PwC to pay in insurer's collapse
PricewaterhouseCoopers was ordered to pay $182.9 million in connection with audits it performed for Ambassador Insurance Co., more than 20 years after the company collapsed into bankruptcy. A third of the penalties are due to interest accrued on the decades-old case.
U.S. District Judge Harold Ackerman handed down the judgment in Newark, N.J., about two months after a jury awarded nearly $120 million in damages to Ambassador's receiver. PwC has said that it will appeal both judgments.
Judge Ackerman ruled that PwC and the estate for Ambassador's former president were jointly liable for the amounts awarded. Another $63 million was included in the settlement for interest. The estate for Ambassador's former president, the late Arnold Chait, has said that it has no significant assets, which means PwC may be required to pay the full amount.
PwC was the successor of Coopers & Lybrand LLP, a firm that the State of Vermont, where Ambassador was incorporated, accused of negligent audits. The case itself, which accused Ambassador's management and auditor PwC of covering up its weak financial condition and mismanagement, is decades old - the insurance company became insolvent in 1983 and was seized by Vermont's insurance commissioner.
KPMG hit by PCAOB, investors
After agreeing to pay some $195 million in a settlement to roughly 280 investors in its tax shelters, Big Four firm KPMG is under fire again, this time from a critical inspection report from the Public Company Accounting Oversight Board, which identified a number of deficiencies in some 18 of 76 audits that it examined.
Although the identities of KPMG audit clients in the 29-page report remained anonymous, the oversight board revealed that deficiencies resulted in one client having to restate, while PCAOB auditors uncovered problems in other audits with leases, workers' compensation accruals, and lack of documentation to support an audit opinion.
The report, conducted between June 2004 and October 2004, indicated that PCAOB inspectors conducted interviews at 11 of the firm's offices to get a perspective of top-down communication and "tone at the top."
KPMG's was the first in a series of reports the board will release regarding its inspections of the Big Four firms.
McGladrey completes AmEx deal
RSM McGladrey announced that its $220 million acquisition of American Express Tax and Business Services is a done deal, after receiving approval from the Department of Justice. The transaction means that McGladrey, a business unit of H&R Block Inc., will double its employees to more than 5,000, and generate more than $1 billion in annual revenues. The company has billed the merger, announced Aug. 1, as the creation of the largest U.S. accounting, tax and business services organization focused primarily on the needs of midsized businesses.
McGladrey also announced that Jay Brandzel will serve as chief operating officer and oversee the integration of the former TBS business. He served in a similar capacity at TBS and has 30 years of accounting and business services experience.
Eight offices that were part of the TBS acquisition have transferred to H&R Block. The offices, which primarily prepared tax returns for individuals and small businesses, fit better with H&R Block Small Business Resources and H&R Block Specialty Tax Services, the company said in a statement.
In "Data mining tools drilling into small business market" (Sept. 5-25, 2005, page 5), the name of the assistant controller of The Mercadien Group was misspelled; her name is Joyce Kalstein.
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