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Fifty-six percent of Fortune 500 companies cited artificial intelligence (AI) as a “risk factor” in their most recent annual reports, according to research by a platform that tracks public disclosures by large businesses. “If annual reports of the Fortune 500 make one thing clear, it’s that the impact of generative AI is being felt across a wide array of industries — even those not yet embracing the technology,” the report from Arize AI  said. “Given that most mentions of AI are as a risk factor, there is a real opportunity for enterprises to stand out by highlighting their innovation and providing context on how they are using generative AI.” The number of Fortune 500 companies that cited AI as a risk hit 281, according to the report - a 473.5% increase from the prior year, when just 49 companies flagged AI risks.

 

Fortune

Financial Times

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Royal Bank of Canada (RBC) has filed a countersuit against ousted CFO Nadine Ahn, which details the findings of its internal investigation into her alleged intimate relationship with a subordinate, and accuses her of breaching its code of conduct. Ahn had filed a wrongful-termination lawsuit against the Canadian bank, citing the presence of "gender-based stereotyping" in her dismissal. Earlier this year, RBC said it had terminated Ahn after a probe found that she was in an undisclosed close personal relationship with another executive, Ken Mason, that led to preferential treatment of that executive, including promotion and compensation increases. A lawsuit filed earlier this month in the Ontario Superior Court of Justice said the bank's allegations are "patently false." Ahn is suing RBC for nearly C$50m ($36.38m).  A spokesperson for RBC said: "Contrary to the statements of claim from Ahn and Mason, the investigation showed there was an undisclosed close personal relationship, and that Ahn misused her authority as CFO to directly benefit Mason."

 

Reuters

Former Columbus Zoo and Aquarium CFO, Greg Bell, is set to be sentenced for years of fraudulent conduct. Bell pleaded guilty to 14 felony counts, including conspiracy, aggravated theft, and tampering with records. He faces a maximum of 33 1/2 years in prison and fines exceeding $20,000. Bell's cooperation with prosecutors may implicate other zoo executives involved in misusing public funds. Bell's actions are seen as particularly egregious due to his role as a CPA and his responsibility to implement accounting safeguards. The sentencing judge, David Gormley, is known for handing down harsh sentences. "The stench that became this criminal enterprise that infected the zoo would not have happened but for the CFO's involvement within it," wrote Daniel Kasaris, Ohio Attorney General's office special prosecutor, in his sentencing memorandum. The case raises questions about the zoo's board of directors and the need for stronger safeguards to prevent future misconduct. Other executives involved in the scandal are also scheduled for sentencing. Franklin County officials expect justice to be served and emphasize the importance of trust and integrity in positions of public responsibility.

 

The Columbus Dispatch

Canadian convenience store giant Alimentation Couche-Tard has made a takeover bid for Japan's Seven & i Holdings, operator of the 7-Eleven chain. An independent committee will consider whether the proposal is an appropriate assessment of Seven & i's corporate value and whether it will lead to long-term growth. As of Friday’s market close, Seven & i had a market capitalization of about ¥4.6tn ($31.13bn). A deal for the whole company would be the largest ever buyout of a Japanese firm by an overseas company, after the 2018 deal for Toshiba's memory chip business by a consortium led by private equity firm Bain.

 

Nikkei Asia

Financial Times

Reuters

Wall Street Journal

The University of Michigan's gauge of consumer sentiment has risen to 67.8, according to a preliminary August reading, up from 66.4 in July, the first gain after four months of declines. Economists polled by the Wall Street Journal had expected a reading of 66.6. Consumers expect prices will climb at an annual rate of 2.9% over the next year, unchanged from the prior month, data Friday showed. They see costs rising 3% over the next five to 10 years. “Consumer expectations are subject to change as the presidential campaign comes into greater focus, even as consumers expect that inflation — still their top concern — will continue stabilizing,” Joanne Hsu, director of the survey, said in a statement.

 

Bloomberg

Market Watch

A potential ratings downgrade could increase the costs for wealth managers at a time when worries about the economy are growing. Moody's has warned that regulatory investigations into wealth managers' cash sweep programs could impact their credit ratings, posing a threat to high-margin businesses like Morgan Stanley and Wells Fargo. Cash sweep programs allow wealth managers to move un-invested cash in brokerage accounts to partner banks, but disputes have arisen due to lower interest rates offered by partner banks. Regulatory investigations remain a concern, with Wells Fargo and Morgan Stanley disclosing that their cash sweep programs are under review by the US Securities and Exchange Commission. Moody's suggests that larger firms with multiple revenue streams will be better able to mitigate the risk, while private-equity owned wealth managers with high debt burdens and less diversified business models may be more severely affected. The investigations could lead to increased interest rates on brokerage accounts, squeezing margins across the industry.

 

Zawya EN

The conflict over California’s rules for the tax treatment of multinational companies’ foreign-affiliate dividends entered its next phase with two lawsuits filed in state trial courts. The lawsuits, one filed August 14th by the National Taxpayers Union and another from the California Taxpayers Association on August 15th, signal the rules won’t be settled for a while. Companies have argued with the state Franchise Tax Board for decades about the treatment of foreign dividends, because it can make a big difference in their California income tax bills. But the stakes grew exponentially when the 2017 federal tax law offered lower rates on repatriated earnings. The large amounts of repatriated earnings have a ripple effect on how much income tax companies owe in California. Retroactivity is at the core of both lawsuits. The groups argue the law violates due process because it applies retroactively to any years that are open under the statute of limitations. It’s retroactive because lawmakers said it is a clarification of existing law, based on the 2006 legal notice. Rather than clarifying existing law, however, the groups argue it is a significant change in the law that can’t be applied retroactively.

 

Bloomberg Tax

More broker-dealer and investment advisers are to pay over $470m to regulators to settle civil charges they violated rules requiring them to maintain records of work-related communications. The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) identified Toronto-Dominion Bank's TD Securities, BNY and Truist as being among the Wall Street firms that settled charges they violated such rules. The FT reports that asset managers and rating agencies are preparing for possible fines and sanctions as the SEC expands its probe into employees texting about company business on personal devices.

 

Financial Times

Reuters

The largest Cincinnati-based bank, Fifth Third Bank, has settled two cases with federal regulators for $20m in fines and an agreement to repay affected customers. The bank was accused of selling "junk" insurance and creating potentially thousands of bogus accounts due to its aggressive sales culture. The misdeeds affected over 37,000 customers who were overcharged for auto coverage, and thousands more may have been charged for financial products they never signed up for. While Fifth Third officials suggested the government's case was flawed, court documents revealed that the bank had little oversight or interest in detecting problems as it focused on employees hitting sales goals. The settlement highlights the need for broader reform in the financial industry. "Banks need to avoid creating a culture where it's OK to cross the line into questionable practices," said Chuck Bell, programs director at Consumer Reports.

 

Cincinnati Enquirer

Virginia Republican Attorney General Jason Miyares has released an advisory opinion advising against environmental, social, and corporate governance (ESG) investments for Virginia's retirement system. Miyares stated that the retirement system should prioritize investments based on financial results for beneficiaries rather than social or political agendas. The opinion comes in response to some state pension programs opting for ESG investing. The Virginia Retirement System does not currently have a policy to prioritize such investments and focuses on economic factors and risk assessment. Other states have implemented legislation against ESG investing, while some require consideration of sustainability and climate risks. Miyares' opinion is nonbinding but reinforces the retirement system's responsibility to make objective investment decisions.

 

U.S. News

David Delafield has been appointed as the new chief financial officer of law firm Perkins Coie. Delafield will be responsible for leading the strategic financial planning for the firm's international operations, which generate annual revenue of over $1.2bn. He joins Perkins Coie from Davis Wright Tremaine, where he previously served as CFO.

 

Bloomberg Law

Law

CPAs face challenges when professional standards overlap or conflict with federal and state laws. This article examines tax standards for CPAs, particularly in New York. In a piece for The CPA Journal Accounting professors Felisha Fret, Anthony Basile, and Ernest Patrick Smith provide a comprehensive analysis to assist tax practitioners in navigating these complex standards. Licensed tax practitioners in New York must navigate through various professional standards, leading to confusion and conflicts. The article analyzes the AICPA Code of Professional Conduct, AICPA Statement on Standards of Tax Practice, IRS Circular 230, and New York State Board of Regents regulations. It highlights the similarities and dissimilarities among these standards and provides guidance on how to handle conflicts of interest, confidentiality, and independence. The article emphasizes the importance of compliance and the potential consequences for noncompliance. It also discusses the intersection of conflicts and the most onerous standards for CPAs. 

 

The CPA Journal