48.7% of adverse auditor assessments and 71.5% of adverse management assessments.”
People
Former Livingston student’s rise in the accounting world [East Texas News]
Robert Belt, whose firm Belt Harris Pechacek was acquired by Crowe this year, talks about how getting ripped off by his sisters inspired him to serve the public interest as a CPA.
“Mr. Windham said, ‘Get something behind your name like a doctor or CPA.’ Those simple words stuck. Years earlier playing the board game Monopoly I was the victim of a fraudulent Ponzi-embezzlement scheme perpetrated by my own sisters, Darla Belt Dear and Dana Trujillo. I guess that childhood board game taught me a lot about how easy it is to take advantage of someone’s trust and the need to protect the public,” Belt said.
Big 4
PwC Is Grappling With an Exodus of Clients and Staff in China [Bloomberg]
PricewaterhouseCoopers LLP’s regulatory troubles in China have caused an exodus of clients and led some of its accountants to seek out jobs at rivals, casting doubt over the firm’s prospects in the world’s second-largest economy. Since March, more than 30 publicly listed companies based in mainland China have dropped PwC as their auditor, according to stock-exchange filings.
EY’s new boss leaves strategic questions unresolved [Financial Times]
Janet Truncale presented Carmine Di Sibio with luggage tags at a joke-filled retirement party at New York’s Glasshouse venue last week, cheekily referencing how he would have to get used to travelling commercial again. Truncale finally picked up the keys to EY’s corporate jet on Monday, seven months after being chosen to succeed Di Sibio as global chief executive of the Big Four accounting firm. Now she also has to pick up the pieces from the collapse last year of his plan to split the firm in two.
Senate reveals $4 million Burrowes pay packet [The Mandarin]
PwC Australia CEO Kevin Burrowes earns $4 million a year for rolling up his sleeves to fix the global franchise’s local arm, according to a response to a question on notice from Senator Deborah O’Neill. O’Neill asked the firm for further details of Burrowes’ remuneration package given the firm had previously told the Colbeck inquiry into government procurement that the remuneration package was $2.4 million. This was later corrected to $2.8 million. The firm’s response to the questions on notice provides further details of Burrowes’ complete package, including a payment from PwC International Limited for the work being done in Australia. “As the Committee may be aware, the leadership of PwC’s global network of member firms (the PwC network) requested Mr Burrowes to consider taking the role as CEO of PwC Australia on short notice and during a difficult period for the PwC Australian partnership,” the firm’s response says. “That role required Mr Burrowes to leave a senior global role with the PwC network, retire from the Partnership of PwC UK and to become a partner of PwC Australia, and that he be remunerated for that role as a partner of PwC Australia.”
Technology
China Thrashes U.S. In Global AI Patent Race—Here’s Why That Doesn’t Mean It’s Winning The AI War [Forbes]
China vastly outpaces international rivals in the global race for generative AI patents, a new United Nations report revealed Thursday, leaving the United States and other nations lagging far behind as they vie for a strategic edge and leadership over the transformative technology.
Google’s carbon emissions surge nearly 50% due to AI energy demand [CNBC]
Google’s emissions surged nearly 50% compared to 2019, the company said Tuesday in its 2024 environmental report, marking a notable setback in its goal to achieve net-zero emissions by 2030. Google’s emissions also increased 13% year over year in 2023, per the report. The company attributed the emissions spike to an increase in data center energy consumption and supply chain emissions driven by rapid advancements in and demand for artificial intelligence. The report noted that the company’s total data center electricity consumption grew 17% in 2023.
A deep look into burgeoning blockchain audit [South China Morning Post]
Unlike standard financial audits for public firms, smart contract audits focus on the integrity and completeness of a piece of computer code as opposed to financial statements. A new study by Janja Brendel, Assistant Professor of the School of Accountancy at the Chinese University of Hong Kong (CUHK) Business School, found that the smart contract audit market is thriving.
Narrowing the workplace’s AI ‘trust gap’ [Accountancy Age]
The lack of confidence and trust between employees and employers, known as the AI Trust Gap, is not surprising given the relative immaturity of GenAI and the exponential pace at which technology is evolving. The World Economic Forum (WEF) reported this year that only 55% of employees are confident their organization will ensure AI is implemented in a responsible and trustworthy way and 42% believe their company doesn’t have a clear understanding of which systems should be fully automated and which require human intervention. To unlock AI’s full potential, our organizations will need to bridge this trust gap and ease lingering trepidation.
Talent
How AI can increase well-being by reducing risks [Thomson Reuters]
The reality is that many of today’s professionals are stressed and burned out. Accounting professionals are no exception. While it is true that the industry professionals has long been associated with high-risk work and ever-changing laws and regulations, the call for more efficiencies in performing work and a better work-life balance has perhaps never been louder.
Attract, retain, and upskill tax talent in era of AI [Thomson Reuters]
“The focus on retaining, attracting, training, and upskilling talent should remain a top-of-agenda organizational issue if businesses are to continue to provide the value that customers and stakeholders have come to expect, especially as we put more emphasis on the tech changes that are disrupting all industries,” stated Thomson Reuters CEO and President, Steve Hasker.
Navigating the Talent Crunch: Harnessing AI to Overcome Talent Shortages in Finance and Accounting [Mike Whitmire of FloQast via Nasdaq]
When AI and automation are leveraged to perform mundane and time-consuming tasks, finance and accounting professionals have more time to focus on other responsibilities, such as more complex financial analysis or strategic decision-making. In fact, a study from SmartSheet found that, when tedious aspects of jobs were automated, workers regained six or more hours of their time per week. This benefit is significant because 40% of finance activities can be fully automated (McKinsey). With this additional time to focus on more strategic or goal-oriented work, accounting and finance professionals might experience higher levels of job satisfaction and improved feelings of fulfillment.
News
58% of CFOs have increased FP&A focus since last year: PwC report [CFO]
The skills required for a CFO to meet today’s FP&A demands continue to expand. CFOs are more active in the decision-making processes of the business, must leverage cost-efficient technology both within the finance function and beyond and using data in the decision-making process. Because of this, finance leaders are looking at improving their FP&A skills and talent to help further the business. In the most recent PwC Pulse Survey, this transformation continues to be evident. More than half of the CFOs they surveyed (58%) said they’ve increased their FP&A focus since last year.
Government working on aggregation of CA firms, accounting standards for insurance sector [The Economic Times of India]
New Delhi: The government, along with the chartered accountants’ body ICAI, is working for aggregation of accounting and auditing firms in the country to make them global players, a senior official said on Monday. The aim is to have the ‘Big Four’ accounting and auditing firms from India, and efforts are already on.
Rapid change leaves Moroccan firms in unfamiliar territory [International Accounting Bulletin]
The development of the economy and the changes in the global environment has resulted in a complete change in how Moroccan accounting firms do business. “Crucial challenges relating to profitability and workforce renewal remain major issues,” said Najat Moughil, partner at Exco ACDEN, a Kreston Global member firm. “The evolution of client expectations, the rise of pricing pressures and the aging of the professional population introduce complex dynamics, requiring an agile adaptation of accounting firms.”