Professor Elam

Accountant Shortage Sending Firms Overseas

Thursday Jan 19 2023

A national shortage of accountants is driving firms to hire overseas reports the WSJ.

Story in today's WSJ.

 

 

 

$31.4 Tillion and Counting

January 18 2023

US is spending 120% of its GDP.

That is the sort of thing usually associated with deadbeat countries like those in South America. I wonder if TeamBiden knows how many billions or millions are in 31.4 trillion.

 

Armanino the new Arthur Andersen

Fri Dec 2 2022

Armanino is the CPA firm which signed off on FTX,

click here to read the story.

PCAOB JHeads to Hong Kong

Friday Sept 16 2022

WASHINGTON—U.S. regulators could know by Thanksgiving if Beijing is complying with an agreement designed to allow Chinese companies to continue trading on American stock exchanges.

Inspectors from the U.S. Public Company Accounting Oversight Board are preparing to travel to Hong Kong to begin reviewing the audit files of publicly traded Chinese companies, Securities and Exchange Commission Chairman Gary Gensler told lawmakers Thursday. The PCAOB is a nonprofit created by Congress and overseen by the SEC.

The inspectors are expected to depart Friday and start work next week, Mr. Gensler told members of the Senate Banking Committee. The process would take eight to 10 weeks. “So we’ll probably know somewhere around Thanksgiving or early December,” he said.

Washington and Beijing reached an agreement last month to allow the PCAOB to inspect the audits of Chinese companies listed on U.S. exchanges, a 20-year-old requirement of U.S. law that China hasn’t met. The agreement, which came after a decadelong standoff between regulators in the two countries, created a path that could prevent some 200 Chinese companies from being kicked off U.S. stock exchanges in early 2024.

The agreement allows PCAOB inspectors to travel to Hong Kong or mainland China for inspections. When it was signed last month, PCAOB officials said the deal promised “complete access to the audit work papers, audit personnel, and other information we need to inspect and investigate any firm we choose, with no loopholes and no exceptions.”

China had previously denied U.S. regulators routine access to such documents on the grounds of national security. In a departure from that justification, China’s stock regulator said last month that audit working papers generally don‘t risk exposing state secrets, individual privacy, companies’ vast user data or other sensitive information.

U.S. officials welcomed the change of tone but have questioned if China will follow through.

“I don’t know if the Chinese are going to comply,” Mr. Gensler said Thursday, even though he said officials from China’s Ministry of Finance directly told him in video calls that they intended to.

Dennis Wilson Cashses in at Lululemon

Wed Sept 14 2022

Read this article to grasp just how much money can be made as an insidder

Why Read the WSJ

Monday August 22 2022

I recommend on your syllabus that you subscribe at the student rate to the WSJ. Here are a couple of good examples from today Aug 22 of what you might learn.

I am teaching ACCT 4311 Audit and ACCT 5308 Ethics, the first article addresses both.

United Kingdom Financial Reporting Council (probably similar to our SEC) is creating a new Register of who can audit public companies in the UK.Those companies are known as Public Interest Entities or PIEs. 

Clearly this requirement to re register is a step up in barring individuals seen as responsible for botched audits in the past. As you will see in my classes we will read numerous cases of just that.

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Meanwhile at the movies. Movie Chains just about went broke during Covid and now  cineworld has. It  is UK based and owns Regal Cinemas.

click here to read the story.

The latest movie fad is moving Marvel Comics heroes to the screen. The next will be Dwayne Johnson in Warner's Black Adam  Johnson's movies have grossed $ 5 billion world wide, he is the new Arnold S.

 

Using Cash Flow Statement to Spot Fraud

Tuesday April 5 2022

Using the Statement of Cash Flows to Spot Fraud   Fraud studies show that cash is the most frequently stolen business asset. For example, cash on hand or cash receipts may be taken directly by employees. Or cash may be misappropriated indirectly through fraudulent disbursements, such as payroll, billing, expense reimbursement and check tampering schemes. A company’s statement of cash flows shows how cash changed during the year, and it can be analyzed to help detect fraud and financial misstatement scams. Forensic accountants generally look for amounts that seem unreasonable. They also look for increases or decreases in accounts that seem to contradict trends in operating cash flows or other financial information.   Focus on Cash From Operations   The statement of cash flows is typically broken down into three categories: 1) cash from operations, 2) cash from investing activities, and 3) cash from financing activities. Forensic accountants often apply ratio analysis to detect unusual changes in cash from operations that might indicate fraud. Examples of amounts to compare to cash from operations include:  Changes in revenue and income from operations, Changes in working capital accounts, Asset purchases, Dividends paid, Current and long-term debt payments, and New loan proceeds.  If a company reports an increase in cash flow from operations, it’s unlikely to borrow money or seek additional capital from owners. Instead, it’s more likely to repay debt or pay dividends. Monitor Related Accounts  Certain accounts tend to have stable relationships over time. That is, an increase in one account generally brings a similar increase in a related account. For example, in many companies, there’s a predictable relationship between: Revenue, accounts receivable and inventory, Inventory and accounts payable, and Fixed assets and depreciation expense. To illustrate, if ABC Company reports a significant increase in revenue in 2021, you’d expect to see a proportionate increase in receivables. Likewise, the company may need to carry more inventory to meet increased customer demand. If the statement of cash flows reveals a decrease in either account, it could indicate that the company is reporting fictitious revenue. However, there also could be a reasonable explanation. In this hypothetical case, ABC Company hired a CFO in January who focused on improving collections and implementing a just-in-time inventory program that significantly reduced the company’s investment in working capital. Not every red flag indicates fraud — but red flags do require further investigation to determine what happened and why. In some cases, red flags may indicate inefficiencies, poor business practices or erroneous accounting practices. Early detection can help mitigate losses.   Game the Statement   When a company is struggling, its statement of cash flows may show a net decrease in cash from operations. To make ends meet, the company may generate cash through bank loans, infusions of investor capital and asset sales. To avoid showing the signs of financial distress, management may artificially boost cash from operations to make the company temporarily appear healthier. For example, the company might defer payments to vendors, finance payables or transfer receivables to a variable interest entity to inflate cash from operations. These techniques may qualify as financial misstatement, if the intention is to mislead investors, lenders and other stakeholders to protect or enhance the perpetrator’s financial interests.   Consider Outside Expertise The statement of cash flows may provide relevant insight during a fraud investigation. A forensic accounting professional can help analyze this statement for potential red flags and investigate suspicious behavior and financial reporting anomalies.    theKFORDgroup litigation team holds extensive knowledge and experience in expert witness engagements, forensic accounting, and business valuations. Our experts are trained and experienced in the litigation process. We can provide insight into financial reporting anomalies for you or your client. For more information, please call us at 210-340-8351.  Additional information included in this report was provided by PDI Global/Thomson Reuters  © 2021 We are proud to continue our support to the San Antonio Food Bank for the fourteenth year in a row.  January 17th  through April 18th we will be collecting canned and dry foods in our office to donate to the San Antonio Food Bank. If you would like to make a monetary donation through our Virtual Food Drive:  please click here. theKFORDgroup proudly participated in this year's Blue Santa Toy Drive  Click here to contact the Firm Copyright © 2022 theKFORDgroup, All rights reserved.   theKFORDgroup 8620 N. New Braunfels, Suite 300 San Antonio, TX  78217 (210) 340-8351 (210) 340-8359 fax http://www.theKFORDgroup.com Want to change how you receive these emails? You can update your preferences or unsubscribe from this list

 

Chegg Has an Earnings Miss

Wed Nov 3 2021

chegg drops 45% on 25x normal volume.

Gee the stock reached 115 during the pandemic, the bloom is sure off the rose now

Evergrande Explained

Monday Sept  27 2021

https://kraneshares.com/evergrande-explained/

Frothy Valuations

Monday Sept 13 2021

Andy Kessler has been warning of excessive valuations in his WSJ column for weeks. This weekend we detailed the lack of breadth  in the face o f higher averages. Here is part of his column today.

 

 

 

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Updated Sept. 12, 2021 10:24 pm ET

 

 

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A Joby Aviation aircraft outside the New York Stock Exchange during the company's initial public offering in New York, Aug. 11.

Photo: Michael Nagle/Bloomberg News

 

 

 

Joby Aviation, which plans to begin an electric air taxi service in 2024, is worth more than Lufthansa, EasyJet or JetBlue. Does that seem right? In this market, why not? Heck, earlier this year, Tesla was worth more than the next nine car manufacturers combined, though now only the next six. Beyond Meat, made with pea protein, is worth more than the entire market for peas eaten globally—like the bumper sticker says: Imagine whirled peas. Do fundamentals even matter?

I can go on. Used-car sales platform Carvana is worth more than Volvo, Honda, Ford or Hyundai. Airbnb is worth more than Marriott and Hilton combined. Crypto-exchange Coinbase is worth more than the Nasdaq. I live at the intersection of innovation and disruption, but when companies are worth more than any possible reality, watch out.

How about those meme stocks still getting hyped on Reddit’s WallStreetBets? Those who bid GameStop shares into the stratosphere waved at Virgin Galactic Holdings as they soared by. A year ago, the stock was $6 and it is now $190—some dupes paid $483, game over. Short sellers Melvin Capital, Point 72 and D1 Capital focused on fundamentals and got their assets handed to them. Shorts lost more than $9 billion between January and June.

New Chairman Ryan Cohen, who is driving change at GameStop, may be a retail genius for turning around Chewy, but Redditors may want to put in a call to hedge-fund manager Eddie Lampert, who bought Kmart and merged it with Sears in 2005, as a highly touted “integrated retail” play, combining stores and online sales, eerily similar to the argument for investing in GameStop today. The stock peaked at $135 in 2007. It is now at $0.30 as the company languishes in bankruptcy. A 1970s Sears Johnny Miller leisure suit is worth more.