Latest / The Accounting Podcast / BDO vs Going Concern, Trump's $3 Trillion Tariff Tax & Film Accountant's $2M Fraud

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BDO vs Going Concern, Trump's $3 Trillion Tariff Tax & Film Accountant's $2M Fraud · 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] A Los Angeles area film production accountant, has been charged with embezzling nearly $2 million from movie productions to fund a lavish lifestyle that included Vegas hotel stays and payments to adult film performers. David Leary: [00:00:18] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:25] Hello and welcome back to the Accounting Podcast. I'm Blake Oliver. David Leary: [00:00:28] And I'm David Leary. Blake Oliver: [00:00:29] And we are coming to you from Intuit Connect in Las Vegas. I feel like there's people. David Leary: [00:00:35] Cheering for us like a big crowd. Blake Oliver: [00:00:36] Uh, great to be here with you in person, David. Uh, this is day one of the conference, and we are recording before we go into the first keynote, where we'll hear from Sasan Goodarzi. We'll have more about Intuit connect all of that news for you in our next episode, uh, where we'll be joined by Alicia Katz Pollack of the unofficial QuickBooks accountants podcast. David Leary: [00:00:59] So hopefully we'll find out about all these AI agents, which I don't see any walking around yet. So new AI agents, big celebrities. What else is happening this week? Other apps, app news. Blake Oliver: [00:01:10] We'll find out. We're going to be walking around and learning what's new. But in the meantime, we've got a lot to cover. So let's dig into it. Top story this week versus going concern. Uh, we talked about this last week that, uh, going concern published an article in their Monday morning accounting news brief about Edo's Apollo deal and, uh, well, David. David Leary: [00:01:35] Well, I think it was first tied to Radiohead layoffs. That was reported by Bloomberg. And then there was a tweet or somebody mapped some things together and it was about their when they did their ESOP, they took money from private equity. And apparently the private equity company was shorting a company that may have audited or was auditing. And yes, you could say, like all the parts of the fraud triangle are there. But apparently going concern implied that maybe there's some non-independent behaviors happening. Blake Oliver: [00:02:06] Right, right. Yeah. So it's funny because when we covered this story, I didn't really understand why it was a big deal. Like I didn't I didn't really get it. Um, I know that BDO was auditing a company that went bankrupt and didn't issue a going concern warning, but that happens all the time. And I know that BDO had taken investment from Apollo. They, they they took a bunch of, uh, debt financing so they could do their ESOP that employee stock ownership plan. So they, they took private equity money and the private equity firm was shorting the company that BDO was auditing, and BDO had already laid off people in order to, uh, cut costs so it could make its debt payments to Apollo, and I guess it's at 9% interest. It's a pretty. David Leary: [00:02:59] They said that it was creating financial stress at BDO, which is the top of the fraud pyramid when there's fraud, right? The fraud triangle. Financial stress is one of the things that is one of the things. Yes. And like these are showing up. Blake Oliver: [00:03:14] So so the implication is, is that that is under stress. They have information that Apollo might want and going concern implied and suggested that BDO had audited that company, its first brands group, and that Apollo lender had scored a win betting against First Brands debt around the time of that company's sudden collapse. So that's that's the that's the uh. David Leary: [00:03:42] Allegations for BDO are actually saying that um, going concern suggested that they provided this nonpublic information to private equity. Right. That's what was being that's what they're suing them for, right? Blake Oliver: [00:03:55] Well, and that's so. And what is, uh, sent the cease and desist letter about and might sue going concern about is making that making that allegation. That would be defamation. Um, now, I mean, there's a there's a few things we have to talk about here. One is like going concern is a blog written by one person, Adrian Gonzalez. So you've got you've got $1 billion accounting firm going after a one person blog, which is not a great look. Um, and the other thing is though, like, did she really like, defame BDO? Because I think anybody could have looked at this situation and could have come to the same conclusion that this is possible. David Leary: [00:04:40] Well, I think that person that laid out that one tweet really connected all the dots and that's I think that's how I saw it is I think Goldstone retweeted this person on there, basically called out in the independence in a tweet. Blake Oliver: [00:04:54] Like people, what you're saying is people are saying this. This is around the internet. This is not just Adrian. David Leary: [00:05:00] Adrian. It's not just us noticing this, too. Blake Oliver: [00:05:02] And here's my take on this. Um, you know, having been a CPA is that I remember learning, uh, in school and being trained in CPE courses about independence and a very, very important concept, a principle of, you know, being a CPA and being an auditor is that you have to be independent in both fact and appearance. And what this story says to me is that BDO may be independent, in fact, and there's no evidence that they aren't. But are they in appearance? Because once you take money from private equity and once that private equity firm is betting on companies that you audit. Then perhaps they're no longer independent in appearance. And I think that is the core of the problem here with private equity money in accounting. David Leary: [00:06:04] Because we don't know who's, I guess historically the reason everybody's in trouble. Oh, you can't put CPA on your on your LinkedIn profile. Cpas have to own accounting firms. It's actually worse than CPA is not accounting firms because basically we don't know what they own. They own tons of stuff. Private equity. They're not just owning the right. They own lots of stuff. Their interests are very spread. Blake Oliver: [00:06:25] Yeah. And so that's the that's the argument about keeping private equity out of accounting is accounting firms are traditionally owned by a group of CPAs, a partnership. And they maintain the integrity of firm because they have integrity themselves as CPAs. But once the CPA is no longer own the firm or owe money to outside groups, who's to say that that won't create that pressure that you talked about last episode with the fraud triangle? Um, and which is to let's remind ourselves, it's you have to have opportunity. So in this case, the opportunity would be, uh, that the auditors have nonpublic information. The second would be financial pressure or just pressure in general motivation. Uh, and in that case, that would be the pressure would be the, uh, debt that the firm owes to Apollo. And then what's the third one? David Leary: [00:07:18] It's the realization or the justification. Rationalization. Blake Oliver: [00:07:22] Rationalization. So it's the ability of the individual who commits the fraud to rationalize their behavior. And, you know, you can do that in all sorts of ways. So your point, David, is, is true that the the three points, the fraud triangle all exist. And so therefore it is possible. It may not have happened, but it's possible. And And we want to prevent that those conditions from existing. David Leary: [00:07:50] Your argument is based on your accounting education. The impression of independence. You would avoid having any of those parts of the triangle be connected. Blake Oliver: [00:07:58] Exactly. Yeah. So? So that's why I think the leaders in our profession, the regulators, need to be really careful when it comes to private equity and accounting. And and if we're going to change up this model, we have to figure out how do we maintain independence. Because that's really all we've got. It's the integrity of auditors that's like that's all that's holding up our financial system. Yeah. David Leary: [00:08:21] So to pile on to this story a little bit more. Um, this is an article in Yahoo Finance. Bdo is telling their member firms to refrain from accepting external equity investments. So they're telling firms not to take money. Blake Oliver: [00:08:36] Wait, wait. The same BDO that we're just talking about. David Leary: [00:08:39] The same BDO. Yes. So what they're saying is that they are um, it represents a strategic reset aimed at preserving its sustainable future and independence. So they're obviously addressing the independence issue by putting out this messaging. Blake Oliver: [00:08:55] So this is from global. So it was the US BDO that took on the global private equity global. Interesting. David Leary: [00:09:04] Well David that could be the first time we hear about this. It's not going to be BDO. It's going to be many situations with PE coming in. Blake Oliver: [00:09:12] So I think we should read uh, Wayne Burson's message that he published on the BDO blog. David Leary: [00:09:20] Before you do that. One thing that I was thinking about when I heard that there that going concern was being sued by or threatening or got the nasty letter is I think when you're these top ten accounting firms, the pendulum swings both ways. Like they do dumb things. We call it out. They do good things and pay attention. When BDO announced that ESOP, we had, um, Wayne Wayne Burson on the show and like really commended him in video for doing this. So we talked nice about this. We're not bashing big firms. We talk nice about them when they deserve that. Very nice about. But it swings both ways. You can't only have the accounting media say nice things about you all the time. No, it doesn't work that way. Blake Oliver: [00:09:58] Well, and the problem with this whole like this whole letter and this PR campaign against going concern, is it it accomplishes the opposite of what they're trying to do. Like, I don't know who the communications people are, but like you do this and now we're talking about. David Leary: [00:10:13] We wouldn't have talked about it again this week. It was last week's story. It became news again this week. Exactly. Blake Oliver: [00:10:17] So anyway, I want to read Wayne Bernstein's statement, uh, about this whole incident. Video professionals, we are at an exciting time in our profession, with many good things on the horizon for our firm and our people. I could not be prouder of BDO and grateful for the incredibly dedicated work each of you do every day to grow our business and strengthen our relationships with one another and our clients. Recently, some negative press has surfaced regarding one of our clients with references to our firm. Some of you have raised these topics in conversation with me and other firm leaders. Our executive team takes these matters seriously, and we want to be transparent with you. As you may be aware, First Brands Group is experiencing a bankruptcy reorganization, which is attracting significant attention in the financial media with regular reporting from major news outlets. As auditor for First Brands, BDO has been included in some of this coverage, with media focusing on Bdo's efforts to manage costs and attempting to draw connections between BDO, Apollo Global Management and First Brands. Regrettably, the reporting so far that mentions BDO has resorted to the use of falsehoods and innuendos. Our firm continues to focus on operational efficiency in the normal course of business in the same way it always has and in the same way as industry peers do. You've likely seen that several other firms have announced and implemented meaningful headcount reductions and cost savings initiatives as recently as this past week. While we are our first brand's auditor. No one has accused the firm of doing anything wrong in connection with our role as auditors, every firm in our industry has had clients that that pursue bankruptcy filings to reorganize in the same way that First Brands is seeking to reorganize through a bankruptcy process. Blake Oliver: [00:11:55] The reporting that occurred last week, attempting to link our audit relationship with First Brands to our relationship with Apollo was false. The two firms had no such connectivity. We are taking decisive legal action to protect our reputation against these claims through our legal counsel, McDermott, Will and Schulte. We issued a notice to Going Concern requesting an immediate retraction of the story published on October 13th, that asserted these false claims. If they do not retract, further action will be taken. That notice is linked here, so you can have full transparency into our actions as a leadership team. We anticipate that the first brands bankruptcy will linger for months, if not a year or two, and therefore potentially will continue to result in inaccurate reporting relating to BDO. Your leadership team will continue to push back where that reporting is inaccurate and continue to be transparent with you as developments occur. In the interim, we share a wonderful firm with vibrant client relationships and a population of colleagues who provide the highest quality of service to our clients. I am prouder than ever of the firm we have built together. While there are always challenges along the way, I'm confident that by remaining committed to one another and our clients, we will continue to thrive. And then it goes on and on. David Leary: [00:13:00] Can you go back to the first paragraph where he talks about the rumblings from the employees? Blake Oliver: [00:13:05] Where is that rumblings? David Leary: [00:13:06] Uh, many of you brought up conversations. Blake Oliver: [00:13:09] Some of you have raised these topics in conversation with me and other firm leaders. David Leary: [00:13:13] I imagine that it's not a couple conversations. I imagine that this is all it's being spoken about at the water cooler and the break room. And this is why you had to address this through an internal letter as well to the employees. I think this is probably a lot bigger, a lot more dramatic internally in the halls of BDO. I have nothing to go on. I'm just based on me Working for big companies is a big, huge company. They have employees. This is how I know how to be an employee. And I know what goes on when you when things like this news like this breaks. Blake Oliver: [00:13:45] I'm just trying to figure out like what is it that going concern said that was like inappropriate. Like what did Adrian write? Yeah. So it's like it was first of all, this is a Monday morning news brief. It's a collection of stories that Adrian sourced over the weekend. And so the first story is the is a link to the Bloomberg story about, um. David Leary: [00:14:13] About the. Blake Oliver: [00:14:14] Job. So it was it was Bloomberg that first reported that BDO cut the jobs with a focus on managing Apollo debt, that auditor BDO cuts jobs to focus on managing Apollo debt. That's the headline. And then she, uh, clips some of that article here. And then she clips the, uh, part about first brands and the collapse. And then she says, in other words. And then she embeds a tweet. And this is the tweet you're. David Leary: [00:14:42] Talking about, the junk bond analyst. Blake Oliver: [00:14:44] And the tweet says from junk bond analyst says the first brand saga continues with BDO in the crosshairs. Bdo, the accounting firm slash auditor behind First Brands, has been laying off staff as it struggles to manage its own expensive debt load of 1.3 billion at 9%. Bdo's biggest lender, Apollo, who shorted first brands Apollo and then Adrian on Going concern, writes if you hadn't heard and you should have, because we've been talking about it for a couple of years now, there is a pretty dire situation. Then she just goes on to another story that's a different. So basically BDO so she is threatening a lawsuit against going concern for embedding a tweet. David Leary: [00:15:24] Embedding a tweet in reporting was on Bloomberg. Blake Oliver: [00:15:26] Yeah. So I mean. David Leary: [00:15:33] My whole opinion of this P and accounting. My whole mindset changed around this is when, uh citrin Cooperman was acquired or that investment of century. Right? And it was the biggest P investment to date still, I think. Right. And when I saw that being covered in a music industry blog, I was like, okay, something's different about this. And the reason why is because the P company owns all these music catalogs, and they bought an accounting firm that just happens to be the number one accounting firm to evaluate or create valuations of music catalogs. It just doesn't add up. And if we're seeing this, I mean, if somebody in the music industry is recognizing there might be independence issues happening with accounting firms taking p money. We're we're we're having new problems. We don't know where the problems are yet, but we're probably going to have another Enron here. We're going to we're going to have a Anderson issue eventually. Blake Oliver: [00:16:24] Do you think do you think that that is going. David Leary: [00:16:26] To be that big? I think it's gonna be that big. It's not on purpose. It's going to be it's probably going to be. Not that the accounting firm did bad stuff. It's going to be the company, you know, utilized records that probably shouldn't have had access to or who knows. Right. That's what's going to happen. Blake Oliver: [00:16:44] Well, David, let's shift gears here and talk about how accountants hold the 90th best job in the US. That's according to US News and World Report's 2025 ranking. David Leary: [00:16:58] Out of 100. Blake Oliver: [00:16:58] Out of 100. David Leary: [00:16:59] Yes, it sounded good the way you came out of your voice, but I was thinking about out of 100, how many jobs possible are there? 5000? Blake Oliver: [00:17:06] I don't know. I never thought about that. David Leary: [00:17:08] Counting top 100 top earners. Blake Oliver: [00:17:11] Podcaster on this list. Um, yeah. So let's see. Here's the stats. Uh, we're 90 out of 100 with a median salary of just under $80,000. That's from 2023 data. The unemployment rate for accounting is 1.4% and there are 1400 openings and projected employment growth is 5.8%. Let's see the scoring breakdown out of ten. We get an overall score of five out of ten. Uh, employment opportunities are a 6.2. Work life balance is a 5.1. David Leary: [00:17:48] That feels a little high. Blake Oliver: [00:17:49] Comfort is a five. Wage potential is a 4.9, and future prospects are a 4.3. That was our lowest score was oh. David Leary: [00:17:57] That's the lowest score of all our scores. Not the lowest score of all jobs. Blake Oliver: [00:18:00] Yeah, I'm not totally sure. Here. Uh. So I'm curious what the other, uh, what the other jobs are that are the best. Let's see. Did they list anything else out here? How did we do, like compared to others? I'm going to pull that up. David, while I pull that up, why don't you go to your next story? David Leary: [00:18:20] So last week we talked about how a stablecoin was buying a treasury app. Well, now, this week, modern Treasury. Um, there an app for doing treasury management? Pretty popular. Um, they now added a stablecoin company to their portfolio. So they acquired an app called beam to add stablecoins and money movement to their platform. So you're seeing these collisions happen because which makes sense. If you have a multi entity and you need to move money around, especially if it's international, you don't want to have to like pay international fees. You want to flip it through these stablecoins. So it kind of makes sense. But we're just seeing you know these these collisions happen the stablecoins and our app. So it's only a matter of time till I swear Bill.com into it. All the platforms just have their own stablecoins and you're going to pay bills that way across the platforms. Blake Oliver: [00:19:10] Well you brought up crypto, David. So I get to talk about how Trump pardoned Binance founder Changpeng Zhao. Yes, Changpeng. Changpeng Zhao, founder of Binance, the worlds largest cryptocurrency exchange, was pardoned by Trump. Uh, finance has spent a year lobbying for this pardon while becoming a key supporter of Trump. Crypto venture world Liberty Financial the world Liberty uh coins have now generated more annual income for the Trump family than their entire property portfolio ever has. David Leary: [00:19:48] Wow. Blake Oliver: [00:19:49] More money from this crypto company than all of their property holdings. So this pardon means that Binance, the world's largest crypto exchange, will probably be able to return to the US market after they were banned in 2023. So, um, you know, we were just talking about BDO and, uh, the implication. David Leary: [00:20:14] The. Blake Oliver: [00:20:14] Impression, the impression, the lack of the apparent potential lack of independence there. Uh, what's the implication here? David? It's like create a crypto company that makes Trump richer than he's ever been. And you get a presidential pardon. David Leary: [00:20:31] Well, it doesn't it does not look very independent, right? It makes our government look corrupt. And that's the problem. And actually now it's just bell until this morning you said like the issue is it's the impression of independence. And that bell really went off for me. We were walking around here discussing the show a little bit. And that's exactly what this is. Trump Valley could be completely innocent on this, but it gives the impression that there is no independence. And that's really the bigger, the bigger issue. Blake Oliver: [00:20:58] Uh, so going back to this. David Leary: [00:20:58] And I don't want to accuse Trump Valley do anything illegal, just like I don't want to be sued by the lawyers at the white House. So just we're not accusing anything. It just gives the impression that, you know, things don't add up. Blake Oliver: [00:21:10] So going back to this top 100 jobs list, you know, we were 90th Accounting's 90th number one jobs nurse practitioner. Uh, it manager's number two, physician assistant. Number three, financial manager is for Software Developer five, information Security Analyst number six. David Leary: [00:21:29] Can you write a software developer and click on what is it saying that you know they said accountants. The future was only. Blake Oliver: [00:21:37] The future. David Leary: [00:21:38] Growth 4.9 or something. Oh you might have lost internet. Blake Oliver: [00:21:41] Yeah. The it's not loading for me right now, but the median salary is 132,000 projected jobs, 303, which is like twice as many as accounting. Um, you know, data scientists is number eight. Speech language pathologist. Number nine actuary gets number ten. I don't understand that. How can actuaries get ten and accounting gets 90 if we go way down the list I wonder what we get. David Leary: [00:22:04] Nobody's ever going to scroll down this much. This is one of those websites where you have to keep saying load more, load more, load more. It's as fast as nine times before they ever know that accounting is a career. Blake Oliver: [00:22:14] Flight attendant is 45 okay, okay, sorry, this list is just not making sense. Like how can how can being a flight attendant be a better job than being an accountant? You're on your feet all day. You're dealing with like, pissed off passengers. You're like, getting sick all the time. I'm sorry. David Leary: [00:22:30] What are we down with? What are we down with? In the 90s. Blake Oliver: [00:22:33] That's what I'm trying to find out. I keep scrolling, I keep scrolling. Okay, we're getting into the 80s. Plummer is 84. David Leary: [00:22:42] That's lower. Blake Oliver: [00:22:42] This is a joke. All right, we're down with, like, exercise trainer. Uh, that's that's 89. Radiology. Radiologic technologist. Statistician. Delivery truck driver. Seriously? David Leary: [00:22:57] Right down there. Blake Oliver: [00:22:57] Okay. I'm sorry I brought this story to the show. This is a joke. I should be I should be kicked off the show right now. Um. All right, what are we going to talk about next? Top stories here. Here's a positive story. Accounting firms say hiring outlook is strong. That's according to an AICPA survey. Accounting firms are bullish on hiring despite a shrinking talent pool. 75% of firms that hired in 2024 plan to maintain or increase their hiring this year. Only 18% plan to cut back. But in the meantime, accounting graduates dropped 6.6% to just 55,000 students in the 20 2324 school year, master's programs got hit especially hard with a 15% decline. But there is that bright spot we've been talking about where accounting enrollment has surged 12% for two straight semesters in 24 and 25, which suggests the pipeline might be turning around. David Leary: [00:23:55] And the graphs, they have the trends of degree completions. And it finally has stopped going down, where it's flattened out between 20 to 22, 23 to 2324. But we're not we're not just falling off the cliff anymore. So maybe we're maybe we're at the bottom. Unless there's those what those W's, all those trend graphs that can happen. It's starting to flatten out. Now. Blake Oliver: [00:24:23] All right. Let's talk about one of my favorite topics. We haven't hit this one in a while. No, not AI. Good guess. Uh, tariffs. So arguments have started. Uh, arguments will start soon in the Supreme Court. The Supreme Court will hear arguments next month on Trump's tariffs that small businesses say amount to an illegal $3 trillion tax on Americans. Lower court's already ruled that Trump exceeded his authority when he imposed tariffs at 10 to 50% on most imports by declaring trade deficits a national emergency. The case centers on whether presidents can bypass Congress to impose taxes in the form of tariffs just by calling something an emergency. So the current status is that they have filed briefs with the Supreme Court, and then we're going to have oral arguments next month. And this whole thing could be, uh, turned upside down. Now, in the meantime, we have evidence here that Trump's tariffs are raising prices for consumers. Retail prices have jumped 4.9 percentage points above pre tariff trends in just eight months. Some categories got hit even worse. Apparel is up nearly 9%. Coffee and tea which you're drinking right now is up 7.5%. Now what's interesting is that both imported and domestic goods are getting more expensive. David Leary: [00:25:43] I thought I've been seeing some articles about even for coffee, like domestic coffee is still going to be more expensive. Like, it's hard to produce stuff because nobody has. Everything you're producing isn't built off of only stuff. In the States. You have to import some parts. Maybe it's the machines you're using to produce the goods you're producing in the States. There's some part that has a foreign dependance, right? Blake Oliver: [00:26:03] Well, and when the prices of foreign goods go up, that means that you as a domestic producer can raise prices because your competition is raising their prices. So, um, foreign steel is now 50% more, for example. But domestic steel producers can raise their prices just slightly below that amount to make easy money. And there's been some unintended side effects. We've got a soybean crisis. David Trump is going to do a multibillion dollar bailout for US farmers because of the trade war tariffs. This example is soybeans. China has stopped purchasing American soybeans in retaliation for Trump's import tariffs, leaving farmers here without their biggest customer. Now, Argentina has seized the opportunity to sell more soybeans to China, filling the gap left by U.S. farmers. And now we're also simultaneously planting a $20 billion bailout for Argentina. That's a favor for his ally, President Melay. Argentina suspended its soybean export tax on the same day, making their crops even more competitive against U.S. soybeans. So it's like we're no longer selling soybeans to China. We're going to send money to Argentina. And meanwhile, Argentina gets to send their soybeans to China. David Leary: [00:27:22] There's not a lot of forward thinking on this. Blake Oliver: [00:27:26] Um, now, here's the other tariff article I've been saving up, and I think this is the one that's the most relevant to our clients. Tariffs are really expensive for small businesses, not just because they're attacks, but also because they create a lot of red tape. These trade rules are complex, and they force businesses to navigate all these documentation requirements that small companies just have difficulty doing. Companies have to have detailed paper trails for every imported item. There are new rules that require you to prove the origin of metals and project products, even when products don't contain listed metals. If the aluminum origin can't be proven. For example, customs will assume it's from Russia and charge a 200% tariff. So you have to prove you know where it comes from. Each goods entry now takes 1 to 3 hours minimum for a simple case up to ten plus hours for complex shipments. So basically tons and tons of red tape, lots of paperwork. David Leary: [00:28:34] Everything that in theory the Republicans don't are against. Those would be very upset about all this slowdown and red tape you have to jump through to bring it in this country. Blake Oliver: [00:28:44] Here's a quote from a real business owner. Uh, this is uh. David Zampieron, the founder of Idaho based Zamp Racing, which makes helmets, suits and other kits for auto racing drivers. This was an Accounting Today. Uh, the story says he spent July glued to a screen tracking a shipment from China, then realized it wouldn't arrive before Trump's trade truce with Beijing was due to expire. His solution was to park the stuff in a bonded warehouse in South Korea, then wait and see. When Trump extended the truce into November and immediately ordered his goods to be shipped. Quote. Even though the pandemic was crazy, there was kind of a certainty there. Now it's more about the confusion, he said. I've been doing this for 40 years and it's never been this complicated. So basically hours and hours and hours of paperwork. David Leary: [00:29:34] I don't know if you saw this weekend what happened, apparently. So remember, I'm going back months and months ago, I played an old Ronald Reagan video about Ronald Reagan. He gave a talk to the American people about, I think it was 1987 about tariffs. Tariffs. Yeah. So Ontario, the Canadian province of Ontario, took that video and wrapped it up in a commercial and ran it during the World Series. And Trump got all upset. And now he implemented an extra 10% tariff on Canada. Now. Blake Oliver: [00:30:07] All right. Where do we go from here? David Leary: [00:30:11] I have some app news, but let me make sure I don't have any non app news first here. Blake Oliver: [00:30:16] You know what? We're in a conference David. And one of my favorite things about coming to an accounting conference is that we get to hang out with our friends. Yes. Uh, you and I work from home, so this is our time to be together in person. And also to meet up with our. David Leary: [00:30:31] Side by side. I get to see your computer screen. I'm like, I wonder how Blake does the show. So I get to see what you're doing. Blake Oliver: [00:30:35] Well, you know, that's because, uh, the reason we do this is because we like to be with our friends. And that's one of the problems with remote work. And a study shows that, like, people really, really do want to work with their friends. And in fact, they would take a pay cut. David, I want to know, would you take a 20% pay cut to work with your friends? David Leary: [00:30:58] 20%? Blake Oliver: [00:30:59] I guess the if the alternative is like you have no friends at work to work with. Uh, are you saying you come on to work with me? You wouldn't take a 20% pay cut. I'd probably make a lot more if you didn't. If we didn't work together. David Leary: [00:31:11] I think 20% be okay. Blake Oliver: [00:31:13] So this is according to KPMG's Friends at Work 2.0 survey. It found that a majority of employees would sacrifice 20% of their salary to work alongside close friends, highlighting the value workers place on workplace relationships over compensation. 45% of workers report feelings of loneliness at work, and that represents nearly double the rate from the previous year. So make your firm a fun place where people get to work with their friends, and you can pay them 20% less. David Leary: [00:31:48] Party firm. Blake Oliver: [00:31:50] All right, David. On to you. David Leary: [00:31:54] On to me. Um, you wanna jump into app news? Blake Oliver: [00:31:59] Let's do it. David Leary: [00:32:00] So the first big piece of app news is keeper. Everybody's first keeper. They've been a sponsor before in the past. The Accounting Podcast they're rebranding to the new type. The new company name or not name. It's going to be double. Double. And what's interesting part of this story is like how open they are being about it. They basically they got sued because there's a lot of apps like I mistype it. Sometimes you go to a different keeper app website. There's a lot of apps named keeper, apparently. And so instead of fighting for this, he made the commitment and the decision to just settle and change the name so they can keep focusing on their product, the product, the team helping accountants. And but it's nice because now basically they're they're using the word double as in double entry bookkeeping, helping you double your productivity. A lot of plays on that. But the fact that he was just honest and said, hey, we got sued and we could fight it, or we could move on as a company and focus on the customers and the product. So it's really good because it's not just a rebrand to rebrand, which happens a lot. So kudos to Ben. Blake Oliver: [00:33:08] A majority of accountants are comfortable with technology taking over jobs previously done by people. That's according to a new survey by Accounting Today and its parent company, Aricent. And, uh, yeah, that's that's actually a really high number. Uh, if you think about it. Like, I didn't know that accountants were that comfortable with tech taking over their jobs, especially artificial intelligence. Uh, almost two thirds say that their firm has already implemented technology for one of those tasks or jobs, and more than half reported that AI, specifically is already making them more effective. And just under half believe that accounting firms will need fewer employees because of it. David Leary: [00:33:54] So I have three small stories about Bill.com. So Bill.com actually, let's rewind. Remember when we went to, uh, Perryville Road in the past for NetSuite, and we noticed there was, uh, there's no bill pay apps around because they rolled out bill pay in the app and there was no bill pay apps around because we're used to seeing Bill.com at every single conference we ever go to. Well, now Bill.com is now going to power the bill pay inside of NetSuite. It's going to be built into NetSuite. All right. Bill.com also announced that they're going to be embedded inside of Acumatica as well, which is these are high end, bigger enterprise level, uh, general ledgers. So they're going to be in there. But now the bad news is for Bill.com or Bill. I don't say Bill.com forever. I'm never going to not say Bill.com bill is actually going to have layoffs, though. Unfortunately, they're cutting about 140 employees, which is about 6% of the workforce. Um, they just as they just try to reduce the workforce input cost a little bit, but so we'll see. The interesting thing about them being embedded now in these enterprise apps, it feels like every time they get embedded into one of these apps, they get ripped out and the app just builds it themselves, right? They were in QuickBooks. We know the story of that. Then they were in Xero and restore that Xero Emilio now they're in these these enterprise level ones. Are they going to pulled out of those as well eventually. Are they going to build it. It's it's going to be a rough journey. On where Bill falls in on this, I think. Blake Oliver: [00:35:18] Let's talk about AI adoption in audit. It has exploded from 8% to 21% in just a single year. Early adopters are seeing massive results up to 8000 audit hours saved annually, 20 to 40% productivity gains and 3.7 million in savings for large enterprises. But there's a catch most companies are stuck in what researchers call the middle maturity trap. They're investing heavily in AI tools but can't execute properly due to governance gaps and unclear ownership. Only 30% of leaders feel prepared for AI governance requirements, and many deployments are stuck in pilot mode forever. That was from a study by Audit Board. I think that that that adoption increase of from 8% to 21% in a single year is really dramatic. Um, and the number of firms with no AI plans has dropped nearly in half. So last time they did it, it was 49%. Now it's down to 25%. David Leary: [00:36:22] So basically it's still one quarter of firms have no plans to use AI. Blake Oliver: [00:36:26] They have no intention, no plans, never. And about 20% are doing it right now. And I guess the rest are somewhere in between. David Leary: [00:36:34] Why are the survey like this? You'd probably like. Yes, we have plans that 25% to not have any plans at all. Blake Oliver: [00:36:42] Hey, I mean, you're gonna retire soon. Why bother? Right? Or sell the private equity. David Leary: [00:36:48] People that haven't migrated to cloud yet? Blake Oliver: [00:36:49] Exactly, exactly. Um, okay. David Leary: [00:36:55] Two more states move forward on alternative pathways Michigan and New Mexico. Okay, so I think we're getting close to 30 states now. Blake Oliver: [00:37:02] So what do they do? Pass legislation? David Leary: [00:37:04] Yeah, they pass legislation or introduce bills. Two more states did that. And now the bills are the same. They're all they're all basically identical bills. All the states are there. Blake Oliver: [00:37:15] So going back to this, uh, discussion about like declining interest in accounting, right. We we had for years fewer students going into accounting. We had a slight bump recently. Um, but like, those are those are like big numbers, I guess, across the board. And it doesn't really give you that much useful information because accounting is a big profession. I mean, we've got lots of different areas, right? And CPA Journal published an article that tries to dig deeper and figure out what is the effect of of this on different accounting fields. So the headline is the disproportionate effects of declining interest within different accounting fields. An uneven pipeline by Megan Grady and John Durant. David Leary: [00:38:03] Both PhDs and CS. Blake Oliver: [00:38:05] So, you know, we had this 7.8% drop in bachelor's degrees and 6.4% in master's degrees a few years ago. Um, but their research shows the shortage isn't affecting all areas equally. The decline is concentrated in public accounting careers, particularly in tax and non-audit specializations. Graduate hiring trends audit actually increased 7%, so audit had 7% more hires. Uh, in uh between 2014 and 2020 tax decreased 34%. So like tax like went down by like a third. David Leary: [00:38:47] So from this period the audit firms were sucking all the talent up. They were so people don't have any alternatives to go down other paths. Blake Oliver: [00:38:54] I don't know. I mean, I don't know, I guess it's like, um, it's hard to say because, like, where do the. David Leary: [00:38:59] Candidates were lower for a long time? Yes. But the hiring kept increasing. And to that, that that piece of the business audit. Blake Oliver: [00:39:07] Now the other fields like forensic evaluation, those kind of fields, they plummeted 77%. So basically audit increased tax decreased a lot and other fields plummeted even more. And I wonder if that that other stuff like I wonder why that is. I guess that was before the big AI boom. So it's not really clear is it. David Leary: [00:39:30] Is it that the jobs weren't available and or is it just they couldn't hire because the bodies didn't exist to hire now? Audits had money. They were paying me a little bit higher than salaries in some of those other positions. But audit could keep you're taking the teeny little cake or pie and you're slicing it up and it just keeps taking Most of the pie, and there's just less and less for tax in other fields. Blake Oliver: [00:39:53] And I'm just wondering if, like the other fields, you know, that's basically consulting. That's what we call consulting, right. Like that's where you have the people that have the ability to go get a job somewhere else, like the skills to go do something else in another field and make more money. So that could be why, um, overall, there's been a shift from public to private. So the percentage of graduates starting in public accounting dropped from 55.4% in 2014 to 38.1% in 2020. This is a big deal. It used to be that over half of accounting grads went into public accounting when they started. David Leary: [00:40:31] Because that's what the messaging beating your head. Yeah. Blake Oliver: [00:40:34] And now that's 38%. And that was in 2020. We don't have more recent data. So the traditional career path may be changing. And that's what I've been talking about for a long time, is I think that actually it's going to shift completely where most accounting grads are going to go into private industry before they go into public accounting, if they ever do. And that's because we need experienced people in public accounting to do audits. We don't need entry level people to do all the grunt work anymore when we've got automatic automation. David Leary: [00:41:06] And AI are so complicated to like, expect your your green fresh college grad to go in and do audits in very complicated businesses. Blake Oliver: [00:41:16] Well, they don't know anything. David Leary: [00:41:16] They don't know anything. Blake Oliver: [00:41:17] How can you have. How can you have any somebody who doesn't know anything, who's never done the job auditing people who have. It doesn't make any sense. So total accounting jobs have increased 10% since 2020, but graduate numbers have declined. And we've also got large cohort of accountants retiring simultaneously. There's work life balance concerns. So anyway I think that's interesting. The, the it's the decline has been concentrated in tax and non-audit fields. And what that suggests, according to the authors, is that it's not just about the general unattractiveness of accounting, but specific concerns about certain career paths. So students don't want to go into tax because they don't want the compressed workload. And I think that they don't explain why here, but I think that the reason that people don't want to go into this other consulting roles in accounting firms is because they can do those roles in non accounting firms and get paid better and have better work life balance. Students are still willing to go into audit because they believe in that career path where you do a couple of years in audit and then go. David Leary: [00:42:25] For them personally. They see the partner. Blake Oliver: [00:42:27] They see the value. Well, no, not even the partner path. Just the path to a good job in corporate. David Leary: [00:42:31] Okay. Good job. Okay. Or the resume? Yeah. Blake Oliver: [00:42:34] Yeah. You get PwC on your resume, you go become a controller. David Leary: [00:42:37] It's a stepping. Blake Oliver: [00:42:37] Stone. Yeah. All right. How are we doing on time here? Let's see. We've got maybe a time for 1 or 2 more stories. Two more. You got anything else, David? David Leary: [00:42:49] Let's see. Blake Oliver: [00:42:50] I've got a fraud story. A Los Angeles area film production accountant has been charged with embezzling nearly $2 million from movie productions to fund a lavish lifestyle that included Vegas hotel stays and payments to adult film performers. Joshua mandel, 46 years old, owned First Day Productions, where he served as the CEO and CFO, and he specialized in accounting services for independent films. He managed cashflow, payroll expenses and prepaid debit cards for production companies, and he had authorized access to production company bank accounts from 2019 to 2023. Here's how the fraud worked. He made unauthorized wire transfers, checks and moved funds into a cash card account he controlled called fun, fun, fun. Yes. And how did he cover it up? Well, he used money from one production to pay the expenses of another, creating a shell game to hide the theft. He paid hundreds of thousands to young women, including adult film actresses. One woman got over $129,000, and he met her on a sugar Daddy website. He spent more than $24,000 at Las Vegas hotels, clubs and shows and over 12,000 in luxury purchases from Louis Vuitton. He was charged with six counts of wire fraud by the Department of Justice, and faces up to 20 years in prison for count if convicted on all charges. The maximum potential sentence is 128 years total. David Leary: [00:44:21] And so he was. He was too busy specializing in bookkeeping, accounting for independent films. Well, I imagine don't have very big budgets to begin with. Like this. Blake Oliver: [00:44:32] Yeah, a few hundred thousand dollars. David Leary: [00:44:34] Independent films are artists. Yeah, right. That's. Blake Oliver: [00:44:36] Yeah. Yeah, yeah. Not not a ton of money, but enough where he could, uh, he could get, you know, $2 million out of him. David Leary: [00:44:44] And no, I don't like every app has an AI announcement. But can it be is launching an AI powered client intake system? And I know you've talked about this before, so I'm wondering if this matches what you imagine it should be. So canopy is launching new AI questionnaires as part of smart intake. It's their AI client intake system. The new product features will give accounting firms one seamless place to propose, collect and deliver work, saving time, creating a smoother client experience. Blah blah blah. The system predicts which documents and answers are needed. Refills known information automatically matches and renames uploaded files. This is kind of what you've said. Like it's the intake system has to be smarter, and I only ask the end users what data they need. Blake Oliver: [00:45:29] Exactly. David Leary: [00:45:30] So we'll see how this works. Maybe we're using the canopy thing. We'd love to find out. Let's send us a message. Blake Oliver: [00:45:36] Going back to our first story. David Leary: [00:45:38] The story we have breaking news again. Blake Oliver: [00:45:40] Well, there's another large firm, Crowe, which is hiring an investment bank after years of ignoring calls to take private equity money. And this was a breaking story in the Wall Street Journal. I guess they'd been saying for years, they're not going to take private equity. And then the Wall Street Journal got inside information that Crowe is now looking into it. They're opening to selling a stake in the firm since 2021, over 24 of the top 100 U.S. accounting firms have taken private equity money. Blackstone, New Mountain Capital and other big players have been snapping up stakes across the industry. Crowe wants the investment to speed up AI adoption and expand services. They just launched, for example, Crowe Studio focused on AI native solutions for finance teams. David Leary: [00:46:29] So that's so 24 of the top 100 have now taken private equity money since 2016, or no 2020. Blake Oliver: [00:46:36] Since 20. David Leary: [00:46:37] 2021 one. That's so we're basically for four and a half years. That's a lot. Yeah. The this is the pace of this is also not good right. That that leaves even more opportunity when things are going too fast. People are not making sound decisions. Blake Oliver: [00:46:54] And there aren't that many top 20 firms anymore that haven't taken the money. Clay plant more, and they're two of them that haven't taken outside investment, clay says. They have no plans. They're just going to continue acquiring other firms. Plant Moran is not exploring alternative ownership, but is open to M&A with a cultural fit. But I feel like as this goes on, you know, it's hard to say no. Hard to say no to that money. And it's not like the regulators are saying you can't take it. So we're going to end up with a situation where the large accounting firms doing the audits for the, you know, mid-market and public companies in in this country are not owned by CPAs, CPS, but our own, at least in part by private capital. David Leary: [00:47:44] Yeah. It's the the concern is. Oh, the public might be confused by the use of the word CPA. But the real confusion is who who really owns the accounting correctly. Who's the accounting firm? Are they. Blake Oliver: [00:47:59] Who are they beholden to. David Leary: [00:48:00] Behold to? Is it the public anymore? Is it the the the founders or the the proprietors? Or is it other money which we don't know where that goes? I mean to to be spiderwebs of the private equity. It's hard to hard to map out. Blake Oliver: [00:48:14] Well, David, that's all the time we have this week. Uh, great to record with you in person. And we're looking forward to, uh, exploring the rest of Intuit connect and seeing, uh, what they've got to show us here. David Leary: [00:48:26] We have to go to a press briefing and learn the box. Blake Oliver: [00:48:28] We're late. We gotta go. Bye, everyone.