The Big 4 as Frankenstein’s Helpers (Happy Halloween!)

PAUL SAMUELSON: Financial crisis work of ‘fiendish monsters.’

With the financial crisis that started in the United States triggering a global recession, a Japanese newspaper reporter interviewed distinguished American economist Paul Samuelson (pictured) for his insights on what the world can expect in the days and weeks ahead.

The 93-year-old Nobel Prize-winning economist and professor emeritus at MIT emphasizes the need for stepped-up and well-planned government spending to tide over the crisis, while lashing out at the deregulation policy pursued under what he calls “extreme right, supply side economics” adopted by former U.S. President Ronald Reagan and maintained by George W. Bush.

Q: You have experienced and studied the Great Depression. What is the difference between the Great Depression and the current financial crisis?

A: Well, the present one in America is still primarily a Wall Street phenomenon. But right behind that is going to be a Main Street downturn, because all of the swollen population, aged 50 to 65, have lost from these subprime ridiculous mortgages.

They’ve lost much of what they’re going to need to retire. And when I say “lost,” it’s not something that the government can stuff back in. It’s gone. And, it all traces to bad deregulation, to incompetent appointments, to conflict-of-interests appointments.

Harvey Pitt, the first head of the SEC for George W. Bush was a lawyer to the four big accounting firms. The four big accounting firms do not deal from an honest deck of cards. They have tricks to keep things off the balance sheet and so forth. And, these are the new fiendish Frankenstein monsters.

Original here.

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Posted on October 31, 2008
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JIM PETERSON: ‘The Risk of Catastrophic Failure Grows’

Are the days of the big accounting firms numbered?

Peterson thinks so. And he may know better than most, as a former general counsel at Andersen. In his latest post at Re:Balance, Jim suggests: “the bust-up figures would be as small as $560 million.”

He notes that Seidman already has a $521-million verdict pending against it. And just three or four years of sub-par profits could push enough partners to the doors that a firm could simply dissolve.

Read it all here…

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Posted on October 31, 2008
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ART BOWMAN: CPAs Must Hold Themselves “Above the Fray”

In his the latest edition of his newsletter, the veteran accounting journalist and commentator Art Bowman says…

We go through cycles of self-delusion, sometimes too giddy and sometimes too glum. The next recovery lies in the ruins of the last recession. Free markets require rules. Without laws and courts, the market wouldn’t be free, it’d be chaotic. These are among the institutions that help create and safeguard great corporations. Measuring the success and failures of free markets often falls to CPAs. We’ve heard the call before and here it is again: We must hold ourselves above the fray, do our jobs to the best of our professional abilities with little regard for our personal rewards. It is our duty, our contribution to stability when others seek to cause chaos.

Subscribe today to the Bowman Accounting Report

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Posted on October 30, 2008
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NEW SURVEY RESULTS: CPAs on Leadership

Take the survey; get the results.Top management too often falls short.

Many CPAs are less than satisfied with the leadership in their organizations, a finding that may not be surprising. But it’s still disturbing.

Roughly 8 in 10 CPAs are reporting they are less than fully confident in the top management of their firms or finance organizations.

The study, “The Qualities of Leadership,” is part of the joint project between Capstone Marketing and Bay Street Group LLC into the “Seven Keys to Success in CPA Management.”

Participants of the study automatically qualify to see the top-line results. You can join the survey here.

Meanwhile, here are a few of the comments gleaned from early responses so far….

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Posted on October 28, 2008
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GUEST POST: Econ 101 for the so-called “Staffing Shortage”

Why do so many CPAs seem to not grasp that the most basic economic concept of supply and demand applies to our practices?

Joseph T. Eckelkamp
President
Eckelkamp & Associates, CPAs

Instead of continually lamenting shortages of qualified staff, we should recognize that upward shifts in demand curves (client needs) when supply curves (qualified accounting staff) remain constant/fall; or supply curves drop while demand remains constant/grows means prices should increase!!!

Profitability, not staff size, is the goal. If we don’t increase prices, we damage ourselves and the profession by chasing (and paying more for) staff to meet higher demand for our services. If your “factory” is operating at capacity, start charging more. Price increases yield pure profit while increasing billings by hiring more staff only fractionally increases profit while adding organizational risk.

Firms need to grow or they wither and die, but adding staff is NOT the only way to grow!!! I would much rather generate $200,000 of revenue using one person to serve 15 clients than I would using two people to serve 35 clients.

Editor’s note: This post first appeared as a comment, but it seems so trenchant and important that we are highlighting it as a guest post. — Rick Telberg

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Posted on October 28, 2008
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Bob Bunting on Leadership: Four Crucial Ideas

What you need to know to make your firm more effective.

What are today’s best leadership strategies? Join the study; get the answers.

by Rick Telberg/At Large

In these treacherous and tumultuous times, the difference between winners and losers – survivors and casualties — may well hinge on the qualities of leadership.

Some firms and finance organizations are already falling by the wayside. Others are clearly gaining new and powerful competitive advantages that could last for years. Some will flourish; some will perish.

But how do you navigate this transformational era? And how do you insure your own success and survival?

We took our questions to Bob Bunting (pictured), one of the profession’s most respected authorities on leadership.
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Posted on October 27, 2008
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Peer Review Faces “A Real Problem”

AICPA senior vice president Sue Coffey addresses another looming shortage, this time in peer reviewers.

Liz Gold reports from AICPA Fall Council:

“Two years ago we had 11,000 peer reviews a year and only 1,700 peer reviewers, and that was a significant decrease from five years previous to that,” she said. “Of those 1,700, 90 percent were over the age of 40, and 45 percent were over the age of 55. We have a real problem, just like the rest of the profession, with the pipeline and getting people involved in peer review, and we need to do something about it.”

New standards that go into effect in January will require only the team captain and review captain to have had training in peer review.

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Posted on October 23, 2008
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PayCycle Finds 58% Small Business Owners Feel Government Not Addressing Needs

Key findings at a glance:

PayCycle, Inc., the online payroll service, finds in a survey that found 58% of small business owners do not feel the government is addressing their needs. Sixty-nine percent (69%) say they are not directly impacted by the credit squeeze because they don’t need more credit, but 91% are still worried about the economy.

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Posted on October 23, 2008
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BUSY SEASON OUTLOOK: 7 tips to survive the new money crunch

I found change to usually be a good thing for billings.

From Gary Jones
Indigorilla Inc.
via LinkedIn

However, even with good things there can be some red flags of caution. For example – receivables become an issue for some/many CPAs in a credit crunch. This credit predicament is different than those I have lived through, we are uncertain as to how all of this is going to unravel and be reflected in practice economics.

IMHO practices should:

1. Vigorously analyze the practice
2. Develop a new plan for giving client credit for services rendered
3. Have a definite plan in place if cash flow slows down
4. Confirm bank line is available from lender (review terms of this line)
5. Consider new opportunities prudently
6. When in doubt – turn business down
7. Write a tax season business plan based on opportunity and risk

I know these sound like common since, but look where this economy has ended up; upside down.

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Posted on October 23, 2008
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