Latest / The Accounting Podcast / Cooking the Books with Barbie: The Downfall of Mattel's Co-Founder & Barbie Inventor

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Cooking the Books with Barbie: The Downfall of Mattel's Co-Founder & Barbie Inventor · 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! David Leary: [00:00:04] And so be prepared, everybody for QuickBooks Online edition. That's going to cost you an extra 60 bucks a month because the Street is going to pressure these companies to charge for some functionality. The door is wide open for this now, now that Microsoft announced they're going to do it. So just prepare all of yourselves, the streets looking for it. And who do these companies answer to first? Usually the street, the streets looking for additional revenue because you rolled out all the subscriptions are going to go up. Just be prepared. Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:47] Hello and welcome to the accounting podcast. I'm Blake Oliver. David Leary: [00:00:51] And I'm David Leary, and congratulations on nailing it the first time. Like a professional. Blake Oliver: [00:00:56] Thank you. I'm figuring it out. So, David, have you seen any movies lately? David Leary: [00:01:02] No, I've. I've been staying on top of how I turned pretty last summer or whatever it was called that series on. Blake Oliver: [00:01:12] You're watching. David Leary: [00:01:13] I'm watching it. I'm watching a teenage girl drama TV show right now. Yes. No movies. Blake Oliver: [00:01:18] Okay. David Leary: [00:01:20] What about you? Are you are you going to movies? Everybody's got the summer movies, right? Summer movies is big right now. Blake Oliver: [00:01:25] Yeah. I went out to see Barbie last night with my brother and my wife, and we had a great time. It's a really fun movie. And there's a reference, a very brief reference in the movie to the IRS. So I figured I had to talk about this on the show. David Leary: [00:01:42] Now, you can expense it, right? You can expense the whole trip, right? Blake Oliver: [00:01:45] So I've gone down this Wikipedia rabbit hole learning about the creator of Barbie, Ruth Handler, who is a character in the movie. Her Ghost talks to Barbie and mentions that she had these IRS problems and tax problems. Ruth Handler was a fascinating real person. She was a female executive who founded Mattel with her husband in the 1930. And. Invented Barbie in the 1950s. Her character in the movie mentions to Barbie that she had all these IRS issues. And so I went and looked it up. And it's actually not IRS issues. It was SEC issues in the 1970s. The Securities and Exchange Commission, they investigated Ruth and other former Mattel executives and alleged that senior management had issued statements that were deliberately false to give an illusion that they had impressive sales growth in 1971, 72 and 73, and that they may have overstated their pretax income of 34,000,000in 1971 by as much as 15 million to $20 million. So like half of their income was potentially overstated due to fraud. In 1978, Ruth and for former Mattel executives were indicted by a federal grand jury for conspiracy, mail fraud and making false financial statements to the SEC. The New York Times reported. Ruth pleaded no contest and received a $57,000 fine and 2500 community service hours. That's a lot of community service. But she didn't go to jail. David Leary: [00:03:25] But did you read about, like, what the scam was? Were they just inflating the number or were they doing some fake receipts, like saying they sold more Barbies than they did like or did they just made up top line? Blake Oliver: [00:03:37] I don't know what the details are. Maybe our friends on the Oh, my Fraud podcast can look into that. But all I was able to find was that they overstated their pretax income at Mattel. And so the SEC came after them. So that's your connection, Barbie and accounting. David Leary: [00:03:54] And then the Hollywood writers just decide, let's toss the IRS under the bus. Blake Oliver: [00:04:00] Yeah, I guess maybe they thought that, like, people wouldn't know what the SEC is. That's the funny part, is that the reference in the movie is to tax and IRS problems. But I didn't find any of that. It looks like the problems were with the SEC and financial reporting. So once again, Hollywood gets it wrong when it comes to accounting. And welcome, everyone who has joined us in the live stream. If you have any thoughts on our topics of discussion here today or anything that has piqued your attention this week, let us know. We want to hear what stories are top of mind for you and a reminder to all of our listeners that you can join us live on YouTube. Subscribe to our channel on YouTube, search for the accounting podcast, and you can subscribe and get notified when we go live. So David, what's new with you? David Leary: [00:04:44] I saw that Intuit's launching an ad network. That's a story. And then I also saw, I think audits are worse than they've ever been, which is kind of crazy because they were pretty bad last year and pretty bad the year before. Blake Oliver: [00:04:58] Let's talk about Intuit launching an ad network. I want to hear about that. David Leary: [00:05:01] So so this came through. It came through not our normal media channels. So this came through like Adweek and through another site called Media Post.com. And basically the long story short, it's Intuit is launching what it calls a first B2B network targeting small businesses. They're calling this SMB media labs. So let me click on this ad to stream here. So they launched this site and it sounds like they already have some people on their network already. And the way I think it's working because it's not you know, you have to piece together a press releases and a vague website. So let's say, Blake, you want to run an ad targeting dentist offices that have four employees. Intuit has that data. They knew who those people are and they maybe you want to target ones that have certain revenue metrics right into it. Has that data, that QuickBooks data, and they're not selling the data, but it looks like what they're going to do is you want to market to those people. So you actually go to Intuit to buy your ads. Then Intuit runs those ads like, say, on Facebook for you. So they're kind of being like it's like a buying service in a way, if that makes any sense. Blake Oliver: [00:06:18] Oh, yeah. Well, so I wonder how they're doing it exactly. But I know Facebook has these custom audiences that you can create where you can upload a contact list and you can build an audience that is that contact list specifically or looks like those contacts. So that is either what Intuit's doing or something like it. David Leary: [00:06:41] An Historically, that was always done off of cookies. But because Apple's going, Apple's started to shut down the cookies, which has made advertising a lot harder to reach who you want to reach in these exchanges. And so you're starting to see, I think, even a who's the big hotel chain, Marriott. Marriott started to do this now. They're offering an ad network for people to advertise. So the ads won't be in QuickBooks, but they'll be on other third party services using the QuickBooks data. So any listeners, they can actually go to media labs intuit.com and read about this if they'd like. And not only that, you can actually can go there and you can actually choose to opt out so you can opt out if you do not want your QuickBooks files in your clients files being used in this. In theory, you can opt out of these ads. So they do talk about how very specifically they make it very clear like these ads will not be in QuickBooks. There's no private data being put out on this. But they said they already have brands already doing these ads. I put my email address and hopefully I get some more info like maybe we could try to run an ad this. I don't, I don't know. But it's a big jump and I don't know how the market's going to react to this. I'm sure the advertisers love it. But what what is the our community I mean, those of you in the chat. Right. What are the accounting podcast listeners? What are all those QuickBooks Proadvisors? How are they going to react to this? Hey, Intuit's got the data and now they're monetizing it externally. Private data. Still, it's not that specific. Blake Oliver: [00:08:12] Well, it's just it's a great example of how Intuit is always looking for ways to monetize the data they have to upsell. Like they are so good at creating more value out of what they have. And I think accounting firms can learn from this because a lot of times we bring in clients and we forget that they need a whole lot more stuff and we're just doing this one thing for them and we could be doing a whole lot more. And that's how Intuit has become $1 billion company is not just by selling, say, QuickBooks Online to somebody, but they add payroll, they add merchant processing, and suddenly the client is spending or the customer is spending hundreds of dollars a month on Intuit products. And they do the same thing on the back end with the data now. David Leary: [00:08:50] It's. Yeah, it's really smart. And to put a number on this a little bit as the third party cookies are getting deprecated by the browsers and by Apple, by the big companies because they don't they don't need them anymore. Advertisers really want first party data. And so this they're calling it retail media people who have first party data. It's attracted $45 Billion in ad spend. So Intuit's just seeing another here's a $45 billion floating out there. We want to get our piece of that right. So it's a huge market opportunity here, but it's very gray, you know, even like, you know, the how it works doesn't have much, right? Like, that's it. It just says like they're working with somebody. Blake Oliver: [00:09:29] Larry, here in the live stream says it should be opt in for subscription discount. It feels wrong to use private accounting data for profit in the terms and conditions that are rarely read. They would never make it opt in. I mean, I understand why you feel that way, Larry, but they're never going to make it opt in because nobody would opt in to this. David Leary: [00:09:48] They're basically providing an ad service right there. The ad buyer, based on who? They're an advertising agency to some extent. Now, I want some ads and they're going to go buy the ads for me. Blake Oliver: [00:10:00] It could be good for accountants, Ryan says. Our firm has interest in leveraging our data even internally, such as benchmarking concern over privacy and engagement letters becomes the big hurdle. Yeah. So in your engagement letter, copy what Intuit does in terms of the permissions. When you sign up a client, they're giving you permission to use their data anonymously to do all of this stuff. As long as you anonymize it and make it a blanket condition as broad as you can so that you have flexibility. And also the same way when you use apps where you don't have to go out ideally and get permission for every single application that you use to provide your service to them, just get a blanket permission that says if you work with us, we're going to use a bunch of different apps. We are going to do our best to make sure that your data is secure. But ultimately, you know, whether or not your data is safe rests with that vendor. Yeah. David Leary: [00:10:53] It's a scary world out there. Blake Oliver: [00:10:55] Yeah, well, you know, you just. You want to be covered, right? David Leary: [00:10:58] I think. Yeah, you want to be covered from my company standpoint and firm standpoint. But at the same time, I was just. I've been having a roof leak and I was watching some YouTube videos on roof, mastic paint, paint for the roof, whatever you want to call it. I was clicking on some videos and I was clicking on some sites. I got an email from this local company in Tucson that makes this roof mass and it says, Thanks for stopping by our website. Like, I didn't type in my email address on their website. Like, how did they get my email and send me this email? It's a little that's what I mean. It's a very scary world we live in. Like, Yeah, obviously you're opting into stuff you don't know about. I don't know what thing. Maybe. Maybe Google sent that to them. I don't know. How did they get my email address that fast? You know, within a couple hours. Blake Oliver: [00:11:38] It's a scary world. And, you know, it's also a scary world because as much as 40% of audits in 2022 are deficient. David, this is the headline in the Wall Street Journal. Accounting watchdog Expects deficiencies in 40% of Public Company audits in 2022. Chair Erica Williams calls findings completely unacceptable. This is up from 34% in 2021 and 29% in 2020. So they inspected a lot of firms, 157 audit firms, and they reviewed portions of 710 audits. So it's a big sample size and 40% of them have deficiencies. And these are significant deficiencies, deficiencies that are so significant that the Pcob says that the auditor should not have issued its opinion. They didn't collect sufficient evidence to back up their opinion. Audit firms are blaming high staff turnover, reliance on less experienced staff and remote work. According to the PCAOB, although they don't collect data specifically on what caused the underlying issues, they just asked the firms, What are the challenges you are facing? And that's what the firms are saying. They're saying that high staff turnover, less experienced staff and remote work adoption. I think the remote work adoption man, you know, that's always the scapegoat. David Leary: [00:13:01] Didn't the chairman or chairwoman when she at the press conference call those out as excuses from the firms? She did. Blake Oliver: [00:13:07] She didn't I didn't watch the press conference. David Leary: [00:13:10] She referenced it as excuses. And then she goes on to say that the main cause is some firms lack any quality control systems, even a monitoring procedure to check that workers have adhered to professional standards in their accounting and auditing. Right. So so basically it's like go do this audit and nobody ever checks it internally. Blake Oliver: [00:13:27] Now it's worse. It's worse in China and Hong Kong. The Pcob did its first ever inspections of Chinese audits, audits of Chinese companies, and found that KPMG and PwC had deficiency rates of 100% and 75%, respectively. David Leary: [00:13:45] 100% deficiency. 100%. Blake Oliver: [00:13:48] Yeah. Yeah. Kpmg at 100% deficiency rate in China. David Leary: [00:13:52] Why don't you just get lucky and do one? Correct. Blake Oliver: [00:13:54] It was only they only reviewed eight audits. But I mean, okay, like four. It doesn't say how it was broken out, but let's say four for KPMG, four for PwC, I'm guessing, right? So all four were deficient for KPMG and three out of four for BWC, if that's how it was broken out. So not a good look for the audit profession. David Leary: [00:14:14] It says the audit clients that receive faulty audits not disclosed by the COB like I get the whole marketing implications of this, but like, maybe that's the way change happens, right? Yeah, like, like have the news article that lists 700 companies or whatever it is, 300 companies with bad audits like cause chaos in the market. That's the way you get change. Blake Oliver: [00:14:36] Yeah. Yeah. By hiding this, by shielding these companies there, there's like, there's no there's no real penalty. And the financial penalties that the PCAOB issues are minuscule like $10 million a year in financial penalties for a multi-billion dollar industry. So they have no teeth, right? Like maybe, yeah, maybe naming and shaming the companies with the bad audits. But then these companies would say, well, it's our auditor that did the bad job. I don't know. But I agree with you like this. This isn't sustainable. David Leary: [00:15:11] And that goes by a bigger question because the whole reason the PCAOB was created in 2002 was because the whole Enron Andersen mess. Right? So now it's 21 years later, they're coming out with these big press conference saying how it's completely unacceptable. The state of audit. Yeah. And I'm like, well, what have you been doing for 20 years? Blake Oliver: [00:15:30] Well, they didn't do much for 20 years. David Leary: [00:15:32] Being the oversight for 20 years, like some of this is on you too. You just can't say it's these big firms like, Yeah, you're part of the problem. Blake Oliver: [00:15:40] Well, I've said it before. I'll say it again. The way that you fix audit is that you make auditors truly independent. They should be hired by an independent third party, not by the companies they audit. And they shouldn't be doing consulting work. They should be completely separate and only do audit and not be a part of these big consulting firms, which is what the Big Four have become. They are consulting firms that happen to do audits, and that's a huge conflict of interest no matter how you skin it. David Leary: [00:16:07] And I think the PCAOB is a conflict of interest. And I feel like you talked about this on the podcast a year and a half ago. Like there's people that they're their senior members at these big audit firms and they go to work for the PCAOB. Then they go back to one of the firms. There's this like this dance that happens and like, who's going to rat out the firm you might go take a job at? Like it's yeah, I don't know. The whole thing's pretty broken. But 40%, like, at what point do we start panicking? 40% is pretty high. Well, and. Blake Oliver: [00:16:38] The question a really good question that Michael asked in the live chat is what's the threshold for an audit to be deemed deficient? And this is not clear. It's not clear, based on Pcaob's communications, what exactly that means, like how deficient does it have to be? So maybe if they gave us more information on this, like just how bad the audits are, then we would know. They do have two different types of deficiencies. There's like a really bad one and a less bad one. It's a good point, Michael. Romeo, says the PwC Australia MRA law leaks sort of proved that a lot of the reasons big clients stick with large firms despite deficiencies is for the added benefits, unquote. Tim says pcob are just disgruntled b4 ex auditors. David Leary: [00:17:23] Disgruntled. Blake Oliver: [00:17:24] So actually, David, the PCB has done something to increase transparency a bit. There is now a website where you can search PCB inspection reports by how many screw ups an audit firm made. They have put 3700 PCB inspection reports online. It's called the Firm Inspection Reports page. I haven't actually looked at this yet. I've got it up on the screen for our live stream viewers. You can search by deficiency rate. So I could actually say, okay, who had a really high deficiency rate? More than 50%. Kpmg in Japan, they had a 67% part one deficiency rate out of three audits. So two out of three failed. Let's see who has the highest Postlewaite and Netterville in the US had a 100% deficiency rate, but they only had one audit reviewed. David Leary: [00:18:16] So just for somebody like me. Yeah. So E.y is going to do in theory how many audits this year? Blake Oliver: [00:18:24] I mean, thousands. Yeah. I don't know. Probably. Yeah, it could be. David Leary: [00:18:30] Might review 2 or 3 of them. Blake Oliver: [00:18:34] Well, more than that for the big firms. Okay, so here's here's here's some firms with more audits reviewed than just one with them. Smith and Brown had 17 audits reviewed for 2021 and had a 76% part one deficiency rate. Rsm 15 audits reviewed 73% deficiency for 2017. Oh, I can do the year. I can filter by the year two. So okay, here we go. So for firms with more than, let's say, five audits reviewed in 2021, let's look at the deficiencies. Malone. Bailey Yeah, they had an 86% deficiency rate. So there are some firms out there that are like not doing well based on what the Pcob thinks they should be doing. Like really bad, right? Like if the Pcob is setting the standard for what a quality audit is and you're getting 70 to 80% of your audits marked as deficient, there's a problem there. But I mean, this just keeps happening year after year after year, right? So how do you improve this? How does this get better? It's getting worse. So the question is, how does it get better? David Leary: [00:19:37] I don't know the answer to that. Blake Oliver: [00:19:38] I don't have an answer. David Leary: [00:19:39] It sounds like it can't be. I know it's I, you know, just throw out the simple answer. But what's interesting? Well, eventually, I mean, the uptick in failures. Blake Oliver: [00:19:47] Maybe I will do a better job. Sorry. Go ahead, David. There's a delay. David Leary: [00:19:51] Oh, say the they talked about the uptick in failures. You know, they said some of it is, quote unquote, basic audit steps sufficiently. They're just not executing the basic audit steps. Well. Ricketts Corner cutting. Blake Oliver: [00:20:04] Yeah. And I wonder how bad it is. I would love to see examples like, does it mean they're not confirming bank balances? They're relying on client information like, you know, was not confirming bank balances at Wirecard in Germany like basic stuff they weren't doing. Yeah. David Leary: [00:20:17] They say such is the use of non credible data to support conclusions. You're right. So basically that's a pretty. Blake Oliver: [00:20:23] And I think usually that means relying on client provided information. If you don't independently go out and confirm this stuff, how do you know that it's real? Okay, let's move on. There's this report from the Center for Audit Quality. About the 150 hour rule. My favorite topic, David. I'll pull this up on the screen here. The headline on the press release is Significant Barriers Deter Students from Pursuing a Degree in Accounting, according to Caq report. Again, the Caq is the Center for Audit Quality. I want to pull up the full report to show you some charts here. So they surveyed 1800 students and recent graduates between October 2022 and May 20th, 23. They did in-depth interviews with business students and recent accounting graduates. Here's a chart that says Reasons for Not Choosing Accounting as a major. This is among non accounting majors and among the top five results we have don't want to pursue 150 hours for CPA and can't afford 150 hours need to start earning. And it was a major reason for 29% of those students and 25% of those students respectively. It was at least part of the reason for 61% of the students or no, sorry, 57%. So looking at this chart, over half of these students said it was either a major reason or part of the reason was the 150 hour rule to become a CPA. And then it's even more for black and Hispanics, non accounting students. David Leary: [00:21:50] So it's finally real data that we've been saying we're going to be survey the people that drop out. It's finally being done now and we have the real data. Yeah. Blake Oliver: [00:21:58] If you want to attract more non accounting students into accounting, remove 150 and you'll have a significant impact on like over half of them. It might change their mind. David Leary: [00:22:09] And based on the PCAOB report. It's not like the education. The increase in education is helping improve quality of the industry or the audience. Right, right, right. Yeah, In theory, that should all be getting better. Blake Oliver: [00:22:23] Yeah. If if the 150 hour rule was increasing audit quality, it wouldn't be going the wrong direction. So among those planning to pursue accounting, the cost of the additional classes to reach the 150 credit hours of education is a major obstacle for 31% and is at least a contributing obstacle for 75%. So 75% said that. 150 the cost of the education is an obstacle. And for a third, about a third. It's a it's a significant obstacle and additional time. Same thing. 74% say it's an obstacle or a major obstacle, with 20% saying it's a major obstacle. So that's among people who are already majoring in accounting. So, I mean, yeah, this to me is real strong evidence that it has a negative impact on the number of accounting grads and that students are switching out to other majors. David Leary: [00:23:21] And at the end of this, do they make any conclusions as far as like the impact this will have on the audit industry? Do they take this data they have and project it out to the future? Blake Oliver: [00:23:32] I don't I don't know. I didn't see any conclusions in the report. I mean, it just identifies the reasons. I think the problem is this is like such a touchy issue. Is that like, you know, even though 80% of the profession, in my estimation, is against 150 or supports an alternative that doesn't require as much education, if, for example, swapping that second, that extra year of education for a year of experience, right, going back to offering 120 plus two years of experience, vast majority of accountants CPAs are in favor of that, but the leadership is not. And it's because the leadership put in place these rules and doesn't want to admit that they made a mistake. That's my. Theory. David Leary: [00:24:15] Did you see that the IRS is not going to do unannounced visits anymore? Blake Oliver: [00:24:19] Oh, yeah, I saw that. David Leary: [00:24:21] Which I didn't even know they were still doing, but apparently they were doing tens of thousands a year. Blake Oliver: [00:24:25] Just showing up at your business to shake you down or. David Leary: [00:24:27] Your house? Well, I guess I was just confused, like, how is this even efficient? Blake Oliver: [00:24:33] It's not. I think that's one of the reasons. David Leary: [00:24:36] I'm not home. They're just wasting time driving to my house. It doesn't make any sense. Blake Oliver: [00:24:41] Well, you know, now with like, ring video cameras and stuff, like you see people at the door, like you don't you're not going to come to the door when you see, like, guys in suits who look like IRS agents standing. David Leary: [00:24:52] There, you hide out. Yeah. So they're going to replace this with mailed letters and then follow up call to schedule a meeting ahead of time, so. Yeah, but I didn't even know they were still doing this. So I think they'll spread the word to your friends, like, because, you know, the whole, oh, the 70, you know, all these IRS agents with their guns are going to come hammering down doors from the $80 Million. Tell your friends, spread the word. They're not even going to come make visits unannounced anymore. So spread the word. Blake Oliver: [00:25:21] They should just harass you on social media. That's how they can, like, comment on all your Instagram posts. That'll get your attention. David Leary: [00:25:29] You didn't pay your taxes yet. That's really funny. That can be effective. Blake Oliver: [00:25:33] Did you have you been following the Hunter Biden saga, David? David Leary: [00:25:38] I think I think I saw something where he's trying to negotiate a settlement. So that way if we get a different president, he would be prosecuted differently or something. I don't know. Something like that. Fill me in on this. This political tax. Blake Oliver: [00:25:50] Drama. There were these IRS whistleblowers who testified in Congress. Special agents from the IRS testified before the House Oversight Committee about their investigation into Hunter Biden's taxes. They accused the Justice Department officials in this investigation of giving preferential treatment to Biden and slow walking the probe. The agents claimed that prosecutors did not push for felony charges, allowed the statute of limitations to expire on some tax charges and retaliated against them by removing them from the investigation. The agents also alleged that prosecutors concealed evidence, delayed search warrants and instructed investigators not to ask certain questions during interviews. So Hunter Biden is getting special treatment. Is the allegation here by these career IRS agents? Not really a surprise. I mean, like, that doesn't surprise me at all, right? Like, sons of presidents tend to get preferential treatment. Yeah, it's not. It's not a good look. No. Yeah, it's not a good look for for Biden. And they really pissed off these agents who testified. Joseph Ziegler, one of the agents, he wrote an op ed in the Wall Street Journal. Saying that criticizing these Justice Department officials and believes that a special counsel should be appointed so an independent reviewer can fully examine the investigation and proper and improper decisions. What's next, David? David Leary: [00:27:14] Do you want to do app news? Do you have something else that's not app news ish? Blake Oliver: [00:27:17] Let's go into the tech. David Leary: [00:27:18] So Sage announced their earnings. And short answer, it's up. They have a rising cloud. Us sales are up. They're doing it's fine. But the conference calls are always the interesting questions. And there wasn't actually there wasn't a lot in their conference call. But this ties back to last week how we talked about how Microsoft is going to add a fee and Microsoft office to get I. Blake Oliver: [00:27:43] Yeah, like 30 bucks. David Leary: [00:27:44] Stock per month all time high. So they're specifically asked this is this is one of the analysts analysts asking the question at the Sage conference call could you please discuss the upsell opportunity from AI productivity tools to the installed base? Now, Sage didn't really answer this. They just said they're doing AI stuff, blah, blah, blah. They spend about 16 to 70% of their recurring revenue on R&D. But the fact that that question was asked tells me they're going to ask it to QuickBooks. They're going to ask it to zero, they're going to ask it to every public Bill.com all these companies. And so be prepared, everybody for QuickBooks Online edition. That's going to cost you an extra 60 bucks a month because the Street is going to pressure these companies to charge. For some functionality like the wind. The door is wide open for this now, now that Microsoft announced they're going to do it. So just prepare all of yourselves. The streets looking for it. And who do these companies answer to first? Usually the street, the streets looking for additional revenue because you rolled out I. So all the subscriptions are going to go up. Just be prepared. Blake Oliver: [00:28:52] There's a new tool called Fraud GPT. This is available on the dark web for $200 per month. The tool can be used to write malicious code, create undetectable malware, and find leaks and vulnerabilities. It is unknown which large language model was used to develop fraud. Gpt. The rise of tools like fraud GPT pose a significant threat to cybersecurity and highlights the need for robust defense strategies. So all those phishing emails that you get are going to get a lot better. And you know, the the joke about like, you know, these like the emails that sound like they were written by somebody who doesn't know English, that that's going to go away. They're going to get really good. So be on the lookout for for really sophisticated fraud attacks. David Leary: [00:29:39] Trying to and I'll just mention it because I don't know if it's worth talking about the whole article, but there was a thing about the IRS. They they get thrown audits as far as their security awareness. And apparently the IRS is really good. So these phishing emails, when they get tested, they're good at everything. But the after action review, whatever they call it, the the wrap up and like making sure it's documented very well the incident. Right. So but it's good to know, like the IRS, they've obviously trained the staff enough to recognize intrusions. But like you said, if these get better, if they don't smell like a fake intrusion email, what do you do? Blake Oliver: [00:30:15] Yeah, right. Yeah, That's what I look for is like, you know, the links don't look right. The, the verbiage is weird, but if all that's accurate, I'm gonna have to be a lot more careful about what I click on. I saw a really interesting article about a use of AI, an actual practical use of AI on the Zapier blog. There is a company called Vector Media. They're the largest transit advertising company in the US and they were having an issue with too many customer support tickets and not enough time for their agents to give personalized responses. And Zapier did a great write up on how they used an integration with Zapier to help. So they use a tool called I think Freshdesk is their tickets. Support tickets tool and they integrated it via Zapier with ChatGPT Plus. And it sends every customer support inquiry over to ChatGPT via the API. And then drafts a response and a summary and post it as a note into the ticket in Freshdesk. And so the agent can read the summary and then see the suggested response and copy and paste it. So it's a really good example of like a today use case. David Leary: [00:31:32] So you still have the human interacting with the other human. Yeah, it's just that human instead of them going and finding stuff and copying and pasting, it's just served up to me instantly. And then I can pick and choose the pieces that were served up to me to deliver the final product to the final response to the customer. Blake Oliver: [00:31:48] Yeah, I think drafting summaries and responses. And just putting those in context in whatever app you're using to do customer support is just so powerful. I'm doing something similar with Notion, where I save articles throughout the week into notion that I want to talk about on the show. I used a Zapier integration to send every link that I save into this database over to ChatGPT and I have a pre-written prompt that goes with it that says, Please summarize this in one paragraph for me with all the key statistics called out and then it posts that back into the into a field in notion. So I have my list of articles and a brief summary of every story. Now I need to go look at the story to make sure that what ChatGPT summarized is correct. And I find that most of the time, like vast majority of the time, I actually can't remember the last time. And I've been doing this for months now where it's gotten something wrong because I also have a little lever in terms of hallucination. How much liberty should it take with the facts? And I set that as close to zero as possible. So so, you know, integrations like that, implementations like that are possible right now in your firm. And I would encourage you to explore those with Zapier. It's a it's a great, really inexpensive way to get started. You're talking 50 bucks a month for a Zapier subscription. The ChatGPT API is incredibly cheap. I spend like a few dollars a month on it. It's amazing. So give it a shot. David Leary: [00:33:18] A Mecklenburg has a great comment here. I'm going to bring it up on the screen. The FBI needs to launch their own fraud, GPT. Such an easy evidence collection. And remember, all these criminals got the honeypot because they basically the FBI basically sold, you know, clean burner cell phones like for years. And they were all not burner cell phones. They were all FBI cell phones that they sold to organized crime. And they took down this huge it was like a worldwide sting, but it's kind of the same thing. Absolutely. They they should create tools like this. You know, how to cheat at taxes website and then you just let everybody let them come to you. It's actually really smart. Blake Oliver: [00:33:56] There is a new conversational AI. That I saw a demo of online. I wonder if I can put this up and play it for you. It's called air. I'm going to try playing this. So this is an AI sales call. The sales rep is an AI. AI Sales Call: [00:34:17] Hey, James. Yeah. Who's this? Hey, James, It's Alexander from Tesla motors. How's your day going so far? It's going pretty good, my man. How about yourself? You said from Tesla, right? The car company. Yeah, that's right. I'm calling from Tesla motors, the car company. Did you have any trouble or questions while customizing your car on our website? Uh, no. It was just kind of shopping around and just taking a look. Gotcha. That makes sense. Sometimes we're just exploring our options before making a decision, and I totally respect that. Can I ask you why you were looking into a Tesla in the first place? Yeah, I mean, I've had my car for way too long now, and so I've kind of taken a look at options. I have a lot of friends who just absolutely rave about Tesla and me and myself. I'm actually a big fan of Elon Elon Musk, so I figured I might as well take a look and kind of explore my options there and see what you guys had available. That's a smart approach, James. It's always good to explore your options and see what's available. Out of curiosity, what do you currently drive? Yeah, I drive a It's an old Ford Fusion, my man. Nice a Ford Fusion. Why are you looking to switch things up and consider a Tesla? Speaker4: [00:35:40] Yeah. AI Sales Call: [00:35:41] Mean I've had that car since literally since I got my first job years back and it was just time for a change. So it's like, you know, it's not super reliable anymore and it's it's time for an upgrade. I'm moving into the city now and I just think it's time. I'll get the new apartment, might as well get the new car at the same time, you know. I totally get that, James. Blake Oliver: [00:36:01] So I'm not going to play the whole call. That was about half of it. I just thought, David, actually, first, I want to get your reaction. David Leary: [00:36:09] So so my reaction I'm thinking back to when I was in the call center. Right. And so so I think there's two things. I see something like this doing. It's not going to replace your your A-plus sales guys, your sales guys, your B sales guys. Those guys are going to benefit from AI in other ways. Right? But if you're a C employee and D employees, because I remember those guys when they were on phones and they all they do is just restate what the customer just told them. And to be honest, it was just like that. If I go back 30 years ago listening to a C employee or a D level employee, like take phone calls, that's how they interact with the customers. Kind of like nothing real, right? Reading a script, actually reading a script, there was a call taking place. Words are being exchanged, but there's not any actual thing happening there. And so this is where if you're a D employer or employee, AI is going to take your job like because because it can do a shitty job just like you're doing a shitty job. Like, is that going to close the sale? Probably not, right? But it can do a shitty job and if you do shitty work you're going to lose your job. That's my that's my reaction. Listening to that. Blake Oliver: [00:37:15] I couldn't have said it better. Tidy force says this sounds so monotone I would have hung up the phone and Luke says maybe something on the other side of the human experience. And I people might like that. These sorts of tools can somewhat mimic that, but I'm excited to be able to skip the small talk and jump straight to the point. I think there is a benefit to AIS, which is that if you're asking a simple question it has in its database, you can just get that response right away. That's what voice assistants suck at right now is like they can only do this small subset of tasks. But imagine when we're going to be able to talk to them and like Siri can go search through your emails and find that order that you place and you need the order number or you're checking into the hotel and you need to get the information about it and you don't have it handy. You just ask, right? Or if you do call up QuickBooks, support an AI answers, and it's actually going to be better at getting you to the right place than the human was who would constantly misdirect your calls or hang up on you. I'm not saying I'm not singling out into it there, but I mean, that's just like a common customer support gripe, right? Like you said, those first level employees, the ones you reach first are the worst most of the time, unfortunately. David Leary: [00:38:26] Yeah, it's very high turnover positions too, because you're always having to like get rid of the the deep performance when you place them in. It's hard to improve that and you never have to fire an AI. You can. If you just need a C level job, it'll be there. Good enough? Yeah. Blake Oliver: [00:38:43] Um. Chatgpt now has custom instructions. So basically this lets you save certain instructions for every prompt. So Heather Smith in Australia was saying this is great because now I can tell it to always use Australian spellings and I'm not going to get those American English responses. So examples of how these chat tools are getting better and more useful for us. Or if you have a certain tone that you always want to use in all of your responses that you're drafting with it, you can do that. I haven't tried it yet myself, but I'm going to give it a shot. David Leary: [00:39:16] So I can see. Always put the airplane emoji in my calendar appointments. Exactly. Blake Oliver: [00:39:22] Yeah. For you. David Leary: [00:39:23] Maybe. Maybe it's the dream of it. Starting to learn my preferences start being here. Plaid announced that they're going to work with Cross river banks or cross river banks, one of these banks that has APIs and they let other fintech companies use their bank rails will cross. River Bank is one of the Fednow banks. So now in theory, app developers who never integrated with any bank will they because if they integrate with Plaid they can use plaid's payment system. And in theory now a lot of apps should be able to start offering instant payments using fednow. And it's a little bit of a dance, right? It's Cross River Bank uses Fednow. Plaid uses Cross River Bank and app uses Plaid. It's a little bit of that. And then a customer is using the app, so it's a little bit of a dance, but in theory it should expand the fednow use even faster. Right? Blake Oliver: [00:40:14] Shall we get to listener mail? David Leary: [00:40:16] Yes. Blake Oliver: [00:40:17] All right. We got some comments on our TurboTax live demonstration, walk through, review, whatever you want to call it. If you have not listened to this episode yet, you got to listen to it. David and I spent well. The video is about, what, 45, 50 minutes? And it's the entire experience that we had working with TurboTax live on our business return. So we filed an LLC partnership return with TurboTax full service, and we documented the whole experience. It's on the podcast feed. It's on YouTube. Check it out. We got an email response or thoughts from Jason Ackerman. He had some comments on this. He said that he thought it was interesting that they required an operating agreement and other supporting documents and didn't just take a trial balance, that this is a good thing and that they had quality control in place. I thought that was, you know, smart. The actual technology was not that great. Jason says, like David said on the pod, the fact that you had to upload documents and not just give access to QBO makes the process a lot clunkier. And the fact that we had to download the 88, 88, 79 and physically sign it was surprising. So that was just for the Arizona State. Authorization because Arizona doesn't allow a digital signature on those yet. But the federal one we were able to sign and I think, David, that was your best point is like they should just connect to QuickBooks. And I think they probably will eventually, right? Like this was their first year in operation. David Leary: [00:41:52] So it makes the most sense. One of the comments that I've seen resonating. Oh, you still have the same letter. Good. Blake Oliver: [00:42:00] Yeah, well, I mean, feel free to interrupt at any point. Jason made a lot of points here. He said the process took a long time that in his firm they would have had the partnership return done in probably two days with review. And the price was surprisingly high for what you got, which I think is something we can all learn from. If your CPA firm is charging less than 1500 for a business return, then you are doing it wrong. And that's the price that we paid for this return. Now I will say that Intuit does discount this price. We paid the full list price, but during tax season, when they were promoting the service for the first time, they were discounting it down to like 700 or $800 for the return. And also, remember, this is their full service. This isn't the one where you do it yourself and then they review it. This is the full service offering where they do everything and you don't touch the software other than the portal. I think the most interesting comment Jason made was the fact that there was no advice given at all. It was just a return that we got. There was no How do you save on taxes next year? How do you maximize deductions? How do you find all the industry specific tax credits? We didn't get any of that. That's a really good point. David Leary: [00:43:08] In my experience at firms I don't really get you didn't really get it either. You get like some links to some things like yeah, here's a link on how to set up this retirement plan thing or whatever. I'm like, and I could just Google that myself. The two comments that I've seen pop up over and over again on social media and on the YouTube comments, etcetera. One is everybody notices the $10 reconciliation difference and everybody says that's going to haunt us next year, apparently. I don't think so. Blake Oliver: [00:43:37] I don't think so because it was just a difference between like it was a reconciling item on the bank statement, you know, like. I know, but maybe is. David Leary: [00:43:47] What it is. And then the other piece that a lot of people picked up on is we happen to have our bookkeeping in somewhat order. Yeah. How long would this have taken if our bookkeeping was a mess? Blake Oliver: [00:44:00] Right. Because they weren't going to help us fix it. They require that. Yeah. So maybe we send it back and they're like, no, it still doesn't reconcile, still doesn't tie out. We send it back. It still doesn't tie out. Maybe you'd never get your taxes done in that case. And it's interesting. You don't have they don't make you pay until you're ready to file. So, like. Yeah. David Leary: [00:44:19] And I just don't get and I mean, obviously I'm not a firm I just can't imagine doing anybody's taxes if I'm not doing the books. For them. The odds of people with a defect in the Matrix coming in with a decent set of bookkeeping books. Yeah, right. Like most people don't. And like, how do you do their taxes? I don't even know how that works at a firm. You had a firm, but you didn't do taxes. Anybody in the chat? How do you do taxes when they people's QuickBooks suck? Like, how do you do it? Blake Oliver: [00:44:47] I don't know. I wouldn't want to do it. No. I got some quick news before we go. Just some Quick Hits. Yeah. Jeannie Whitehouse has been named as the new president of the IT alliance. The ICA is the Information Technology Alliance. It's a membership association of mid-market technology professionals in North America. White House, known as the Countess of Communication, will take over from outgoing president Sean Slaven in August. And our listeners may know Genie from her presence on the accounting conference speaking circuit. She is the redneck CPA in the wine industry in Napa, as she describes herself who loves basset hounds. So you can expect to see her running the IT alliance. And in other professional news, folks moving around the profession. Peter Olinto Sugarbear, as he is affectionately known over at Becker, is leaving Becker. I mean, I can't I can't imagine how many thousands and thousands, tens of thousands of candidates are huge fans of of Peter from taking Becker classes. He made it really interesting. I didn't take Becker. I took Glyme, but all my friends took Becker, it seems like and love Peter Olinto and I actually got to go to like a happy hour with him when I was in public accounting and got to meet him. He's like a celebrity, you know. People come up to him and are like, they they are starstruck. So it's not clear where he's going to go. He was there for 25 years, but he is not leaving education. David Leary: [00:46:33] It looks like going Concern has an article related to this. And there's a this is either a tweet or LinkedIn post and it says, congratulate Peter for starting a new position as a global lead instructor at Uworld. Uworld like not like the capital of you world. Blake Oliver: [00:46:50] New World Test Prep. Oh, it's a big test prep company. All right, so he got a new gig, so he's not leaving the test prep world. He'll be there still. What else? Oh, CPR Journal.com covered Public remarks by Paul Munter, the SEC chief accountant, and Richard Jones, the FASB chair. And something caught my attention. Jones Back in earlier this month, he said that FASB has reset its agenda based on stakeholder outreach, that key focus areas will include intangibles, disaggregated disclosures, cash flow statements and timely standard setting. But he doesn't see a need to rethink held to maturity accounting based on bank runs. Both amortized cost and fair value are presented today, and he sees that as sufficient. Of course, my problem is that the amortized cost and the fair value, like the fair value stuff is all buried deep in the financial statements and nobody reads it. So even though it's presented, it's not obvious. Like I think they could do a better job presenting that sort of thing. I don't know. It's just it's so messed up that like, I don't understand this, like that. Banks can choose how they want to value these assets held on their balance sheets. Like, why do they get to choose? If we wanted to have like. Reporting be easily comparable across banks. We should just say, here's how you do it, here's the rule and you do it this way. You don't get to choose whether or not you're going to use amortized cost or fair value or whatever. Like it's there's too much discretion and that's what allows management to manipulate the numbers. David Leary: [00:48:35] Yeah. And there's certain I mean you don't want it happening anywhere, but I think it's certainly more risk when banks are doing it. They're playing games with their numbers. We don't want. Blake Oliver: [00:48:43] Banks to be playing games. No. Yeah. Anything else before we go, David? David Leary: [00:48:49] I think that's it. I mean, I'm going to see you tomorrow on Sunday because we're going to the National. Well, it's. Blake Oliver: [00:48:55] The National Association of Enrolled Agents Conference. David Leary: [00:49:00] In Scottsdale. It's 158 degrees right now. Blake Oliver: [00:49:04] It's it is the surface of the sun here. You can bake cookies on your car dashboard. I've seen people do it. We had some friends who did it just to see if it worked. And it does. So. Yeah, I'll see you over there at the Westin Kierland and it'll be good to get to know more enrolled agents. Our app Earmark works for continuing education. A lot of people don't know that, but we have federal tax courses up there. We've got a podcast all about federal tax that we produce with Paget and you can get all of your continuing education done every year with it. So hopefully we'll spread the word about earmark. And for our CPA and CMA listeners, our listeners as well. You can use Earmark to get CPE credit for listening to this show right now. If you just listen to us, you can get continuing education credit, just download the earmark app on the App Store or Google Play. Check it out. It's free. You can upgrade for a steal if you upgrade before August 1st. It's $99 for a year. On August 1st, it goes up to $129 per year. We have over 800 hours of continuing education on the app and that's because we do it with podcasts. David Leary: [00:50:17] And we just released a bunch of new features. Blake has a good little video and blog post about it. Blake Oliver: [00:50:22] Brian asks if we're coming to the tax Twitter retreat. Unfortunately, I didn't get it on my calendar early enough this year. I was not aware of it, but I would love to come next year if I can. If I can swing it. Yeah, but we will be we will be at the unique CPA conference at the end of August. I will be at gusto next in San Francisco. We are going to be at Suite World. We are going to be at QuickBooks Connect. There's some other ones that I can't remember right now. We'll keep you. David Leary: [00:50:53] Up. Primeira in Chicago. Blake Oliver: [00:50:54] Yep. David Leary: [00:50:55] Next at the end of the month. And I'm sure there'll be other conferences that pop up, it's just. Yeah, text, Twitter, retweet did not make it this year. Blake Oliver: [00:51:04] Thanks everyone for listening. You can connect with me online. I'm @BlakeTOliver. You can track David down. He's @DavidLeary. We'll see you around next week. Bye, David. Bye.