Latest / The Accounting Podcast / GPT-5 Launch & Charting Fail, Crazy $$$ Going Into AI Accounting Tech

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GPT-5 Launch & Charting Fail, Crazy $$$ Going Into AI Accounting Tech · The Accounting Podcast

• Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! Blake Oliver: [00:00:04] The SEC is going to allow stablecoins, some stablecoins to be treated as cash equivalents. There are strict requirements, though. Stablecoins have to be fully backed by cash or Treasury bills, maintain a 1 to 1 peg to the dollar and guarantee redemption rates. This excludes algorithmic stablecoins and anything not tied to USD. David Leary: [00:00:26] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:34] Hey everyone, you're listening to the Accounting Podcast, your weekly roundup of news in the accounting profession. I'm Blake Oliver. David Leary: [00:00:41] I'm David Leary Blake. We have a lot of stories this week. But before we jump into all of them, let's just do the first one, which is AICPA and Nasba. They owe us an apology. Blake. Blake Oliver: [00:00:50] You mentioned this last week. You said you were going to talk about it. Okay. What? So why do they owe us an apology? David Leary: [00:00:56] You were very loud about the 150 hour rule. Very, very loud. So loud that it got the attention of state societies and got attention of Nasba got attention of AICPA and they kind of put us on a naughty list. Like there's an unofficial AICPA naughty list to where we'd release an episode, then we'd get a phone call or we'd get an email, hey. Blake Oliver: [00:01:17] Talking. David Leary: [00:01:18] To that, right. We get yeah, we get a, you know, put in the corner for a little while. And well, last week, the AICPA and Nasba have officially formally endorsed 120 hour CPA licensure pathway and the newly released ninth edition of the Uniform Accountancy Act. So now this is like real like they're it's not just lip service or they're thinking about making a change to an alternative pathway. It is now endorsed in the Uniform Accountancy Act. So and we saw right. You were right. Blake Oliver: [00:01:49] Well thank you David. David Leary: [00:01:51] You're in the right side of history. Blake Oliver: [00:01:52] It's good to feel. It's good to be right. It feels good I think. Uh, the accountant in me likes it when I'm right. And we saw another state approve the 120 credit hour pathway. Alaska became the latest state to ditch the 150 hour CPA requirement. Interestingly, governor Mike Dunleavy, who spent his whole career in education as a teacher and superintendent, stayed completely silent on the bill. He didn't sign it or veto it. It just became law automatically when he let it just pass across his desk. So another state goes for 120. Great to see David. I have so much to talk about with AI this week because we saw the launch of GPT five yesterday. I watched the launch announcement. I want to talk about my impressions of the new model. I played around with it yesterday and this morning. I'm in love with it. It is really cool. They made one tweak in particular that I really like. That is going to make it really useful for accountants and for me. And even though I'm a little concerned about this lawsuit with the New York Times and how ChatGPT can't delete any chats for certain plans, which makes it potentially discoverable even if you delete it. Blake Oliver: [00:03:14] Um, I might just ignore that because it's so powerful. They also screwed up in their live stream, and I wasn't the only one who saw this. They put some charts on the screen, like during their presentation that just didn't match up with the numbers. They're just completely wrong. Like, like one bar lower than the other. We'll talk about that. I want to hit on the Bureau of Labor Statistics revisions and the firing of the head. Trump fired the head of the BLS. It's like firing your accountant if they don't give you good numbers. The tariffs are now in effect. We're at 15% average tariffs. We'll talk a little bit about that. The SEC is allowing stablecoins as cash equivalents only some of them though. And if we can get to it we've got some listener mail. Google SEO is dead. There was a bunch of app news, fundraising, new features. Hopefully we can get to all that. Maybe a little bit of follow up. David, you had some stories too. I'm really interested to hear this one about Baker Tilly telling CPAs not to use their license on. David Leary: [00:04:23] Bubbled up again. Blake Oliver: [00:04:24] Online. David Leary: [00:04:25] Yep. Not allowed to use your CPA license. Blake Oliver: [00:04:28] And that is P is being blamed for that. Wipfli raised P money. You've got this story about a fintech that serves doctors that bought an accounting firm. And KPMG is saying, don't blame us for Silicon Valley Bank. They were the auditors when Silicon Valley Bank collapsed. And there's some sort of lawsuit and they're they're trying to fight that. So lots to talk about today. But first let's thank our sponsors. David Leary: [00:04:55] Sponsors this week is Onpay. Keeper and team up. So hopefully everybody supports our sponsors because that's what makes this show possible every single week. Blake Oliver: [00:05:04] And welcome to our live stream viewers on LinkedIn and YouTube. Please comment. Let us know what you think. We love to interact with you. Hey, Christopher. Hey, Jaffar and Zafar. Great to see you as well on this Friday afternoon. Don't forget you can join us live. Subscribe to the podcast on YouTube. Hit that notification bell icon. You'll get a notification wherever you are on your phone. If you got the YouTube app installed, and you can join us when we're live and you can earn free continuing professional education wherever you watch or listen. After you watch this episode, wait a couple days. The course will appear on the earmark app. You can create a free account and earn free CPE for listening. Just go to earmarked app, create your free account and join the tens of thousands of accountants, CPAs, CMAs, enrolled agents who are earning free continuing education. And I want to highlight one show on our app that is doing really well, and that's called Tax in Action with Jeremy Wells. He is all about practical tax for accountants. It's it's not just theory, it's real tax information you can use. We've got do we have like ten episodes now of that show going. It's for subscribers. David Leary: [00:06:25] Six I don't know if it's ten but I think it's like 6 or 7. But it's doing really well. Blake Oliver: [00:06:29] It's a great show. It's one of our shows that we're producing with Jeremy. He's doing a great job. So if you are interested in some different tax continuing education, do check out tax. David Leary: [00:06:38] That show is it's one topic. It's not a high level overview. It's just one topic at a time. Blake Oliver: [00:06:44] Each episode is one topic. Yep, yep. Um. All right. Do you want to start with this? Removing the CPA, this Baker Tilly story. I'll put this on the screen. David, you found this, uh, on what site was it? David Leary: [00:06:58] So I found I got exposed to LinkedIn, so I saw this on LinkedIn yesterday. This is a screenshot from Reddit. So yesterday on. Blake Oliver: [00:07:06] Linkedin, it's not there. It is now. It's on the screen. David Leary: [00:07:09] Yesterday on LinkedIn, it really bubbled up again. So somebody posted that they wish or hey can. Blake Oliver: [00:07:16] You refresh that David. It's a little blurry. Sorry. David Leary: [00:07:19] Okay. Blake Oliver: [00:07:20] Something's weird with our live stream sharing. David Leary: [00:07:24] Where'd it go? There it is. Refresh. Blake Oliver: [00:07:27] There we go. David Leary: [00:07:29] Now it's readable. Yep. Okay. So on LinkedIn yesterday, this whole story bubbled up again about how, like, the whole another set of people are discovering. Wait a minute. People are being told to remove CPA from their email signatures and their LinkedIn. So we covered this, what, six weeks ago? Four weeks ago. Right. Blake Oliver: [00:07:48] It's been ongoing. It's ongoing. Apparently this is not a new thing. This has been happening for a while, for years. But it's it's accelerated as private equity has made more and more investments into mid-size accounting firms. David Leary: [00:08:00] And so now the latest is Baker Tilly. So this is a screenshot of an email from the chief risk officer at Baker Tilly. And I'll just read it to remain in compliance with recent Board of Accountancy requirements as part of our new alternative practice structure. As Baker Tilly, we're implementing a new policy outlining when CPA designations can and cannot be used. This is a new policy for both Heritage Moss Adams and Heritage Baker Tilly. In short, the new policy will outline that only principals in the licensed CPA firm Baker Tilly US LLP may include their CPA designation if properly licensed in their firm's email signatures. No other principals or team members may include their CPA designation in their email signatures and external materials such as LinkedIn A CPA designation can be listed as part of your educational experience or license is maintained. However, only principals should reference their CPA designation in connection with their employment with Baker Tilly. So it's the same story we saw a couple of weeks ago where you can't have CPA on your name and it this. I don't know why this bugs me because I'm not a CPA Blake. I just know lots of CPAs. But I also know, like if I put in my best of my ass and put in the hard work and had it, I would not want to have to pull that off of my profile, right? So I kind of put a comment. David Leary: [00:09:19] It's gotten a lot of, uh, well, this Reddit post itself, in 24 hours, it had 1000 upvotes and over 250 comments. Some of the comments were pretty, pretty funny. One person said, I work at Baker Tilly and did not receive this email. Who cares? I'm not going to take it off. And then he edited the post. He said, just got the email. Still not going to do it. So people are like revolting against this. I have a suggestion and I did this in support and support of CPAs everywhere. I think all LinkedIn users should go add comma CPA to their profile in protest. And I actually did this last night. I added David Leary, comma, CPA, completely pretend accountant in support of accountants that are being forced to remove CPA off their title in LinkedIn. It just doesn't pass the smell test. You talk to anybody outside of the industry and say, hey, is it okay if a CPAs forced to pull this off their profile, they wouldn't pull this on doctors or lawyers. Like why it's being pulled on accountants is ridiculous. It's just not it. It's it. It just bothers me. And I don't even I don't even care. I don't even have CPA on my page. Blake Oliver: [00:10:21] But it's a bad situation. And you could blame private equity, but you could also blame the state boards of accountancy who have created this situation, where the lawyers at these firms are saying, we don't want to deal with the issue that you're creating for us, telling us that we can't call ourselves a CPA firm or we can't. Our people can't hold themselves out of CPAs if they work in this non CPA firm. In this alternative practice structure, it's the boards of accountancy that have created this problem. So I think they need to figure out how to fix it. And it's too late to put the cat back in the bag when it comes to the alternative practice structure. The firms are doing this. It's happening. So don't punish the individual CPAs for this. And I don't really think it helps in terms of preventing confusion. David Leary: [00:11:12] It's a good way to get a bunch of people not to ever become CPAs or join the profession. Like like nobody's got your back. Why would you become a CPA if you're going to work your ass off, pass the test, and then somebody says, you can't put it on LinkedIn. Sorry. Blake Oliver: [00:11:26] And and there's so much more that the state boards could be doing to protect the profession, to protect the public that they're not doing because they're just distracted by stuff like this. Here's a great example. A Connecticut CPA just got three years in prison for stealing over $53,000 from clients across multiple schemes. The CPA or I don't know if they're still a CPA. Carl Anderson was arrested three separate times in just four months for different thefts from his accounting clients. But here's the crazy part. He had already served over four years in prison in Washington state for similar crimes in 2008, but Connecticut still granted him a CPA license without checking his criminal background. So here they are, these state boards telling firms pressuring firms not to let their people use the CPA, or giving them a hard time about these alternative practice structures. And yet they're letting CPAs get licenses with reciprocity and not doing proper criminal background checks. Tax. And these the CPA stole from his clients. And I guarantee you, if we see a story like this, this isn't the only time this has happened. David Leary: [00:12:42] I bet you if you go to his LinkedIn profile, he has CPA on his profile. Still, it's not BF. Blake Oliver: [00:12:49] Borgers. Bf Borgers managed to keep his CPA for months and months and months before he was finally pressured not to, uh, not to use it or to give it up. I want to highlight a comment we just received in the live stream from Tim Butters. Tim says that the IRS commissioner just got fired. What? David Leary: [00:13:09] Wait a second. Blake Oliver: [00:13:10] I am pulling this up right now. David Leary: [00:13:11] Cnn.com. Blake Oliver: [00:13:14] Here it is in the New York Times. Trump is replacing Billy Long as the IRS commissioner. He's only been in there for weeks. David Leary: [00:13:24] Talked about it Monday or Tuesday. It was like brand new. Blake Oliver: [00:13:28] This is according to four people familiar with the matter. Why is Trump removing Billy Long? He was an unusual choice. No background in tax policy beyond promoting tax credits that the IRS has warned are riddled with fraud. And while he was in Congress, he supported legislation calling for the abolition of the agency entirely. What can. David Leary: [00:13:51] I speculate? Can I speculate? Blake Oliver: [00:13:54] You're always welcome to speculate on this, David. David Leary: [00:13:56] The last like week or so, I think he's been out there saying when the IRS is ready, he's going to try to implement the laws passed in the OB. Am I saying enough BS? Ob the one big. Blake Oliver: [00:14:11] Bba. David Leary: [00:14:12] The big beautiful bill. I wonder if he actually got to the got into the IRS. He's been talking all of these employees. You said he's been having one on ones he actually understands maybe the state of the IRS. And maybe he went back to Trump and said, hey, Trump, we can't do a lot of this stuff because I don't have the resources to do it. And maybe that's why he got his ass canned is because he pushed back on Trump and Trump doesn't like it when he doesn't hear the answer he wants. But this is shocking. That did not. This is the story I did not see coming that he was that he would be cut two months in. He's just gone. Blake Oliver: [00:14:43] Wow. And there were some positive stories about Billy Long. He was showing up to the IRS offices early to meet with people who had never before met with the commissioner. He was listening to the employees. He was even telling employees to leave early on Friday afternoons. That seems like a popular thing. Oh well. More chaos. Why didn't this happen. David Leary: [00:15:05] An hour ago? So we could have prepared for this news on the show? Blake Oliver: [00:15:08] Well, it happened because it's a perfect lead in to this firing of the BLS head story, which I want to talk about. Um, we also got a comment here from Isaac. Isaac says my home state, South Carolina, passed a bill this summer changing the education requirements to sit for the CPA exam. Now I can pursue it without getting my master's. I will add CP to my profile. Lol. Yes, Isaac. Listeners of this show do not give in to private equity. Do not give in to the bureaucrats at the state Boards of Accountancy. Keep your CPA on your LinkedIn and if you get fired for it, tell us. We can't give you a job, but we can share your story with the world. We must fight back against the degradation of the CPA. David Leary: [00:16:01] And I don't think anybody's gonna get fired over this. Like they just. That would be a death knell for a firm. They'd probably have massive employees just quit if they fired 111 of your teammates, if they fired them because they used CPA and law LinkedIn, everybody would walk out of that firm. It's a death knell. So I don't think they have the power to actually do anything about it. People should just keep using it. Blake Oliver: [00:16:23] Let's thank our first sponsor, who is Onpay. David Leary: [00:16:28] Onpay. Blake Oliver: [00:16:29] I'll. I'll do this one. Forbes and CNBC rank on pay number one for small business payroll on pay really knows how to get payroll done right for every client you serve, no matter how complex their software is, easy to use and backed by outstanding service levels, they handle new client onboarding for free and have experts on call to keep you and your clients on track. The system includes multi-state payroll, local tax filings, integrated HR tools, and more with no hidden fees. When you join on Pace Partner program, you get a custom dashboard to easily manage all clients in one place. Plus, you can gain exclusive perks like revenue sharing or discounts, free payroll for your firm, co-branding opportunities, premium swag, and more. Onpay helps you run your practice efficiently while providing exceptional payroll that your clients can count on. And we use Onpay for multiple entities with our businesses and we love it. To learn more about using Onpay for your firm and clients, they could be farms, startups, restaurants, bars, doctors, nonprofits, gyms, franchises, dentists. Podcasts. Head over to The Accounting Podcast. That's The Accounting Podcast. And when you sign up, let them know you heard about. Let them know you heard about them on the podcast. David Leary: [00:17:45] While you're reading that, I just checked a Twitter quick about Billy Long and this is a from grok. So grok was like the top result thing in the latest. And it said reports suggest a possible ambassadorship for long. So is that like a is an ambassador like a promotion or demotion if you get ambassadorship of a country. Depends on the depends. Blake Oliver: [00:18:04] Yes. Depends on the country. David Leary: [00:18:05] Country. Yes. That's true. Blake Oliver: [00:18:06] It can be a pretty sweet job if you get like a nice country, like, I don't know, ambassador to the UK or something like that. That's that's pretty great. It pays well. You get a private residence. You're like living like a king in a in a foreign country. Um, well, hopefully. Hopefully this is a promotion and not, uh, not a not a termination. But we will see what this means for the IRS. All right. Should I talk about the oh, the Bureau of Labor Statistics and Trump firing the head of the Bureau of Labor Statistics. We got to talk about this. So why did this happen? In June, the government reported 147,000 new jobs. The administration hailed this as really good news. But then recently, the BLS revised their numbers. And in June, it turns out employers only added 14,700 jobs. That's a 90% reduction. Trump was not happy about that, but this is a normal thing. He claimed that the numbers were being rigged for political reasons against him, but it's hard to imagine that I've been following the BLS for, I don't know, ever since we started doing this podcast. We pay a lot of attention to these numbers. Economists use these numbers, and it's important to know that these revisions are normal and they happen because the BLS sends out a survey to about 100,000 employers every month, and they have to publish these numbers every month. So if employers don't respond to the survey, they keep the survey open. And then as the additional responses come in, they will revise the data. This is normal. And I feel like. David Leary: [00:19:59] They always say revised all the time. All these studies. It's like revised. Yeah. Blake Oliver: [00:20:02] Well there's the monthly report and then there's the revised and they revise the previous numbers. And so it's sort of like this rolling average situation. And the administration didn't like this. Trump didn't like this because the numbers went way down. And it was not good news. And it's especially not good news in the context of the tariffs coming into effect and economists predicting generally slower economic growth, although not a recession. That's not good going into midterms next year. And why have the numbers been revised downward so far? You could say it's the unpredictability, the uncertainty created by the economic environment due to tariffs. But also the BLS has had an 18% budget cut since 2009. So in the middle of costs going up, inflation going up dramatically, 20% increase in the cost of everything. In a lot of cases the BLS has had a budget cut. So they're struggling to collect this data and report on it accurately. And to me this is like if you're a business owner and your accountant gives you an interim PNL that's based on incomplete data because you haven't provided all of the information they need. And then they give you another PNL later where the numbers don't look as good because now they've got more data and you fire them for it. This is like firing. David Leary: [00:21:28] Happened if you're one of the live attendees in the chat. If this has happened to you, please just say yes. I've been fired because a client did not like the balance sheet and profit and loss statements. Blake Oliver: [00:21:37] It's shooting the messenger. So this is concerning because there's a lot of there's a lot that rides on the the BLS numbers, the consumer price index data from the BLS controls in many ways how much you pay in taxes, what you get from Social Security and how much you earn on certain investments. And if inflation is not measured properly, this is one of the other things that they measure is inflation. Your tax bill goes up because brackets don't adjust properly or you don't get those cost of living increases for Social Security. And there's even this $2 trillion market for inflation protected bonds that could get thrown off. So it's really important that the BLS is funded and collects good data and is not politicized. David Leary: [00:22:30] But in a similar vein, I think I didn't bring it as a story because I think it was so much accounting related until you brought in this, this part of it. Um, I think I saw he's he he's telling NASA to crash a satellite into the atmosphere and burn it up because some satellite was giving weather data and temperature data that did not align with what Trump liked regarding global warming and stuff like that. So he wants to just crash the satellite and stop getting the data right. Blake Oliver: [00:22:55] It's kind of similar. You don't like the the news, you don't like the data. You shoot the messenger. But that is that's basically the path to ruin. And if you if you study history, you'll find that the reason that fascism and socialism ISM failed. Ultimately, despite all their other problems, is because the information system in these societies altered to please the people at the top. So the people making the decisions. This happens in in communist societies to the totalitarian communist regimes like China. The people at the top, Mao or Stalin are great examples of this. Uh, punished anyone who gave them numbers they didn't like. And so the people below doing the data collection learned don't give the bad numbers, only give good numbers to the people at the top. And then they start making bad decisions because they think things are going well when they aren't. So we have to stand firm as numbers people and protect the integrity of the data. We need referees. We need objective numbers that are not colored by politics. It's super critical and I hope that we as accountants can stand up for that. David Leary: [00:24:15] And you would hope as a leader you'd want to have all the data before you make a decision, not just the data you like. Yeah. Blake Oliver: [00:24:22] Dustin in the live stream says this happens a lot. This happens at a lot of big corporations where leaders won't listen to employees and don't like the data. I agree it can happen in big companies too. Yeah. And, you know, maybe that's why most of the, you know, economic growth, job creation, that's a good reason why it happens in small businesses and midsize businesses and not in bigger ones. Because as soon as you get this layer of bureaucracy where information gets filtered and doesn't get to the top, then you start making good decisions. There's a lot of other reasons for that, too, but I think that's a big one. I guess since we're talking about Trump, we might as well talk about the tariffs. Not a whole lot. I want to dwell on here, but we should mention that the all those threatened tariffs that were delayed and delayed and delayed have now taken effect. And we are at about Out depending on who you talk to. 15 to 18% average tariffs. Which is the highest since World War two. And we previously before all this. Were at like single digit tariffs. And this to me seems like a direct cause of this slowing job market. Why were the numbers revised down. Well. Businesses are in this uncertain climate, uncertain economic climate. They don't know what the cost of inputs are going to be due to immigration crackdowns. Blake Oliver: [00:25:44] We don't know what the cost of labor is going to be. It's really hard to plan. And if you can't plan, you can't expand. And so it's natural to see these this slowdown. 62% of voters disapprove of Trump's handling of tariffs. And that's according to Fox News. So that's not like a liberal poll there, 62% of Americans disapprove. And there's another thing that's a bit off with the logic of the administration. The administration talks about how the increased revenue from tariffs will offset the tax cuts in the one big, beautiful bill. But if the tariffs work and they actually reduce imports, then the tariff revenue will go down. It's like the problem with using taxes on cigarettes to fund your schools. We saw this decades ago. Well the taxes are designed to get people to not smoke as much or to stop smoking. And so then they don't buy cigarettes and then the taxes don't end up funding the schools like you'd hoped. Yeah. So we've actually seen our trade deficit drop. But it's not because we're exporting more, it's because we're just importing less. So that's another example where this number that Trump really focuses on, which is the trade deficit is improving in his mind, but it's not economically beneficial to anyone. Now we'll see if manufacturing comes back to the US. We've seen Apple say they're going to invest $600 billion. David Leary: [00:27:22] Isn't that. Blake Oliver: [00:27:22] Kind of how. David Leary: [00:27:22] His deal is? Like, hey, if you if you are going to build even if you haven't hired yet, if you're if you plan to build in the US, we'll get rid of the tax for you. Blake Oliver: [00:27:33] Yeah. Or lower it to, you know, something that you can actually absorb historically. Reasonably. Yeah. Historically or give you an exemption. David Leary: [00:27:41] Um, I see corporations just playing him like like like if you could. Oh yeah. We if you're Apple, right, you could hire an architecture firm. Right. Or an engineering firm for $1 million. Engage them in making all these blueprints, all these plans so you could go to Trump and go, look, we're going to build this manufacturing facility here. Even if you bought the land, if you're Apple, it's worth the tax hit. You're going to save on the other end. And then when the next administration comes, just scrap the whole thing and don't build the plant. Blake Oliver: [00:28:08] Right? Just make the plans, but don't actually. David Leary: [00:28:10] Make the plans. Blake Oliver: [00:28:11] Real significant investment. We'll see. I mean, I think there we definitely see these companies are investing like Apple's going to make glass now with Corning the famous glass company. Great museum by the way. If you've never been there go to the Corning Museum of Glass. It's so cool. Uh, they're going to make the glass for the iPhone and the Apple Watches, all that, like special. What do they call it? Gorilla glass? Yeah. So that's neat. I mean, that's manufacturing jobs, but we'll see if that creation of jobs actually is worth it. It's going to be very expensive to create these jobs. And the tariffs might end up destroying more jobs or reducing economic growth just as much as it increases it. So it could be a net zero effect. I'm not saying it. It won't work at all. But the economics just, you know, it's not great. But the good news is that if we actually stick it like 15% tariffs, while it's not ideal and there's no economist who would tell you that's better than having lower tariffs, it is something that can be absorbed by the economy and it will stimulate more manufacturing in the US. That's true. It's just the question is how much and at what price and when. David Leary: [00:29:24] How long is it and when. Blake Oliver: [00:29:25] How long is it going to take. And that's the thing is it takes years to build these manufacturing facilities. So Trump might not even be in office anymore by the time it happens. David Leary: [00:29:34] And then the whole supply chain, because chances are, if you're manufacturing something, you probably have raw materials that are probably being imported. So now it's just this dance. Like everything cannot just be manufactured only here within the border. There's the raw materials coming in. Blake Oliver: [00:29:49] We just we do not have the raw materials here. And actually that's another thing is like all the mining that needs to happen, everybody who's in favor of more raw materials extraction, more mining, more oil exploration in the US. They're in. They're into it in theory. But then when it comes to their backyard, they're not so excited about it. David Leary: [00:30:11] Oh, okay. This just happened talking about backyards. There was this big project to build a data center here in Tucson, a huge data center. And the city council just voted against it and shut the whole project down now. And I find it very ironic that all these people are posting on social media about this videos. They're recording about it. Like, literally all that's in a data center just in somebody else's backyard. I feel very hypocritical. All this, this social media campaign that bubbled up to stop a data center is created and it's all in data centers everywhere. It seems silly to me. It just it's that in my backyard thing. Blake Oliver: [00:30:46] And and here's another thing that doesn't make sense about all this is we don't have enough people here to fill the manufacturing jobs we want to create. American factories have 400,000 open jobs right now. According to a New York Times story back in June, one manufacturing CEO says that for every 20 positions, there's only one qualified candidate. And part of the reason is that the jobs that are being created are highly skilled manufacturing jobs. And it's not so easy just to take somebody who has never worked in a factory and plug them into a factory. Like if you took me or you, David, and put us into some like, let's say that Corning Glass facility. David Leary: [00:31:28] I know nothing about that. Yeah. Blake Oliver: [00:31:31] Yeah, it's a big investment just to train the people. And then at the same time, we've got reduced immigration. So where are these workers going to come from? The HVAC industry is another example. They need to hire 400,000 to 500,000 more technicians over the next ten years. And that's because of the AI boom creating demand for data center cooling systems. But enrollment in vocational schools is dropping and not growing. So we are at These policies are conflicting here. And if we can't fill the jobs we create, we just lose. It's like similar to these $600 tariff checks that Senator Hawley wants to send out to everybody, tax businesses that import goods and raw materials and then send the money out to consumers. Well, the consumers are going to get hurt way more in the form of higher prices than they're going to get in rebate checks. It doesn't help. And then the stimulus checks just create more inflation. It doesn't make sense. Okay. Let's thank our next sponsor keeper. David Leary: [00:32:37] By combining client communications file review reporting and task management. Keeper has everything you need to run your bookkeeping or CAS. Practice keeper is an all in one app that allows you, your team, and your clients to easily collaborate to make sure monthly close is efficient as possible, starting with a beautiful custom branded client portal optimized for bookkeeping work. Your client can answer questions you have about uncategorized transactions, allowing you to categorize and automatically post them to QuickBooks online correctly, all without ever leaving keeper. Keepers month end file review feature will surface transactions that may not be posted correctly, and with keeper's customized reports, you'll be able to increase the value that your firm provides clients by giving them reports they'll actually read. Keepers built in task management ensures nothing falls through the cracks, and it includes time tracking, so you can see where you and your team spends their time keepers. Email features allow your firm's email communications to appear in one shared inbox that can be easily aligned and turned into tasks for your team, ensuring no work falls through the cracks. Keepers Tax Suite allows you to expand your use of keeper beyond your clients, and now you can use keeper with all your tax clients too. And Klepper just announced a beta of their new eye Bank feeds feature. It's a smarter, faster way to manage your bank feeds. It organizes every transaction into buckets based on confidence, so you can bulk approve the easy stuff and zero in on what needs review. This allows you to speed through the close with fewer errors and less back and forth. You can automate the classification while still maintaining control. Keeper has a very affordable and clear pricing model that starts with only $8 per client per month. To learn more about why thousands of bookkeepers and accountants trust keeper to manage their monthly month end close and to get 20% off of your subscription your first three months, head over to The Accounting Podcast. Keeper that is The Accounting Podcast promo. Blake Oliver: [00:34:28] And let's go ahead and also thank our next sponsor. And that is missive here at earmark. We rely on missive every single day to manage our team communications, specifically our emails and internal chat. And there's a reason hundreds of accounting firms have made the same choice. If you're running an accounting practice, you know the pain. As you grow, you become the bottleneck. Every client email lands in your inbox, you forward it to team members with a quick handle this and then it just disappears. There's no visibility, no accountability, no idea if it's actually getting done. Missive solves this brilliantly. Instead of emails vanishing into individual inboxes, client communications go to dedicated team inboxes where everyone who needs access can see them. You can assign conversations to specific people, create trackable tasks, and have internal discussions right within the client conversation, all without the client seeing your internal notes. What makes missive special is that it feels familiar, like the email client you're already using so you don't have to learn something totally different. But it's also incredibly powerful under the hood. Whether you like to organize by client, by service line, or run pod based teams, missive adapts to your workflow. Plus, their AI can automatically escalate escalate urgent emails to managers so you're not constantly checking every inbox, ready to stop being the communication bottleneck and want to try missive for free. Head over to The Accounting Podcast. That's The Accounting Podcast. Now let's talk about the open AI GPT five launch. If you go into ChatGPT and you are subscribed to a team plan, actually, it even is available on the free plan, just with limits. You can now access GPT five. Now, I could go and tell you a bunch of numbers about how this model is better than GPT four, but that doesn't really mean anything to most people. And I think the thing that is going to make the biggest difference is just the experience. I've been playing around with it, and the biggest difference I've noticed is I no longer have to switch between models, depending on the kind of question I'm asking. David Leary: [00:36:41] You mean as far as like saying do deep research or that those types correct? I noticed that too. This morning I was like, that's gone. They must just do the model, just must figure it out and do what it should do now. Blake Oliver: [00:36:53] So now when you put in a prompt, the model decides how complex the question is and determines whether to just give you a quick answer with a fast model, or if it needs to do extended thinking, or if it needs to go out and do research and get back to you. You don't have to think about that anymore. And just in doing some prompting, I am really impressed with the results that I get. Another thing that's really interesting is that the model seems to anticipate what you might want to do next, and offers to do it and says what it will do, and you just have to say yes. So here's an example. I went to GPT five and I said, what are the key elements of a reasonable compensation report for an S Corp? And I got a very easy to understand ten bullet point list of everything that a typical reasonable compensation report would include. This is the report that you would file away in case you get audited by the IRS for how much you paid yourself as a W-2 employee of your single member s corporation, or one employee s Corporation. And so it gave me that. It gave me the ten points with some bullets. And then it said, if you want I can also give you a sample table and calculation layout that would make a reasonable compensation report airtight in an IRS audit. That would make it plug and play for S Corp clients. All I said was yes, please. I just responded with two words and then it gives me an example table and it tells me the calculation logic. And then it also says if you want I can give you a ready to use word template with this table, the narrative sections and placeholders for data sources so you can produce client ready reports in minutes. David Leary: [00:38:45] So it gave you a preview of the table before it went and built the whole thing for you. Blake Oliver: [00:38:49] It gave me an example. Got it. So then it builds the word template. All I have to say is yes please. And it uses Python and it builds this word template. And then I told it take on the role of a reasonable compensation consultant. Ask me questions one by one until you have enough information to give me a reasonable comp report for my S Corp. And then it goes through a set of questions. It did a total of eight questions, and I just answered them with the information I had. And then it recaps the information and it does the research on the market rate data. Now I haven't verified this. I'd have to go do that. It has citations for all of the rates for the different roles. And then it asked me if I wanted to go with a mid-range value or a more higher end one, because I've got a CPA and I said, no, just go with the mid-range one. And then it actually created the report and it gave me a word document I could download. Now I could see this was kind of short and it didn't seem long enough. It didn't seem like it would be enough. And so then I had a conversation with it, asking, okay, what's missing from this? And it basically goes through this whole exercise with me and creates a reasonable compensation report. And I think I did this in like ten minutes. And now I need to download this and verify this and check this and whatnot. But that's pretty neat. That's pretty mind blowing. This is something that would not have been easy to do prior to GPT five. David Leary: [00:40:22] Well, and I'm and I'll go into my story because I had an experience where obviously on Monday I prepared for the show and GPT four was out. And now I was preparing today with GPT five, and we didn't we didn't talk about a story last, last episode. So I was saving it for this episode. So I attempted to do some more research and it conflicted what I was going to talk about on Monday. So I'll cover the score and kind of paint the picture of what my brain was working and how I got. It's not derailed. I got misinformation from the GPT. Essentially. Blake Oliver: [00:40:55] This happened to me too. This happened to me too, when we were talking in a previous episode about the big Beautiful Bill. I've been doing research with perplexity, and I think I had the same issue that you had with this story. So, yeah, tell me, tell me what happened. David Leary: [00:41:10] I'll tell you the story. So I'll even rewind a little bit. Do you remember when, um, Blackstone purchased Citrin Cooperman? The major P. Blake Oliver: [00:41:19] Yes. David Leary: [00:41:20] P investment Citrin Cooperman. And the music industry lost its mind because apparently Blackstone has billions of dollars of music catalogs. And Cintra Cooperman has a specialty where they value music catalogs. They've valuations for music catalogs. And that's just always stuck with me. So every time I see a P investment and accounting firm. I kind of work backwards from there. That's interesting. Well, when they announced that in the news articles about how with Wipfli is taking on P money from a company called New Mountain Capital, they're going to take an equity investment of around 40%, and that's going to value the firm at $1 billion. And when it had this article, it talked about notable clients of Wipfli. And two of the notable clients are the green Bay Packers and Philadelphia Eagles NFL teams. So I was like, that's interesting. I wonder if this private equity company has any interest in professional sports. So I asked ChatGPT, I got a response back, but yes, they did. They actually had and this is where I started to get derailed. So as of Monday, I was my research said New Mountain Capital made a majority investment in legends. Legends is a event management company. They were actually started by the Owner of the Dallas Cowboys. So it's between them and the New York Yankees, and they basically help you run your stadium services, your tickets, your sponsorships, your merchandise. David Leary: [00:42:44] They help you run your pro sports team at the events, essentially. And I just thought that was kind of interesting, like, oh, how convenient. I own a sports services company, and now my accounting firm has high profile clients. I want to buy my. That's the way PE works, right? You you get all these pieces and you support all these things. You own support each other. Right. But in accounting that's that independence issues here. Right. And so it's yes, it shouldn't be. It should not be the case. But then I started doing more research this morning because I want to dig in more on this. And it turns out as my research this morning, mountain never made a majority investment in legends. It was it was a minority investment. Not only that, they already sold it. They sold it like two years or three years before they invested into, Uh wipfli. So I just got, like, derailed, like I thought I was. There was a real story here, but it's completely derailed because ChatGPT four on Monday gave me a different answer than what ChatGPT five did today. And it was pretty major to to, to use the word majority investment versus minority investment. That that changes the whole narrative. Like, and that's a pretty big mistake by an AI tool. Blake Oliver: [00:43:59] And the issue I had was when we were talking about the Trump accounts in a previous episode, I mentioned that there was this requirement that you have to cash out the account at a certain age. I think it was 30 something like that, or maybe it was younger, but my point was it makes it kind of like pointless as a retirement savings vehicle if you have to cash it out and pay tax or something when you become an adult. And that isn't true because while that was in a version of the legislation, it wasn't the legislation that Trump signed and it was on the Tax Foundation website at some point, and that's what perplexity cited. But when I went to the website to try to dig into this, to understand it better, because I dug into this, it wasn't there anymore. So these AI research tools, they don't think necessarily about what they're looking at in terms of what's true today versus what was true in the past. And they can still hallucinate to some extent. It's a lot lower, but it's still meaningful. It's A and we'll see this. I want to go back to the GPT five launch because they screwed up. They had an even more embarrassing mess up. Here's a picture of a chart that was displayed in the live stream. Deception evals across models is the headline, and it compares GPT five with thinking to OpenAI, O3, the previous top thinking model from OpenAI. And check out this chart. David, the bar on the left above coding deception. The two bars. We've got a pink bar that says 50 above it, and a white bar that says 47.4. David Leary: [00:46:00] So the lower number is a taller bar. That's what I'm saying, right? Blake Oliver: [00:46:04] By a lot. Right? David Leary: [00:46:05] Yes. Blake Oliver: [00:46:07] So there's either a labeling issue. I think this is a labeling issue because they're saying that coding deception went down, but the number is totally wrong. And it's crazy to me that this live stream, this presentation for this multi, this company valued it. How much is it now. You know, billions and billions and billions of dollars got this wrong and they did it twice. There's another chart here. When they showcase the how it performs on academic tasks. Where on the left hand side here, you see OpenAI, O3, 69.1% pass rate and GPT four O 30.8% pass rate. But the bars are the same height. David Leary: [00:46:54] All right. So just I want to follow the logic on this. The reporting on data about their own company. Blake Oliver: [00:47:01] Benchmarking of their. David Leary: [00:47:02] Own, their own, their own, their own product that they produce using the product they produced to report on this. And it screwed up the graphs. Yeah. Blake Oliver: [00:47:12] And I my question is, did they use AI to create these presentations. And the lesson here is you've got to have a human in the loop. Somebody has to check this stuff before it goes out because yes, there are still hallucinations. Um, the deception rate in production traffic for GPT five is still 2.1%. I assume I interpret that to mean that 2.1% of the time it's hallucinating or lying or getting something wrong. And that's small, but really meaningful. David Leary: [00:47:54] In accounting, it's super meaningful. This is pretty major. Yeah, yeah. Blake Oliver: [00:47:57] So you got to have a human in the loop on all this stuff. And it's funny to me that OpenAI didn't have somebody, a numbers person, looking at this stuff before it went out into the world on a livestream investor. David Leary: [00:48:12] I'd be very I'd be like, that company does not have its ducks in order. They don't have the proper communication channels, the proper, proper marketing person, the proper, uh, executive assistant to the, Uh, SEO is going to probably whoever was speaking to these slides, that person's assistant didn't watch his back or her back. Like, this is not a not a lot of confidence in this. Blake Oliver: [00:48:34] I think another reason this happened is because they used graphic design software or AI to make these charts, and they didn't do them in PowerPoint. And if you do them in a tool like PowerPoint, you have to put the number in when you create the chart. And then PowerPoint automatically via logic creates the correct bar size. So if you take that out, if you take the logic out of the process, then that can happen. It's a warning to all. Let's thank our final sponsor David. And that is team up. If you're a growing firm struggling to scale or turning away clients because you can't find the accounting talent you need, listen up. You probably want to hire a person, not a company. You've heard about hiring in the Philippines, but using outsourced companies comes with an endless turnover and mediocre talent. Introducing team up. Team up helps accounting firms hire top Filipino talent directly. No middleman. No corporate policies getting in the way. And when you hire direct, you own the relationship completely, training them on your way and building your own culture. And think about it from the accountant's perspective. They'd rather work directly with you than sit in a corporate cubicle. And these are accountants. They can do the math and know they're getting a fraction of what you're paying the outsourcing company. Ready to see what hiring a person in the Philippines could cost? Team up just released their 2025 Salary Guide for Accounting Talent in the Philippines, and it's completely free for our listeners. You'll get current market rates for various roles, real candidate profiles, and everything you need to hire confidently to download your free copy today. Head over to The Accounting Podcast. That's The Accounting Podcast. David Leary: [00:50:14] I want to talk about, uh, at the end of the day, this is a business model for accountants, and it's a really smart one. Um, so the headline essentially is an investment advisor slash fintech that targets doctors. Just bought another accounting firm. So this is their third acquisition. So they bought, um, a service provider in the space they're in, which is like doctors dentist that that space. They bought a tax accounting firm, but now they just acquired, uh, another, another, a second tax accounting firm they acquired on August 4th, they acquired Boston based Schwartz and Schwartz, PC, um, their tax and accounting firm. And so you're probably wondering who this company is, right? Yeah. Blake Oliver: [00:50:54] I was going to say, what's the name of this fintech? David Leary: [00:50:56] The name of the company is earned. So earned. They're they target doctors and they're an investment advisor. So I'm a doctor. I make a lot of money. What do I do with it? Earned. Invest it for me. And they manage my assets, so earn themselves. They have 3000 clients, and they manage $2 billion of assets of their clients. But doctors are busy, right? They have high tech, they have high taxes. They have limited time and career burnout. The doctor themselves probably doesn't want to have to go to. I have an investment advisor and an accountant and a tax guy. It's all under one roof. You get your personal finances, your personal taxes, your business accounting, your business taxes and your investment all under one company. So it's it's really it's super smart because they're listening to the they're solving for the customer. And if you do that you know what to offer products and services to offer. It's really, really smart. Um, and then on top of that, they've selected clients that have money, which is also smart, right? They didn't build this niche for restaurant owners operators which are struggle. Right. It's a it's a really smart niche and it's a really interesting business model. But yeah so they've acquired this is their third acquisition. They also purchased a tax firm before in the past. And now they bought another tax firm. So basically now they have a tax firm on the East Coast and West Coast, and they're offering cast services, accounting services, personal taxes, the whole stack. One, one stop. Blake Oliver: [00:52:22] Specifically for doctors and their practices. David Leary: [00:52:26] Doctors and dentists, high net worth. Yeah. Blake Oliver: [00:52:28] If you look at the fastest growing accounting firms, that is what they have in common is the focus on the customer. We serve exclusively nonprofits. That was ypc's go to market growth. Um, it's it's really about serving that particular customer. If you can focus like that and you don't do everything for everyone, your margins are just so much better. You just create such a better customer experience like what you're talking about. You can solve a lot of problems. If you solve more problems for fewer people, you're going to have a better firm for sure. David Leary: [00:53:05] Because these doctors have more money than time. That's right. Blake Oliver: [00:53:09] So exactly. David Leary: [00:53:10] They're just solving they're giving the doctors back time, because now the doctors don't have to have eight relationships with people. I kind of want this. I still keep questioning. Well, HBO is going to do legal services now in Arizona, right? Blake Oliver: [00:53:24] Like that. That's the plan. David Leary: [00:53:26] Because this separate even the separation of that, I'm like, I want help to file my corporation's minutes. Why can't my accounting firm help me with that? Right. There's these these barriers that are not what the client wants. The client wants what this company is doing. It's genius. It's really, really smart. Now, I imagine this is going to cause problems because, you know, they're the investment company, but now they have CPAs. They're gonna have to tell them to take off CPA from their profile. It's going to be a big mess. But like the focus of what they're solving, the problem they solve for the client is so smart. This is such a good business, it's genius. They even still do payroll for this as well. Retirement plans. They'll do all that stuff spun up. So you have a one stop shop if you're a doctor to go to. Blake Oliver: [00:54:08] Now what's the downside of that? Zafar brings up a good point In the YouTube chat, Zefal says, I'd be afraid of locking myself into a single company as a doctor. If they mess up, you'll have a big headache. David Leary: [00:54:21] That's true. Blake Oliver: [00:54:22] So I guess it depends on what's your appetite for that risk? I imagine if you're a busy doctor and they've got good track history, though, you're willing to take that chance. Like you said. David Leary: [00:54:36] Visit a doctor. I'm putting everything into one single guy. And if he makes a mistake, it's a big risk. So. So, yeah, you know, kind of the same thing. Blake Oliver: [00:54:45] Regarding our our final sponsor message, that ad for, uh, team up the deck says very cool ad readout advertising replacing my accounting career, lol. We've gotten that actually from a few listeners who have said they're not fans of the outsourcing company ads, and I just want to say that we, uh, we haven't we don't like what do I want to say If if somebody has a service they provide to accountants and they want to advertise on our podcast, and we don't think there's something unethical going along, going on, right? If we don't know, like we we let them do it. They want to reach you, they want to talk to you. So I would also say that outsourcing and offshoring is not necessarily a bad thing for your career, because if you're doing the kind of stuff that is getting offshored, that's going to get eliminated by AI anyway. David Leary: [00:55:41] Yeah, I think if you're if you're a listener and you have your own firm and you're struggling to fill positions, this is a viable option. But if you're just somebody at the firm, you're not a firm leader. I could see how, yeah, this feels like, wait a second, I'm going to get replaced by offshore. But it's really it's really filling gaps in teams because you can't again, there's a shortage. You can't hire everybody. It's very, very hard. Blake Oliver: [00:56:03] And the way that the way you overcome that is don't be the person sitting behind their desk just plugging numbers or running reports or doing the grunt work is get in front of clients, because that is something. David Leary: [00:56:17] That. Blake Oliver: [00:56:17] You can't do easily from abroad. David Leary: [00:56:20] I think there's so much work for accounting and accountants in demand that I don't have. I have not heard any stories of, oh, we're getting rid of all these accountants because we used outsource labor. Like, I don't think I don't feel like it's a replacement. It's really just giving you an outsourced teammate. Maybe. But but yeah, the comments have came in for sure. Blake Oliver: [00:56:39] Changing topics. The SEC is going to allow stablecoins, some stablecoins to be treated as cash equivalents. There are strict requirements, though. Stablecoins have to be fully backed by cash or Treasury bills. Maintain a 1 to 1 peg to the dollar and guarantee redemption rates. This excludes algorithmic stablecoins and anything not tied to USD. But I do have concerns about this because like we talked about in a previous episode, the whole stablecoin regime is going to depend on auditors doing monthly attestation reports to produce, to back up the reserves, and annual audits for issuers of stablecoins that are big enough. But I think a lot of stablecoin issuers are not going to have those audits. So imagine a world in which we now have the cash on public company balance sheets or private company balance sheets, and a good chunk of that cash is in stablecoins. Well, it's easy when it's cash in a bank to trust the confirmations happened. The cash exists. It's, I think, harder for me to believe that asset exists. When the auditor had to rely then on like a second opinion of somebody who audits the stablecoin issuer. We're creating layers of a test responsibility. And if there are gaps in any way, if these stablecoins are not truly backed, I'm not sure if the investors are going to be as protected as if it's like cash in the bank. We are. I don't know if this is possible to stop. It seems like we're just headed in this direction, but I could see this creating some systemic risk for the economy where we have these essentially derivatives stablecoins right on top of cash that should be in treasuries or in the bank. Is it really there? David Leary: [00:58:42] And I think it's going to be gamed and played with because it's so instantaneous. Right. Like they're going to game it and then get it to the reserve number it's supposed to be at the day, the order at. Blake Oliver: [00:58:54] The end of the. David Leary: [00:58:54] Month game it the next day. Right. It's. Yeah. Blake Oliver: [00:58:57] Could you do that? I mean, that's an interesting thought experiment is could you take your Stablecoins. And then on the, you know, first of the month you go and and gamble them. Yeah. David Leary: [00:59:10] You own. Blake Oliver: [00:59:10] A bunch. David Leary: [00:59:11] Of risky stuff for 30 days and just. Blake Oliver: [00:59:14] And then pull it all back into stablecoins when it's time to do the attestation report. I wonder if there's going to be any safeguards for that in the standards that come out for auditors. It really should be like a continuous audit. It can't just be at one point in time because. David Leary: [00:59:32] Like you said this, they should be able to just see this at any time, right. It's a digital fund. Like like how is this not just an automated process? That's just there's a dashboard at the SEC and it's all these green dots. And as soon as one turns red, go contact that company and see what's up. It seems like this is super automatable based on what it is, but I think it could be gamed. It's probably going to get gamed. Blake Oliver: [00:59:54] I agree. More stablecoin news China, which banned all cryptocurrency transactions in 2021 is now rethinking that, and they are scrambling to consider yuan backed stablecoins. The reason? Fear of missing out because of the Genius Act and this new stablecoin regulation in the United States. China is worried that US denominated stablecoins will end up being the global currency, which will continue our hegemony over money in the global economy. But if China can create its own stablecoins that are all used alternatively, then they could take economic power in that sense. David Leary: [01:00:42] So isn't the Chinese yuan tied 1 to 1 perfectly to the USD already? So is this just an extra? Blake Oliver: [01:00:50] They manipulate it. They they manipulate it. Yeah, but no I don't I don't. I mean, that was true in the past, but that might be one of those things, David, where it's like a time. David Leary: [01:01:01] To research. Blake Oliver: [01:01:01] This. You might be remembering something from, like, your much younger days. David Leary: [01:01:05] The yuan's the original stablecoin. It was pinned to a 1 to 1 value of a US dollar. Blake Oliver: [01:01:10] Well, it wasn't 1 to 1 ever. But there was a ratio. There was a. David Leary: [01:01:12] Ratio. Blake Oliver: [01:01:13] Yeah, yeah. Um, David, do you want to talk about KPMG and Silicon Valley Bank? David Leary: [01:01:19] So this is really a follow up story. Do you remember the Silicon Valley bank collapse and how. Blake Oliver: [01:01:24] Could I forget it man? That was one of the most exciting times in in news. David Leary: [01:01:30] And the concept was like, how could KPMG miss this? And then you went and looked at the, uh, the K-1 filings. Right. K-1, right. Blake Oliver: [01:01:39] I think so the I went and. David Leary: [01:01:41] Looked at the financials. I'm not a CPA. I'm just pretending. Right. Remember this? Um, and you had to like the 90th page of footnotes. You found a little sentence that maybe could have alerted people that there was possibly an issue. Well, there's a class action suit from investors of Silicon Valley bank that bought stock between January 1st of 2021 and March 10th of 2023. And they're suing KPMG, basically saying that they didn't provide good enough statements when they audited Silicon Valley bank. And so they basically asked the judge, um, get my uh, yeah. So they asked the judge to dismiss the suit because they, um, suggested they actually had it for over a year before they issued an audit opinion that actually had that before the bank failed. And about the liquidity issues that were happening at the Bank of. Blake Oliver: [01:02:36] The held to maturity securities. David Leary: [01:02:37] Yeah. So they they're asking the judge to completely dismiss the case. Um, we'll we'll see. Um, but but they already had a judge before on June 13th, ruled that there was a there's sufficient evidence that they had misleading statements by SVP and its auditors. So I don't think they're going to. And that was 2024 when they already. So judge already ruled that there was enough evidence. So but still obviously like of course you're going to try to get out of this if you're being sued, right. Makes sense. Blake Oliver: [01:03:07] Kpmg, the auditors, are rarely ever held responsible, um, for this kind of stuff because there's so many protections. That's why audits a great business. There's really not that much risk in it if you check all the boxes. So more follow up David Macy's is clawing back over 600,000 in executive bonuses after discovering that their 2023 pay was based on inflated profit numbers. We previously reported on the show about how an employee had been hiding $151 million in delivery expenses since 2021, which made the company's EBITDA look better than it actually was. The executive bonuses were tied to the inflated numbers, so now executives have to pay back the overpayments. Executive bonus payouts dropped from 60% of target to 52% once the real numbers came out. As of April, Macy's was still looking to recover $352,000 from executives. I posted about this on Twitter and somebody commented and said, uh, just don't use bonuses based on EBITDA. And I have to agree, it's a stupid, stupid way to motivate your executives because EBITDA earnings before taxes, interest, depreciation, amortization is a consequence of management. It's not something that could be managed directly. The only way you can manage it directly is to cook the books. David Leary: [01:04:35] Yeah. Blake Oliver: [01:04:35] So don't bonus people based on the bottom line number. You're just creating bad incentives. Now, I'm not saying that that was the reason this happened, but it's a lesson. I mean, it could have been intentional. You never, know? You know, like there's a possibility. David Leary: [01:04:53] Well, what's the reason? Just like an accounting misunderstanding. Was that kind of what we concluded, after all? That we never. Blake Oliver: [01:04:59] Really found out the whole story, but it sounded like somebody didn't know what they were doing and hid the mistake by doing the same thing over and don't want to go ask for help. David Leary: [01:05:11] Basically, they never wanted to ask for help. That's right, that's right. Blake Oliver: [01:05:14] And so the account this a balance sheet account that should have been an expense just kept accumulating until finally somebody noticed it. So that's a failure of internal controls. There obviously is that nobody was looking at this number that just kept growing on the balance sheet. Another follow up story. Remember Luckin Coffee and its massive fraud scandal? The Pcob has finally shut down the Hong Kong accounting firm that audited Luckin Coffee. Luckin had retained this firm as their auditor after settling SEC fraud charges in In 2020 for fabricating transactions. But during the 2021 audit, the Hong Kong firm completely ignored the prior fraud when assessing risks. They failed to design proper audit procedures despite knowing about the company's history of inflating revenue expenses. The firm and its owner also violated accounting standards across multiple Chinese audits, showing a pattern of inadequate work. Now, David, do you want to guess the number of the financial penalty for this firm? David Leary: [01:06:18] How are they? $48,000 is the fine. Blake Oliver: [01:06:24] You're a little low on that. The price is wrong, David. It was $75,000. But I think we can all agree that $75,000 for doing a failed audit of this giant company, Luckin Coffee, is like, probably nothing compared to the audit fee they received, the financial penalty. David Leary: [01:06:43] The audit fee, or 90% of the audit fee or something like that. That's what they should do, the fees. Blake Oliver: [01:06:47] They should take away all the profits. But it should be more than that, right? Because if all you lose is the profit you made, then there's really, you know, there's not that much risk in doing bad audits. It should be significantly higher. It should it should really be painful. And I'm going to guarantee you that $75,000 to an audit firm. I mean, you know, when I don't know what partners in Hong Kong make. But here, audit partners at a big firm, you're talking half 1 million to $1 million a year is not is like normal depending on the it depends on the size of the firm obviously. But you're you know, even in small firms, you're going from hundreds of thousands to over $1 million a year in compensation just for one partner. So a $75,000 fine. It's, I think, an example of of how the PCAOB. David Leary: [01:07:44] It's immaterial. The fines are in material ineffective. Blake Oliver: [01:07:48] And it's a lot of naming and shaming. And yeah, you can revoke the registration, but this happens years and years later. So like I've said in the past, you could just set up a sham audit firm and do sham audits for a really, really long time before you finally get. David Leary: [01:08:01] Keep CPA on your LinkedIn profile and not have to take it. Blake Oliver: [01:08:04] You can. Yeah. Bf Borgers great example of that, right? Did fake audits for years and years and years finally gets caught. The financial penalties are insignificant compared to what he probably made and I don't. Did he go to he hasn't gone to jail. It's like there's no consequences. So what are these state boards of accountancy doing? How are they protecting the public, taking CPA off of people's LinkedIn profiles? It's just shameful. David Leary: [01:08:32] That's that's. Blake Oliver: [01:08:32] All right. Last follow up story. Mike Lynch's estate got hit with a almost $1 billion judgment from Hewlett Packard Enterprise. This was a story. David Leary: [01:08:43] So the boat that sank? Blake Oliver: [01:08:45] Yes. Yes. So Mike Lynch sold his software company autonomy to Hewlett Packard Enterprise in 2011 for a ton of money. He became a billionaire. If he wasn't already. And he had that yacht accident last summer where he was celebrating his acquittal on criminal fraud charges related to this deal with his family and friends on this yacht in the I think it was in the Mediterranean, there was a freak storm and it capsized the yacht and he drowned along with, like a bunch of his friends and family. They called him Britain's Bill gates. Yeah, he sold the company for $11 billion. But HP later accused him of inflating the company's value and wrote down autonomy by 8.8 billion. What a write off. The civil case found Lynch liable in 2022, but he beat the criminal charges. David Leary: [01:09:42] Yeah. And he wants is trying to get the money back, and then he just magically is now vanished. How convenient. Yeah. So. And on the show, on an upbeat news note. Go for it. Do you remember a few months ago? We're talking almost a year ago. Maybe we were talking about. There were signs of that we're going to be in a recession. Blake Oliver: [01:10:03] Yeah. David Leary: [01:10:03] And one of those signs were dating apps. People were not using the dating apps. They weren't using the paid versions, just the free versions. Well, this last week, match match groups they own. Like all the dating the dating apps, their stock popped 10% on Wednesday because they beat their expected revenues. Um, the expected was 890 million, and the revenues came in between 910 million to 920 million. So almost like 30 million more in revenue. And they have all this momentum now because they've added some AI features like AI discovery. And then I don't even know what this is, but a double date feature on Tinder. I don't even know what that means, but they've added these new features that are getting all this uptake. 90% of the users are under the age of 30, so maybe the recession is not going to happen. People are mad at the dating apps and the dating websites are making money, so maybe there's not going to be a recession. Blake Oliver: [01:10:56] I had a conversation with gusto senior economist Nick Tremper, that will be coming out soon on the earmark podcast. And my takeaway from him was similar, which is that actually the numbers are. Okay. Like small businesses in particular are doing okay despite the tariff headwinds, despite the immigration stuff. We haven't had the catastrophic outcome that we were talking about. And that's because we didn't get the 100% tariffs in most cases. And so I'm optimistic, but I feel like all it would take is one big event, some sort of economic catastrophe or natural disaster or a world event. David Leary: [01:11:49] Was there a new virus or something happening, I think. Blake Oliver: [01:11:51] Please don't say that, I don't. I cannot. David Leary: [01:11:54] I swear I saw something, David. Blake Oliver: [01:11:56] I can't do another COVID, I just, I can't, I, I love working from home, but I can't be at home all the time. David Leary: [01:12:02] Yes. Blake Oliver: [01:12:03] That's. Don't. Are you giving me. I'm getting anxiety thinking about it. All right. We didn't get to the fundraising news. The all these new app features and integrations. We'll have to hopefully we we can kick off next time. David Leary: [01:12:17] What we'll do next week. I'm going to put them in a little table, and we can just run through them with screen. Share it and we'll talk about all the raises. Blake Oliver: [01:12:25] Um okay. David Leary: [01:12:26] And David Long is gone. This is crazy on Twitter. Blake Oliver: [01:12:29] Well, again, the New York Times story said it was for sources that weren't named. So Not confirmed for sure. David Leary: [01:12:38] But you know the that their interns stay longer than Billy Long. The shortest stint ever for a Senate confirmed IRS commissioner ever. So we set a record. Just probably not the one he wanted. Blake Oliver: [01:12:53] I wonder, I really want to know the backstory. I hope we get to find out what happened. David Leary: [01:12:57] Tune in next week. Blake Oliver: [01:12:58] Tune in next week and earn free continuing professional education credit for listening to this episode and past episodes of the Accounting Podcast. Go to earmark app in your web browser or download the free app for iOS or Android. Create your free account and discover the amazing world of accounting and tax podcasts that give you CPE credit for listening. And if you're an IRS enrolled agent, look for that IRS CE banner on the courses. You can also filter for those in the in the search, and you can find courses on federal tax topics and ethics topics that will help you get your IRS continuing education credits. So there's really no excuse not to be all caught up with your continuing education, because you can just do it every week. You can listen to our show. You can listen to other shows. You can do it while you're working out. You can do it while you're driving. Our goal is to make it as easy as possible to earn that CPE. And I know what a pain it is. I'm a CPA. I have to get 40 hours a year. I did not like how I had to do it before earmarked. So I created earmark for myself and for all of you. So join me and join our mission to make continuing education more relevant, easier, and just higher quality to David. See you around here next week. And thank you to everyone who joined us live today. Have a great weekend. David Leary: [01:14:26] Bye everyone.