There’s a reason why the Justice Department shut them down
Written: Sep 01 '05
|
Product Rating:
|
|
|
Pros: Their not-for-profit audit and tax people are quite competent
Cons: Cons? Several of their former tax executives might soon be cons.
The Bottom Line: Their tax folks will likely be squeaky clean from now on. But it’s closing the barn door after the horse has left.
|
|
|
| Saxguy's Full Review: KPMG Tax Services |
While surfing through the Business and technology section, I stumbled across KPMG. I have had experience with KPMG as my organization’s outside auditor. Plus, a phase of a very public Justice Department case against KPMG’s tax service had a settlement this week after KPMG admitted to setting up fraudulent tax shelters.
Back to my own experience. Yes, I am Saxguy at night and on the weekends, but during the day, I am Controller (head of accounting) for a sizeable not-for-profit organization in Chicago. One of my key duties is to interface with the outside auditors, schedule the outside audit and deliver a clean audit opinion on time and budget. KPMG was our outside audit firm for 5 years. I dealt with them regularly on audit and tax matters.
We were not paying separately for tax services, since not-for-profits usually do not have to pay income tax, nevertheless I would need to spend 4 to 8 hours with the tax executive assigned to the audit every year. Why? Not-for-profits are subject to same laws pertaining to payroll taxes, expense documentation and independent contractor status as any other corporate taxpayer. If we were to get into IRS trouble for non-compliance, questions might be asked about why the auditors did not detect it.
Of course, compliance with IRS and payroll tax regulations was another one of my key responsibilities. As long as I am here, we WILL be absolutely clean. I had no problem with KPMG verifying that. My annual meetings with their tax executive proceeded well. He was knowledgeable and a former IRS agent. We knew what the key issues were: timely filing of the tax return we did have to file because we were renting floors to tenants in a debt-financed building, documentation on travel expense, appropriate status of benefit plans as taxable or non-taxable and correct identification of employees as opposed to independent contractors. These meetings went very well.
A few years ago our (outside) audit committee recommended that we rotated auditors, so we conducted a process and switched auditors.
I can say that I thought the KPMG audit and tax people assigned to our account were quality accountants, intelligent and easy to work with. Certainly some of their staff were easier to deal with that others, but I thought our account was being staffed with quality people and that we were receiving good service. For this reason, and the fact that their very survival as an organization depends on them remaining clean, I will give them 4 stars and recommend them.
During this time, I was aware that KPMG was marketing tax shelters to wealthy individuals and was under scrutiny by the IRS and US Department of Justice. Litigation commenced and this week, there was some news:
KPMG this week agreed to a $456 million settlement and admitted setting up fraudulent tax shelters. For the record, these shelters were for individual clients with net income in excess of $10 million dollars. KPMG avoided a criminal indictment, unlike Arthur Andersen & Co., as long as it commits no further crimes and it cooperates with the Justice Department in the criminal cases against the former KPMG employees who perpetuated the fraudulent scheme. One of the articles I read said that KPMG will shut down its private client tax practice and compensation and benefits tax practice by early next year.
What this means is for corporations who need tax services, KPMG will likely be reliable and trustworthy from this moment forward.
But there’s a larger issue here. Accountants who are criminals are making the world worse, not just for other accountants but for all of us.
- Think of how many people have lost pension money because of financial frauds perpetuated by crooked executives and helped by their crooked accountants and crooked outside auditors.
- Taxes fund the government. Illegal avoidance of taxes means that legitimate taxpayers have to pay more.
- The honest accountants and executives are now struggling with massive regulations developed to prevent future frauds after these massive frauds already occurred. These regulations, while currently applying only to organizations with securities traded on a stock exchange, have also been implemented as a best practice by many not-for-profit organizations
- Corporations and individual board members have to pay more for liability insurance. Those costs get passed on. Plus, in this environment, honest board members may be less inclined to take board seats because of the increased regulatory scrutiny and increased financial and legal responsibility attributed to board members.
- The vast majority of honest accountants may have to deal with a substantial decline in the industry’s reputation.
Think these large financial frauds don’t affect you? Think again.
Thanks for reading. God bless!
Recommended:
Yes
|
|
|
|
|
- Add to My Yahoo!: 
- Add to Google Homepage: 
© 1999-2009 Shopping.com, Inc.