RSM Faces Shareholder Coup in UK

Following months of internal disarray and the revelation of a major accounting error, a group of shareholders of RSM UK is attempting to oust the firm’s board and block the appointment of new CEO Jill Jones, the Financial Times reported.

The group, led by two former RSM UK executives, claimed in a letter that it has power of attorney to vote on behalf of 64% of shareholders in response to the accounting blunder and a CEO selection process that it believes was rigged – a charge RSM UK has denied. One source close to the situation told the Financial Times that anger against the board was so severe that the group decided to move forward with its grievances despite the impact of the ongoing COVID-19 pandemic.

The accounts misstatement related to an error in reported sums set aside for professional liability claims, such as legal action or regulatory fines. The subsequent restatement had a net impact on profits of £2.2 million. RSM UK reported a £5.8 million pre-tax profit in the year to April 2018, which was restated in the 2019 accounts to a loss of £113,000.

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Looking Beyond the Pandemic for Accounting Firm Success

The COVID-19 crisis is illuminating the benefits of sharing knowledge, helping others and staying connected, say executives of global accounting associations.

Member firms are busier than ever answering client questions and concerns related to the global pandemic, including extended tax deadlines, aid packages and the like, but it is also a good time for firm leaders to reexamine how they are positioning themselves in the market and the role their firms play in their clients’ lives.

Association executives from Scotland to Atlanta gathered in a live video conversation on March 25 hosted by futurist Ian Khan to discuss the issues. He was joined by economist Sandra Saghir and the CEOs of Allinial Global, PKF International, Morison KSI and PrimeGlobal.

Some of the changes firms were forced to make, including moving to the cloud and enabling remote work, have been embraced for years, but not by every firm. The pros and cons will be worked out in real time during the pandemic for those firms. PrimeGlobal’s Stephen Heathcote notes that some MPs are already changing their mindsets about how they run their firms – viewing multiple offices as a costly hindrance rather than a must-have.

As for client service, James Hickey, of PKF International, suggests that firms will need a new go-to-market strategy because the profession as a whole is good at proscribing what clients need but bad at asking clients what they want. At a three-day conference last year, the word ‘client’ was mentioned only five times, he says. In light of the economic downturn, some businesses may forgo advisory services after tax season, “so we’ll have to find out what they need after that and use two ears, not one.”

Terry Snyder, Allinial Global CEO agrees. Done correctly, clients will realize just how valuable CPAs are, because business owners tend to seek out their CPAs much sooner than other professionals in a crisis. It’s up to firm leaders to put themselves in front of clients to help them through this difficult time. Every now and then, he says, people rethink their roles and reinvent themselves. “Sometimes you have to be shaken really hard to get people to do that.”

Firms should go on overdrive to reach out to clients, even if it feels like too much communication, they say. A global economic slowdown has accompanied the health crisis, and as businesses are shuttered around the world, CPAs are a source of reassurance and answers on how to prepare for the aftermath.

Saghir says that accountants will be key actors in moving toward economic sustainability. Build your skills and develop trust with your clients so that when the economy starts moving again, “they’ll know that during hardships you were standing by them.”

Grant Thornton in UK Gives Staff Offer: 40% Pay Cut or Voluntary Sabbatical

One of Britain’s largest accounting firms is combatting the financial effects of the coronavirus pandemic by “inviting” thousands of staff to agree to a 40% pay cut or a sabbatical, The Financial Times reported.

Grant Thornton said that the move would help it to support staff and clients while navigating “clearly exceptional times,” the newspaper reported.

The firm encouraged staff to consider the pay cut, with a similar reduction in hours, until the end of May, or a sabbatical until June while being paid 30% of their standard compensation.

The firm employs about 4,500 people in the UK.

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MNP Merges in White + Abbott, Winsor Coombs

Calgary, Alberta-based MNP has acquired White + Abbott and Winsor Coombs, both located in the area of St. John’s, Newfoundland and Labrador. The merger is effective June 1.

MNP, formerly known as Meyers Norris Penny, offers tax, accounting and advisory services from more than 80 locations in Canada, and is looking to add to its growing presence in the eastern part of the country. MNP is the largest accounting firm in Canada after the Big 4.

“We’ve been delighted to help MNP grow as a part of the Nova Scotia community over the last few years and are excited to do the same here in Newfoundland and Labrador by welcoming not just one, but two well-established accounting firms that share our values and client-centric approach,” says Kirk Higgins, MNP’s regional MP for Atlantic Canada.

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RotenbergMeril Expands Headquarters

Looking for a larger and more modern headquarters, Saddle Brook, N.J.-based RotenbergMeril (FY18 net revenue of $12.2 million) has announced a move to a new 22,000-square-foot space within its current Park 80 West office plaza.

Focused on creating a more energizing and efficient work environment for employees, firm leaders chose an open floor plan with more natural light, improved technology to encourage collaboration and mobility, and new amenities such as a café-style lunchroom and wellness room.

“It’s important for our new office space to align with how our accounting firm and our clients are innovating, and to foster a collaborative environment for our growing workforce,” says MP Neal Rotenberg.

Scandals Force KPMG, PwC to Repair Reputations

Two Big 4 firms are updating audit practices, adding technology and taking other steps to boost their reputations in light of major scandals last year.

KPMG and PwC have taken similar steps to address ethics lapses that resulted in millions of dollars in SEC fines, Bloomberg reported.

The changes are seen by some as improved assurance that financial reports are reliable, but critics believe a fundamental conflict still exists – the need to keep valuable audit clients while consolidation reduces the number of those clients.

KPMG, reeling from a so-called “steal the exam” scandal in which senior staff conspired with the PCAOB, made changes detailed in its most recent audit quality report. The scandal resulted in prison time for former staffers and a record $50 million settlement for extensive misconduct, as determined by the SEC. KPMG worked to find out which of its clients would be reviewed by PCAOB.

The reforms include:

  • Overhauling the audit leadership team
  • Moving internal inspections out of the audit practice
  • Revising performance evaluations and compensation
  • Updating audit methods
  • Introducing a cloud-based audit system that can examine a far larger amount of data
  • Increasing partner supervision and support
  • Improving methods of assessing risk, internal controls and estimates

KPMG is also exploring partner tenure, staffing levels and even the order in which the work is handled, Bloomberg reported.

“We know there’s really no silver bullet here,” says Jackie Daylor, KPMG’s national MP for audit quality and professional practice. She says she hopes the firm can be more proactive in providing extra resources or oversight.

At the same time, competitor PwC is addressing problems with following its conflict of interest rules. The firm agreed to a $7.9 million SEC settlement last year after providing services to audit clients that were not allowed, and for failing to inform the clients’ audit committees about the work.

The reforms include:

  • Requiring independence training for staff and partners
  • Adding reviews of contracts or proposals
  • Improving communications with audit committees and adding independence coaching before or during an audit
  • Adding an independent director to the firm’s governance board
  • Forming an advisory group on culture, risk management and other areas that impact audit quality.

KMPG followed suit on some of the changes, Bloomberg reported, adding independent directors to its board, hiring a chief culture officer and re-evaluating its corporate values.

Barbara Roper, director of investor protection for the Consumer Federation of America, says auditors must stand up to management of the companies they are auditing. The risk is losing that client, but it’s a risk firms must take.

Roper said they should be transparent about how they measure audit quality – from inspection deficiencies to independence to skepticism – and use those metrics when promoting and compensating senior leaders.

“It’s got to be more than lip service.”

More news from KPMG

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Allinial Global Welcomes U.S. Virgin Islands Firm

Allinial Global, the association of independent accounting and consulting firms, has admitted new member firm Rodney & Associates of Christiansted, U.S. Virgin Islands.

The firm offers a broad range of services, from basic tax management and accounting to more in-depth audits, financial statements and financial planning. It serves individuals and businesses in a variety of industries.

The association also admitted Khan Akber & Co. Chartered Accountants in Dhaka, Bangladesh, and TW Thompson & Co., Bridgetown, Barbados.

“We’re pleased to welcome our new members and confident that their unique capabilities and reputations for client-focused service will bring significant value to the Allinial Global community,” says Terry Snyder, Allinial Global president and CEO. “Adding high-quality member firms in key locations helps us provide the seamless global connectivity our membership expects when addressing the complex needs of their clients and prospects.”

Allinial Global has 231 members with locations throughout the world generating about $3.3 billion in collective revenues.

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H&CO Merges in EFA CPAs & Business Advisors

Emilio F. Alvarez

H&CO (FY18 net revenue of $14.5 million), with three offices in South Florida, has merged in EFA CPAs & Business Advisors of Miami.

The merger is expected to strengthen H&CO’s newly formed audit division and will allow the company to provide specialized audit and consulting services as well as grow EFA’s existing construction accounting niche, the firms announced. H&Co operates from Coral Gables, Brickell and Fort Lauderdale, Fla.

Armando Hernandez

“We welcome Emilio F. Alvarez and his team to our family,” says Armando Hernandez, H&CO CEO and president. “The cultures of our two firms are a perfect match. EFA takes the same level of pride in the services that they provide to their clients as we do.”

By combining the specialized international tax expertise of H&CO and the construction accounting experience of EFA, this merger creates a larger and more comprehensive offering of international construction accounting. “By combining our talented professionals, there are no limits to what we can accomplish,” says Hernandez.

Alvarez, EFA founder and MP, will join H&CO as MP of the audit division and will be responsible for the overall strategic function and objectives of the audit team.

“H&CO and EFA are two firms with very similar cultures, identical views of the future and practices that complement each other. It was only logical to get together. Our strength together is bigger than the sum of the parts,” Alvarez says. “With a stronger tax and auditing platform and a well-trained staff we will continue to provide excellent service to many industries as well as to domestic and foreign high net worth individuals.”

Prager Metis Woodbury, N.Y., Office Relocates to Larger Space

New York-based Prager Metis CPAs (FY18 net revenue of $98.2 million) has relocated its Woodbury, N.Y., office to a larger space in the Long Island town at 100 Sunnyside Blvd.

“This move demonstrates how the firm has successfully become a trusted advisor to businesses and individuals in Long Island,” says national MP Lori Roth. “The move to a larger office space was essential to accommodate this growth.”

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February 2020 Transformation Survey: Employee Transformation

“Transforming while performing” is the mantra of firms today, ensuring current performance while re-tooling and re-engineering the firm for the future.

In February, IPA began gathering information on staff transformation in a mini-survey series. Here are a few results from the 49 respondents, mostly MPs, firm administrators and human resources leaders.

What does employee transformation mean for your firm?

1) Increased Technology Training

2) Cultural Changes

3) Focused Retraining / Reskilling Firmwide

4) Hiring Staff with Talents Beyond Traditional CPAs

5) Updating Firm Processes

6) More Clearly Defined Firmwide Strategy

7) Accelerating Advancement Opportunities for Staff

8) Firm Structural Changes

9) Rethinking who can be Admitted to Equity Partnership

10) Flattening / Changing the Traditional Organizational Chart

Currently, where is your firm in the process of employee transformation?

1) Exploring Options and Needed Changes

2) Have Implemented Plans in Some Departments

3) Creating a Plan, But Have Not Implemented Yet

4) Have Successfully Implemented a Firmwide Plan

What specific skills / changes are needed to meet the challenges your firm is facing?

1) Increased Firmwide Innovation

2) Increased Employee Engagement

3) Career Development Coaching and Advice

4) Cross-Functional Collaboration

5) Increased Agility

6) Redesign of Firm Processes

7) Increased Technical Skills Firmwide

What metrics / indicators does your firm use to track your transformation efforts?

1) Profitability Metrics

2) Employee Retention / Turnover

3) Employee Engagement

4) Productivity Metrics

5) Positive Behavioral Changes (firmwide)

What challenges is your firm facing in the process of employee transformation?

1) Lack of Clear and Defined Strategy

2) Partner / Owner Resistance

3) Unavailable Talent

4) Cultural Resistance

5) Financial Constraints