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When Tax Day Was Party Night at the Post Office · The Accounting Podcast

• There may be errors in spelling, grammar, and accuracy in this machine-generated transcript. Blake Oliver: [00:00:04] Kpmg says that within 2 or 3 years, routine testing could become the first major audit area with effectively no human audit team directly doing the work. 2 to 3 years, no human audit team directly doing the work. David Leary: [00:00:22] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:30] Hello and welcome back to the Accounting Podcast and Happy Tax Day. I'm Blake Oliver. David Leary: [00:00:36] And I'm David Leary. Yes. Happy coming back to listen. Hopefully hopefully you can those you can just take a break on the last day, the tax day of the year and listen to our podcast for an hour. Join the live stream. Blake Oliver: [00:00:48] You know, David, before tax e-filing became dominant, the tax day at American Post offices was a public spectacle And history.com wrote an article all about how it used to be, how April 15th evolved into a quirky annual event marked by midnight crowds, live entertainment giveaways and brand promotions. But it largely disappeared as taxpayers moved online. We're going to talk about that, but first, let's thank our sponsors. David Leary: [00:01:18] Yeah, our sponsors this week, we have Cloud Accountant staffing on Pay and Worthy. Blake Oliver: [00:01:24] Are you tired of the endless search for qualified accounting talent? You're not alone. Growing accounting firms are struggling to find available and affordable team members when they need them most. Cloud Accountant Staffing has the solution with their revolutionary candidate portal. 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So, David, you got any idea when April 15th became the official tax deadline? David Leary: [00:02:39] No, but I'm old enough to have experienced the rushing my printed return in a line of cars and putting it in a mailbox so that it would get postmarked on the 15th. I am old enough to remember that, but I don't know when that started, but I have driven and did a 11 p.m. drop off at the post office in line with thousands of other cars before. Blake Oliver: [00:03:01] Well, that started in 1955, when April 15th became the filing deadline. And that became that turned the Post office into the place where last minute filers gathered, often in huge numbers. Most branches, they would stay open until midnight. It would create long lines and lots of cars and walk in traffic. And Leslie Kennedy wrote this article on history.com talking about how it became. It morphed into a festive occasion. Um, businesses, media outlets would turn the deadline into a promotional event. And there are some examples in the piece that are fun to imagine. Radio stations broadcasting live from post offices, fast food chains, drugstores, and casinos offering samples, vouchers or giveaways. Barbershop quartets and school groups performing for people in line. There was even a dunk. The IRS agent Booth in Pennsylvania and Florida, which they tied to charity fundraising. And this is the best one in Philadelphia. Playboy showed up with a pink booth and proposed stress relief massages. Um. David Leary: [00:04:13] And this is the only option. You had to have it postmarked. There was no other ways to file like, so it was it. We don't do a lot of things collectively as a civilization in the United States anymore, but that is something we all do. And it's cool to have a human experience in that. Blake Oliver: [00:04:28] That's right. There's only two things that you have to do in life and that's, uh, pay taxes and die. So it's something we still have in common, although now we can e-file. And that started in 1986, although adoption took a lot longer than that, because how many people had computers to file in 1986? By 2011, more than three quarters of Americans were filing electronically, according to IRS data. And by last year, 94% of individual tax returns were filed online. And of course, as more and more tax returns were filed online, fewer post offices stayed open late, and the large crowds and the promotions built around them faded away into history. A fond memory. David Leary: [00:05:17] We should bring that back somehow. Blake Oliver: [00:05:19] Have a tax day party at the post office. Well, David, I've got more tax news. Since it's tax day, you know, we can, uh, we can dig into that or I'm curious to know, what are your top stories this week? David Leary: [00:05:32] I mean, I have, uh, zero had a blog post claiming how they are an AI native operating system called zero OS. I thought that was kind of interesting. Um, I have an article about a high growth accounting firm. Spend almost two times more on marketing than their peers. I also have, um, I don't know if you saw the, uh, Kimberly-Clark. Warehouse. Fire! Blake Oliver: [00:05:54] No! What happened? David Leary: [00:05:55] So I covered on that. We could talk about that story quickly here. It is a little bit of an accounting related. So a worker said he wasn't paid enough at at a Kimberly-Clark distribution center in Ontario, California. Blake Oliver: [00:06:07] What is Kimberly-Clark? David Leary: [00:06:09] They are toilet paper paper goods. So it's a huge warehouse of toilet paper and paper towels and paper goods. And this 29 year old worker did a selfie video, not selfie, but like Instagram or whatever you call it. Social media video. I'm thinking like a boomer today. Blake Oliver: [00:06:27] Made it real. David Leary: [00:06:28] Yeah. He filmed himself starting it on fire. Blake Oliver: [00:06:31] Wow. David Leary: [00:06:32] And he was saying in it that it's because he wasn't paid enough. If you can't pay us living wages, what do you think about this? I could at least afford this later. And he burned the whole thing down. Now, what caught my eye on this is I was watching the San Bernardino County District Attorney Office, and then US U.S. officials had a press conference about this, and it was the value that shocked me. So the inventory value was $500 million, and the building value was about 150 million to 156 million. So these are big numbers. Now, your inventory went from a $500 balance to zero. This is a material event that happened for Kimberly-Clark. And they're gonna have to record this because they can't even record increases to the expected insurance payout until it's more closer to being finalized. They can't record the cash until the insurance does the payoff. So they're going to have a quarterly, pretty big quarterly loss, probably because the insurance provider won't kick in until a future quarter. Like it's a material event that happened. And it just the other accounting story that kind of caught my eye on this is I was wondering, like, is this the only warehouse that's a lot. Kimberly-clark has warehouses all over the country. So it's good to have redundancy because could you imagine, like all your inventory burning to the ground in one day or in one evening. Um, and the other piece that kind of caught my eye about this I was thinking about was how does this affect risk in the future? Well, insurance companies start raising rates on companies that pay their employee lower wages. Is this a real is this a real risk that happened here? Or is this just somebody that was a little, uh, unhinged, a little bit about something that personally maybe happened to happened to him? But welcome. Blake Oliver: [00:08:15] To our. Oh, sorry, David, I didn't mean to cut you off there. David Leary: [00:08:18] Oh, I mean, it's over a half $1 billion of damage in 111. Blake Oliver: [00:08:23] Employee 111 upset employee. Welcome to our live stream, viewers. Great to see you. A boring accountant for coffee emojis today. I've definitely had that many. And we've got a new live stream listener E Higgs. Hey E Higgs says finally live. Make sure you guys cut out that first half second. Oh no. I think what I said came through on the feed. Uh oh. I made a mistake when we started recording. I forgot to turn on local recordings. They notice it after the fact. Uh, we will cut. We will cut that out. All right, back to tax. Back to compliance. Americans spend 11.6 billion hours, 11.6 billion with a B hours completing federal compliance forms. That's the estimate for 2026, anyway. The value of that labor, according to the Bureau of Labor Statistics, is over half $1 trillion $530 billion in labor. Completing federal compliance forms, which is basically mostly federal tax returns. As far as I can tell. I mean, what else do people spend a lot of time on? 62% of those hours go to Treasury forms, including the 1040. The average American spends roughly 12 hours just completing their individual tax return and supporting paperwork. 12 hours. Whew. Um, that makes me feel better because I'm pretty slow. Federal agencies maintain over 10,000 forms and documents, and expect to receive over 210 billion responses in 2026. David Leary: [00:10:05] So is the. Because a lot of the arguments of having the IRS just provide you a return, you sign it or, you know, some of the arguments to use direct file when they're building. That was to remove this time burden of citizens having to do this. And you would think that like, there's a kind of a conflict because I think if you have a conservative point of view, you kind of take the point of like, the IRS shouldn't tell me how much I pay, I calculate it and decide how much I'm going to pay in taxes. I don't want them telling me what I owe, right? Just calculating their own. But at the same time, when you have numbers like this, a conservative point of view might be like, this is not an efficient use of capital and resources. As a country itself. Blake Oliver: [00:10:46] Yeah. Definitely not definitely inefficient. The cost of bureaucracy. Um, I forget what the size of our economy is, but I feel like half $1 trillion. Is it like 20, 30 trillion? Something like that. So like that's, that's material there. David Leary: [00:11:02] Yeah, yeah. Blake Oliver: [00:11:03] Um, hey, some more tax news. Guess what? Just five days before the deadline, the IRS finalized its list of 70 jobs that qualify for the no tax on Tips deduction. So we had five days after they finalized these rules to implement them for our clients. Eligible workers can deduct up to 25,000 in tips per year from their taxable income. And accountants did not make the list, but it includes rideshare drivers, tattoo artists, golf caddies, charter boat workers, ice sculptors, and David. David Leary: [00:11:39] Santa Claus. Blake Oliver: [00:11:40] Podcasters. David Leary: [00:11:41] Podcasters. Blake Oliver: [00:11:42] We can get tips and we can deduct them. But here's the catch. Mandatory service charges don't count. So if a restaurant adds an automatic 18% gratuity that customers can't remove, that money doesn't qualify. The deduction phases out for individuals earning over 150,000 or 300,000 for joint filers started for tax year 2025 and goes through 2028. David Leary: [00:12:09] That's exciting. That means this could be the death of the automatic gratuity, because that's always like printed weird. People don't disclose it, then you tip extra. Like this could get rid of that. Blake Oliver: [00:12:19] Which another another catch is that the tips have to be paid in cash or a cash equivalent form, which includes cards, checks, gift cards, certain tokens, I guess, cryptocurrency or electronic mobile payments denominated in cash. So I guess what does that mean? You can't, you can't you can't pay it in kind or something like that in property. Well, it says some kinds of tokens. I don't know the detail on that. Um, and they have to be voluntary, not negotiated. So you can't like put it in your contract and then uh, get that deduction. Um, floral designers, gas pump attendants, visual artists are in there. David Leary: [00:13:01] Basically it's the list of anybody who got tips before they announce this. Like if you had an industry or a job that was normally getting tips for the last two decades, you're on the list. But any anybody that's trying to say they get tips now, like accountants who normally don't get tips, you can't jump on this list. Blake Oliver: [00:13:17] Well, and there's some exemptions, some exclusions to this that we should be aware of. Uh, exotic pet smuggling, human trafficking, counterfeiting, fencing, stolen goods, drug trafficking or dealing or unlicensed sales that violate applicable law. The rules also specifically exclude prostitution services and pornographic activity. More details for accountants to know. Hey, some more IRS news. The IRS had 126 AI projects in development or in active use as of June 2025. That was up from just ten in August of 2022. So they had like 126 AI projects going mid in the summer of last year. But now, since the agency has lost 25% of its workforce, basically 61% of those IRS AI projects were still unfinished. And the agency has no workforce plan to close the skills gap. So we're talking the last episode about how there's all these projects to do more automated audits, AI doing these audits with, uh, what was that company you mentioned? David Leary: [00:14:32] I would say, uh. Blake Oliver: [00:14:34] Palantir. Palantir, Palantir. Yeah. Um, so. Basically a lot of those projects have stalled. Uh, last one I've got, you know, we talked a lot about the direct file program on our show. I don't know if I mentioned this in a previous episode, but, um, apparently the IRS overestimated how much the direct file program cost when they terminated it. So they said that it was going to cost $61 million to run for 2025. It actually only cost 16 million. So they were off by like four times, right? 61 million actual cost 16 million or less than a third of what they estimated. Um, that was from a report by the Treasury Inspector General for Tax Administration. Um and that's actually a really low cost for what it did. Registrations for direct file grew 78% from 2024 to 2025. So the program was gaining traction and was less expensive than they thought it was going to be, and yet it got canceled anyway. David Leary: [00:15:40] Well, I think when they estimate when you build the estimate and try to get your budget right, you're figuring out the total cost. And so there's 32 million taxpayers that are eligible for this, but only 750,000 actually used it. So that would if you're budgeting to service 30 million people and you wind up servicing only a million, you're going to have a discrepancy in that. Blake Oliver: [00:16:00] David, I'm going to let you take the next story. But before that, I'm going to thank our next sponsor and that is on pay. Are you tired of payroll headaches getting in the way of the client experience you want to deliver? Manual workflows, creating bottlenecks, compliance, nightmares, and endless support calls that go nowhere. 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To book a demo, head over to The Accounting Podcast dot com slash The Accounting Podcast dot promo forward slash ONPAY. And welcome to Dre the dream. Great afternoon to you as well and a great day to do accounting. Boring accountant says last minute updates are why our clients wait until the last minute to file. Thank you IRS. All right David, what's next? David Leary: [00:17:31] Um, I want to talk about this blog post from zero zero Zeros, claiming now that they are AI native and they have an operating system called zero OS. So this is on the zero blog site was published by Jolie. She's the chief product and technology officer of zero. And I just want to jump into this article as far as like, it had 20 buzzwords in it. I'm just going to read the list and it'll give you an idea of what the article is like. All right. Ai. Native. Intelligent. Saas. Autonomous finance. Autonomous workflows. System of action, AI Operating system, AI, CFO accounting intelligence, verifiable AI decision data, context graph, real time insights, end to end workflows, proactive finance partner always on finance teams. Actionable insights. Domain expertise. Connected ecosystem. Full service financial stacked system of record AI powered orchestration. So this blog post just caught all these keywords, right? And I'm reading, I read the blog post like four times and my $0.02 is. I don't think this is written for customers. New customers or existing customers. I think this article is written for the street in an attempt to move the stock price. Intuit zero Sage Oracle. They're all 52 week lows, pretty much pretty close. And they've been getting hammered right. Because people think, well, AI is just going to do QuickBooks. Ai is just going to do zero. Ai is just going to do Sage's job, right. It's going to replace. You've heard about the SaaS apocalypse, right? All the SaaS companies are being hammered. And but I just can't imagine it's true because I don't know if Intuit or Xero are seeing declines in their subscriptions because of these AI competitors. I mean, just ask Xero how it takes decades for them to barely make a scratch into the QuickBooks world. So do you think in the last 8 to 10 months, 12 months of AI, two years of AI, they're actually causing a zero or QuickBooks to lose subscriptions. I like they almost should be communicating that to help their stock price instead of all these buzzwords. Does that make sense? Blake Oliver: [00:19:39] Yeah, they should actually like build it. Yeah, actually do it. David Leary: [00:19:46] And or just prove that. Just show your subscription numbers if they're not declining. There is no SaaS apocalypse. People aren't canceling their subscriptions. I will read one full sentence. That was at the bottom back end of the article that I thought was kind of interesting where they phrased it. It's Y zero OS isn't just a built on feature, it's the infrastructure for the next era of entrepreneurship. By transforming zero from a system of record into a system of action, we are ensuring that as technology grows more autonomous, our customers grow more capable. I feel like that's like an AI sentence. Like, like, like AI wrote this whole article, maybe, possibly it's missing a little bit. The dashes, which are some of those signs that was written by our AI, but it's just, it's just an interesting article because I don't think it's for customers. Blake Oliver: [00:20:32] So, um, we've been talking on the show about is AI a threat to QuickBooks to zero? Could you just use Claude? Could you just use ChatGPT to do your books? And this is a question I get from investors a lot. They always want to know, like, what is the competitive moat like? Yeah. Could you just recreate Xero or QuickBooks? And I actually saw a post. I don't know how well it actually works, but, um, and I can't find it right now, but there was some developer who ran, uh, it was like an old version of QuickBooks desktop, threw it at cloud code and Claude cloned it. So he created basically like a free open source version of QuickBooks desktop that you can install and use. And that's an interesting idea. Here's another post I saw. This was on Reddit. The headline is I replaced QuickBooks with an MCP server running inside Cloud Desktop. I'll just read the post. I'm a self-taught developer with a finance background. I built a full double entry accounting system that runs entirely as an MCP server inside cloud desktop. No separate UI, no dashboard. You talk to cloud and your books update the MCP server exposes 17 tools that clod calls during conversation. Drop in a photo of a lunch receipt with a client and cloud will categorize it. Pick the right expense account and post the entry. Debits must. Equal credits. Accounts must exist. Transactions follow double entry logic. Clod handles the conversation. The server enforces general accounting rules. The project is a.net console application with local SQL SQLite. So all your data stays on your machine. It covers charts of accounts, transactions, bank reconciliation, financial reports such as the PNL balance sheet, trial balance, General Ledger Multi Company support, and QuickBooks imports. I built it because I didn't want to pay for QBO and figured clod and MCP could handle the interface layer. Turns out it works great. We'd love to hear if anyone else would find this useful. David Leary: [00:22:30] I see posts like this all the time, even today. I put something on LinkedIn about if I see another OCR AI scanning app, like scanning receipts, there's like 1000 of them have been launched in the last like two weeks, three weeks, because AI is just making it really easy to launch apps and build apps. But what scares me about this, Blake, is accounting firms. If you think about the last 15 years, you as an accounting firm had control over your tech stack and your clients tech stack. Yeah, we're a zero shop or a QuickBooks shop. All our clients are on zero. We use Dex for receipt scan. We use Melio for bill pay. And you would you design your tech stack for your clients and implement that? Now your clients are just building their own stuff. Like, like you just gave examples of how do you as a firm manage this now? Like it's, you used to have like. Blake Oliver: [00:23:18] Yeah, yeah, no, I mean, this, these are like hobby projects. You could build this for yourself and use it yourself, but like your, How's your accountant going to use it? Yeah, I don't know. David Leary: [00:23:27] That's what I mean. Like it just doesn't scale. Accounting firms are trying to get good at scaling. So over here you're going to use AI internally in your firm to be more efficient. In the meantime, your clients are going to make you the most inefficient you've ever been. Blake Oliver: [00:23:40] Because this is why, as with every other tech revolution, we will end up with more work rather than less, because it will enable our clients to do way more accounting stuff that we'll have to clean up. David Leary: [00:23:52] Messy accounting. Blake Oliver: [00:23:53] Exactly. I mean, if the future is anything like the past, right? So by the way, that that post I read about that post on Reddit that I just read, the app is called Tidwell T, I'd dwell.com. And, uh, I guess if you can go check it out there and I guess you can install it, you can get it and install it, I don't know. Anyway, go there and check it out. It's a really interesting concept. I mean, it's basically what I was theorizing about on the show a couple of weeks ago, where you could build this using like a spreadsheet and you could basically do the same thing, right? Have Claude Cowork create an Excel sheet that's basically a double entry accounting system because you can do that in Excel, right? Yeah. And I mean, it'd be better with a database that enforces the debits and credits and the rules and all that. But you could just start it in Excel and then you could have it do your basic accounting. David Leary: [00:24:48] Especially giving if you're giving Claude Xero in QuickBooks, you're like, hey, connect to our database and pull the data so customers can interact through you to read their QuickBooks and Xero data. They now obviously have an understanding of the data structure. They could create the tables themselves. A new database like this is, I think it's really risky for Intuit and Xero to get in bed with these companies. They can't be trusted. You just can't trust them. Blake Oliver: [00:25:13] Speaking of trust, a new Jersey tax preparer just got sentenced to 12 years in prison for the largest Covid 19 tax relief fraud case in the country. Leon Hanes filed more than 100 false tax returns, faked employee accounts and wages to claim the pandemic era tax credits that we're all familiar with. He sought to get 117 170 million from the IRS, and he actually got 55 million of it before they shut him down. He also collected his cut in cash to avoid a paper trail, and then never reported that income to the IRS. Let's see how much jail time he got. It's usually never enough. It doesn't say. I can't find it crazy that he got $55 million out from this. But, I mean, we we remember how bad the oversight was. David Leary: [00:26:19] The money was just. Blake Oliver: [00:26:20] The Small Business Administration was like a few hundred people trying to administer this program, giving out billions and billions and billions of dollars. David Leary: [00:26:28] I have another fraud from a tax preparer story. This is a Pennsylvania tax preparer who previously went to prison for a $4.3 million tax fraud, is now facing new federal charges on a larger alleged scheme. Um prosecutors say Jessica Cordero, along with her husband Jose Baez and others, used their tax prep business in Allentown to steal identities, file fraudulent tax returns and submit bogus pandemic unemployment claims, ultimately pulling in 5.5 million. But what's really crazy about this is the second scheme started just two weeks before she was getting supervised release from prison. So they started the whole new scam while she was still in jail for the fraud from the original scam. It's like just repeat offenders, like people. People that commit crimes just can't help themselves. They want to keep doing it, I guess. Um. Blake Oliver: [00:27:16] That's great. Um, I've got a story about the big four and audits. Our favorite reporter at the Wall Street Journal, Marc Maurer, wrote a story headline is in this critical part of audits, the accountant's role is shrinking fast. Kpmg is moving quickly to automate one of the core labor intensive parts of auditing routine testing of transactions and balances such as payroll expenses, receivables, cash procedures and cost of goods sold. Kpmg is beginning a pilot this summer and will deploy AI agents in testing next year. And basically, what's going to happen is what we've expected that human auditors are no longer going to do the testing directly. Instead, AI agents coordinated by larger orchestration agents will execute the work. And humans are going to shift to reviewing outputs, gathering data, and performing risk assessment. Kpmg says that within 2 or 3 years, routine testing could become the first major audit area with effectively no human audit team directly doing the work. 2 to 3 years. No human audit team directly doing the work. That's according to audit Chief Digital Officer Thomas McKenzie. Next to no human beings is the quote. Pwc. They're using AI tools for more advanced testing. An example is work including pharmaceutical rebate revenue recognition. It's evidence matching tool can now process 30 client document types. That's up from just six months earlier. Ey is piloting agent to agent interactions, in which audit agents communicate with client agents to request support, assemble data, and prepare work papers for human review. Deloitte is, interestingly, the firm that's taking a more cautious public stance on this. And they're emphasizing the AI should augment, not replace human auditors. So what is the measurable impact? If we quantify it, the article says, according to these big four leaders cited in the article, that roughly 20 to 30% of a typical financial audit will be completely handled by AI by 2029. So that's in like what, four years? What year is it? Three years. David Leary: [00:29:37] Three years. It was KPMG. Blake Oliver: [00:29:40] Kpmg is is doing this. I mean they're all doing it. Uh well except I guess Deloitte maybe not as much but it's KPMG. Pwc and E are all working on this stuff. David Leary: [00:29:49] Okay. Because KPMG just announced that they're expecting to cut about 440 jobs in audit and KPMG UK. Blake Oliver: [00:29:56] Yeah. I mean, there's going to. David Leary: [00:29:58] Be 100 employees that there's a risk in. Around 440 were ultimately placed on leave or cut. Blake Oliver: [00:30:05] I don't see any other outcome than the big four just cutting massive numbers of staff jobs. If they do this right. Like, I mean, 20 to 30% of the entire audit automated by AI. I mean, maybe they don't want billable hours. David Leary: [00:30:22] That's what's crazy about this. Like, how are they going to do this? Blake Oliver: [00:30:24] Yeah. Um. Well, and, you know, that's, that's, that's why we're finally going to see the end of the billable hour. It's got to happen. Like if they cut 28 to 30% of the human work, that's 20 to 30% of their billable hours. What are they going to do? Just raise their rates 20 to 30% to compensate? I mean. David Leary: [00:30:45] I think we had that article I saw. The thing about lawyers are doing that the, the, the top of the food chain, lawyers charging, you know, four times what they used to per hour because they have to make up for the lack of billable hours. They're just charging more. Blake Oliver: [00:30:58] Meanwhile, E is requiring US tax staff to work in person 12 days a month starting July 1st. It's roughly three days a week, but there's no weekly requirement. It's a monthly one, so you can spend those 12 days however you want throughout the month. You just have to work in person 12 days a month. This is affecting over well, they have 73,000 tax professionals worldwide. And so but this only affects the US people. But that's still going to be a lot of people, thousands and thousands of people. David Leary: [00:31:33] That's just Tuesday, Wednesday, Thursdays. It's a three day workweek, essentially. Blake Oliver: [00:31:39] Uh what's next? There's an article here in um, was it Business Insider featuring an interview with E. Wise talent chief, one of their top HR people. Uh, Ginni. Uh, Carlier. Carlier. They told Business Insider that AI is changing how the firm recruits, develops, evaluates, and promotes employees. The central message is that traditional linear career models are becoming less relevant as AI makes work more fluid and places greater value on skills, judgment and impact rather than title or tenure. I mean, what that sounds like to me is the the linear career path in your accounting firm is like going away that it won't be there. I just wonder how how are the big firms going to like train the future managers? I mean, I guess they'll still recruit staff. It'll just be a lot fewer staff and then there'll be less of like an up or out situation where they're going to try to hold on and retain and train, because they're going to have to spend a lot of time like training. And maybe it'll be more like an apprenticeship program instead of like a, a churn and burn situation. They'll recruit higher quality candidates. David Leary: [00:33:05] Yeah, it'll be less because you're hiring less people at the bottom. You're going to have more time to nurture them, like you said. Uh, internship type model. Blake Oliver: [00:33:14] I also wonder if this is going to shift the the pipeline where it's more accountants go from school into industry and then the big four recruit from industry. Once those. David Leary: [00:33:24] People with experience. Blake Oliver: [00:33:25] Once they have experience, because I feel like, you know, they're going to prefer to like not pay the salaries, right? Like you bring in these staff and they're not actually doing anything for years. I feel like the big four are not interested in making that kind of investment in people generally. Like they got to get something out of them. They got to have utilization. They got to have realization. That's the mentality, right? Like they got to at least cover their costs. David Leary: [00:33:49] Yeah. Agents are the perfect accounting firm. Employees for the partners are going to love them. Blake Oliver: [00:33:57] Um, okay. David Leary: [00:34:01] I have a story on, um, accounting firms. Blake Oliver: [00:34:05] Well, that's good because this is the accounting podcast. David Leary: [00:34:07] Okay. Well, I just talked talking about a new hinge marketing study says that the average growth for accounting and financial services firms has dropped from a peak of 13% to under 10%. It's its weakest level in five years. So accounting firm growth is starting to slow down a teeny bit. Okay. Um, but a lot the, the biggest difference between firms that are stronger than the weaker ones, right, are ones that are having a heavier investment in thought leadership and are using, uh, AI for social media rather than they don't depend on referrals anymore. So they're going out and getting their own customers. So the sample size was 133. Accounting and financial service firms. Um the high growth firms, the median annual growth was 33%. Average growth firms was 9.6%. And no growth firms um contracted about 10%. Blake Oliver: [00:34:58] Whoa. So 33% growth. That's really, that's, that's amazing for a services business. David Leary: [00:35:05] And that's your high growth firms. Blake Oliver: [00:35:07] High growth. David Leary: [00:35:07] Firms. So they were growing three and a half times faster than the other the, their peers. Um, they were getting referrals were still the number one lead source for all firms. But the high growth firms. What they do differently is they spend 9% of their revenue on marketing. The firms are growing slower, are only spending maybe 5% for most firms. So the the firms that are growing are investing in marketing. And then they're getting that that they're seeing the return on that growth, the marketing investments, and they're spending twice as much. So if you have a firm that's growing at 10%, you want it to grow at 30%, spend 10% of your revenue on. Blake Oliver: [00:35:44] Or is it or is it just that the firms that are growing really fast have money to burn on marketing? I mean, is it causation, correlation? How do you know? I guess that's why you need to track this stuff, right? David Leary: [00:35:58] And more than 90% of the high growth firms are using AI for content creation, workflow automation and market research. So there there's, you know, there's, there's relationship here, you know, if you're spending on marketing and you're making your processes more, uh, more streamlined through AI, you're going to have a faster growing firm. Blake Oliver: [00:36:19] I've got some follow up from a story that we covered a long time ago. Evergrande. Remember Evergrande? David Leary: [00:36:26] That's the Chinese apartment complexes or building. Blake Oliver: [00:36:30] Construction company, the massive construction company that during that whole overbuilding period in China, was audited by PwC and collapsed completely. And the Evergrande liquidators and PwC are finally heading to court. It's going to happen in May, according to accounting today. The case centers on a lawsuit filed by Evergrande's liquidators to recover funds from the company's auditors. Um, yeah, it took two years to get to the first public hearing in this matter, so can't wait to report on that. David Leary: [00:37:08] This is KPMG. Blake Oliver: [00:37:10] That was PwC. But I do have a story about KPMG audit. David Leary: [00:37:14] How much did they pay PwC for the audit. Blake Oliver: [00:37:17] Yeah that's a good question for AI. Okay. David Leary: [00:37:21] How much. Blake Oliver: [00:37:22] Okay. While you do that I'm going to talk about KPMG. Um Canada has accused KPMG of botching audits for four tonnes four tonnes for funds tied to a company called Bridging Finance. It's a private lender that collapsed in 2021, with over 2 billion Canadian in assets under management. The Ontario Securities Commission is saying that KPMG failed to properly value the loans in those funds, and treated red flags as isolated problems instead of signs of something bigger. And the regulator is seeking 40 million in penalties against the firm. Kpmg, of course, says it firmly disagrees and will vigorously defend its work. Wow. 2 billion in assets. The receiver of this collapsed company has only recovered 317 million of the 2 billion in assets. Investors bought fund units at inflated prices and made decisions they may not have otherwise made, according to the Ontario Securities Commission. Did you figure it out? David Evergrande. David Leary: [00:38:37] Evergrande paid PwC between 2009 and 2022, anywhere from 4 million to $60 million somewhere in that range. Blake Oliver: [00:38:47] Let's thank our final sponsor for this episode, and that is worthy. Right now, delivering advisory services at your firm can take your team members 3 to 5 hours per client. Pulling data, building spreadsheets, stitching together slide decks. That means your best people max out at ten, maybe 15 advisory clients before the whole thing breaks. I guess that's 3 to 5 hours per week. Introducing worthy. 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This is a great way for you to see how worthy can work for your firm and clients. To claim your three months of unlimited access, head over to The Accounting Podcast dot promo slash worthy. That's accounting podcast dot promo forward slash WURTHY. Let's talk about a story that both you and I highlighted, David in our prep. And that's this fundraise by a company called Juno. They raised 12 million in a seed round to scale an AI tax prep platform that they say can automate 90% of the data entry work while still keeping a CPA in the loop for final review. The round was led by Bonfire Ventures with participation from Impression Ventures and X fund. They're going to use the funding to scale their platform. David Leary: [00:40:59] And in Juno's pitch is essentially not to replace the CPA, but to make the CPA dramatically faster. Blake Oliver: [00:41:09] So basically, it's going to do they're emphasizing transparency, which I like. I like to hear that. Not autonomy. So the the system is going to provide source to return traceability, showing where each number came from, side by side validation tools and visual bounding boxes for review, real time processing, automatic flagging of prior year changes and inconsistencies and integrations with nearly every tax platform, plus tools such as Tax Dome and K1XC. This is the sort of thing that, um, is going to be necessary for accounting firms because sure, you could, you could build this yourself and you could do this like in the off the shelf tools. You could use cloud co-work probably to start doing all this stuff. But how do you do it at scale? How do you do it in the same way with each client, with each employee working for you? And how do you have the, the review, the, the, the audit trail, all that like built into the system, right? David Leary: [00:42:15] So you're trying to play themselves. This is safer. Ai tax. Yeah. Because you're going to have traceability and you can check every number. But instead of just like the agent did it, I hope it's all right. You're going to have that traceability along the way. Blake Oliver: [00:42:27] Well, the reason that's important is because David, you highlighted a story here, a stat that one third of workers are not checking AI outputs before they submit them. David Leary: [00:42:39] I might be on that list sometimes. No. So there's a new survey that came out from resume now, which is like an employer board type job board thing. They surveyed 1000 employed U.S. adults, 35% rarely or only occasionally review AI output. So basically that means two thirds. Or two thirds review the AI output, but a third one third do not. So they're just putting. Blake Oliver: [00:43:07] Their work in blindly. They're trusting it and just submitting that. David Leary: [00:43:10] Or 18% trust it as is straight out of the box. And 17% only review when something seems off. So it's just not that many. Not many people review it. 40% have used AI at work. And here's an interesting stat, and this should scare you as an accounting firm owner, 15% admitted using it secretly without telling their manager. Blake Oliver: [00:43:32] Oh yeah, for sure. I that's got to be happening all the time. Yeah. David Leary: [00:43:36] Um, only 40% say they review the output every single time. And this is a December 20th only 8%. Blake Oliver: [00:43:43] 40%, 40%. So 60% are skipping reviewing that output. David Leary: [00:43:47] Yeah, maybe this time, maybe not this time. Yeah. Every single time. Blake Oliver: [00:43:51] Yeah. So so that's, that's also why you need a system to do this stuff. Because if you have like a system that your employees are using to generate work with AI, you could have a control in place that checks to see if they changed anything after. So if an employee is just generating something with AI, using your tool and then just submitting it for review, and they didn't change anything or they didn't spend any time looking at it, then flag that flag that it didn't actually get reviewed. And you could probably do that by checking how long they looked at the document in their browser, you know, some sort of tracking thing. If they made any changes, what changes they made, you know? Yeah. David Leary: [00:44:36] So speaking of systems, have you heard of Agentic AI frameworks? Blake Oliver: [00:44:41] I mean. David Leary: [00:44:43] Or does it just sound buzzwordy, I guess? Let me we can work. Blake Oliver: [00:44:46] Well, you know, what would it what would it be? It's a framework for working with Agentic AI. David Leary: [00:44:51] Yeah. So if you think about like a model, like a GPT is kind of the brain, and then you have the agent, which is kind of the worker that's using the brain to do the task. Yes. The framework is the operating system that organizes and runs those workers, right? And so I saw an article about how AI injecting frameworks are the next big thing. And it's fine. And it had that nice definition, which is easy. But where it ties back to the show is a new company called artifact. They are launching basically a version of this. Think about it. The way I would describe it would be like a Zapier for accounting firms. Um, it's called Omni. It's their AI powered orchestration platform. It's going to be your connective later. That's going to sit on top of all the apps you already use in your firm. So basically they're training agents not to do all your accounting work, but agents to use your tech stack. Mhm. And then this app manages all those agents. It's kind of an interesting. It officially launches on Omni on April 7th, 2026. So it's brand new. Um, And the way it works is you describe your workflows in plain English. It's going to automatically build the workflows, then execute them. But what's interesting, you don't have to rip out your existing tech stack. In theory, this could let you deploy and use all your existing apps. Now, I don't know how many how deep it goes, because if you think about it, there's a thousand apps that add on to QuickBooks or Xero and these tech stacks, like I don't know how, how many apps it supports, but that's, it's interesting that that's you're skipping building it yourself. How do you manage these AI agents? Blake Oliver: [00:46:20] It's an interesting idea because that's, that's the challenge with using AI right now is if you're a firm on something that doesn't have it or doesn't integrate, you've got to rip that out before you can do any AI stuff. But maybe this tool will just operate on your, on your desktop, right? Like click around like people. I think that's a big opportunity is just building. Yeah. Building AI agents that can just plug in like humans into a current firm so they don't have to change their workflow in their systems. And it can just work with that ancient version of like, whatever it is you're using on your desktop to do something. David Leary: [00:46:53] Yeah. Because the firm, if you're like, hey, I built this new AI thing and a firm can grow all their software and change all their processes and just use us instead. You're on a 30 year business cycle before that actually happens. But if you can, you're right. If you could build a tech layer that just runs all this crazy old Excel spreadsheets, God knows whatever else that people are using to run their firm. If you could build that layer, you probably have a lot more opportunity for market success. Blake Oliver: [00:47:19] David, I have to go. Thanks everyone who joined us live. Don't forget, you can earn free continuing professional education for listening to this episode and all of our past episodes. Get the earmark app, go to earmark.app in your web browser, or download it for free from the iOS or Android Google Play stores. Earn one free CPE for week per one free CPE per week. Thanks everyone who joined us. David. See you next week.