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Get Rich Doing Bad Audits · The Accounting Podcast

• Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! Blake Oliver: [00:00:04] So the I would be given access to some details about you, David, perhaps your LinkedIn profile or something. And the human would be as well. And what they found is that participants who debated GPT four with personalization, where the GPT four was given information about you, they were 81.7% more likely to increase agreement with their opponent stance compared to those debating humans. David Leary: [00:00:30] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:38] Hello and welcome back to the show. I'm Blake Oliver. David Leary: [00:00:41] And I'm David Leary. Blake. You're out. You're in Atlanta. What were you doing? Lollygagging? I don't know, traveling. Blake Oliver: [00:00:48] Yeah, I I've been cutting back on my travel, but, uh, I decided to go out to Atlanta to the Digital deep dive summit. David Toth is very charismatic and invited me to come speak on how to make money with podcasting for about 50 marketing people from top 400 firms. So really great group of people, big firms. But man, you know, it took me two days to go all the way to Atlanta to do a one hour session. And it sort of validated for me what everything we're doing with earmark, because I feel like everything we said I was doing a session with Brandon Hall, the real estate CPA, because he has a very successful podcast with 100,000 downloads a month. Uh, everything we said we could have just done on a podcast and didn't have to go anywhere, right? So, I mean, it's funny, though, it takes me back to this concept of inputs and outputs and valuing inputs. So let's say I was at a firm where I am doing timesheets. I'm filling out timesheets even though I may work in, I don't know, marketing or something. I'm doing timesheets, and on that basis I was very productive this week. Right? I spent two days going to Atlanta to talk to people and, you know, meet and all that stuff, right? Inputs. But what did I actually accomplish? One hour of actual content delivery. Very inefficient. So anyway, I, you know, and there's something I just don't like about this in the sense that, you know, it costs $1,500 to go to this thing. So like most people can't afford it, you got to spend hundreds of dollars on hotel room and airfare, and only 50 people got to hear me speak. And I don't like that, uh, that it's so exclusive, right. Like, everybody should get this knowledge. So I recorded the session with my voice memo app on my phone, and I'm going to turn it into a series of posts. So follow me on LinkedIn if you want to get the takeaways. How to make a podcast that generates revenue. I'm going to share all the secrets for everyone who couldn't make it. David Leary: [00:02:47] You could turn into a webinar and we could run on earmarks webinars. That's right, that's right. So many options, which you could do with this to reach millions. Millions. Well. Blake Oliver: [00:02:55] While I was in Atlanta, there was news. David Leary: [00:02:57] Yeah, yeah, there was news. And so you just said about like getting rich making podcasts. But really, I think the bigger news, um, and this ties to last week's story, um, getting rich doing bad audits. So last week you brought up the Tingo fraud, right. And and because of that, you went on, uh, an Easter egg hunt and you found the auditor and you clicked through, and it was a firm in Colorado, and you went to the About Me page or the Meet the Team page. And there was one person at the firm. Blake Oliver: [00:03:28] Yeah, a one CPA firm did the audit for a multi-billion dollar company, and it turned out to be a fraud. David Leary: [00:03:36] It turned out to be a fraud. Well, in last week we also talked about the Trump Spac. Trump went public with Truth Social. Uh, the ticker symbol is what DJT uh, his initials DJT. Yeah. It's everything's marketed. It's actually really smart, actually. Um, and I asked last week, I was like, well, who is the auditor? Like, how did this happen? Oh, yeah. Blake Oliver: [00:03:56] And we didn't know and we were going to look into it. David Leary: [00:03:58] No. So so there was news this week that the auditor issued a warning that raises doubt about the company because the losses. But now we have the auditors name and it's B.F. Borges, CPA, PC. So I was like, well, let's go to the website. Blake Oliver: [00:04:15] Okay. We're on BF Borgers cpa, PC website. It looks like, uh, it's a nice website. David Leary: [00:04:23] And then I went to meet our team. Mhm. And I get to the team and I start scrolling, and there's only one person on the website. Blake Oliver: [00:04:31] Ben Borger is the only CPA at BF Borger, CPA, p c. So auditing a multi-billion dollar Spac deal. David Leary: [00:04:39] Yes. So immediately my radar went up and then I went back to last week and watch the video of you talking about this last weekend, because I had to see was it the same firm. Now it's a different firm. So apparently in Colorado, you know, hey, just quit incidental. But I was like, oh my God, this is the same firm Blake talked about last week. And but then I remembered I had another email in my inbox from Chris Vanover, listener, Chris Vanover from CPA club, and he actually sent us an email about the auditor, and he created a whole YouTube video about this. Well, I bring that that YouTube video. Give me a second. So Chris went deep and he went really, really deep. So we're going to play some parts of this video. But he also questioned who is this CPA firm. Chris Vanover: [00:05:23] A going concern opinion against Tmtg casting substantial doubt about its ability to continue. So who audited Tmtg? None other than BF Borgers. They've actually been the auditors of Tmtg dating back to 2022, when they were a private company and will now serve as the independent registered public accounting firm of the new public tmtg going forward. But who are they? Well, they're a firm headquartered in Colorado, and they're led by their managing partner, Ben Borgers. They have about 50 people on their team, ten of whom are CPAs, and a staggering 96% of their total client fees were actually for issuer audits. And even accounting today reported that this Colorado based auditor actually dominated the 2020 and 2021 rankings of firms bringing on the most new SEC clients. In fact, for three consecutive quarters in 2021, they actually topped that list. But let's find out even more about them. David Leary: [00:06:31] So I'm going to skip a little bit okay. Blake Oliver: [00:06:34] So they're they're bigger than we thought. Right. So it's one CPA on the website. But Chris is saying there's 50 people at the firm, ten CPAs. Yeah. David Leary: [00:06:44] And I went to their LinkedIn and there was just nine people and they all seemed to be in the Philippines. So I don't know where Chris got his number on his video. Right. I'll I'll defer that. He's more correct than me because he went very deep on this. Blake Oliver: [00:06:56] Yeah, but you're right. I mean, if there were more CPAs working at this firm, you would think that there would be more than eight people associated with the firm on LinkedIn. And like you said, most like a good chunk of the people are in the Philippines that are on LinkedIn. David Leary: [00:07:09] And I'm assuming if I'm a CPA at this firm, okay, I'm going to have some ego. I want to be on the Meet the Team page, right? Yeah, it's very questionable. It's very questionable. So I'm going to skip where he talks about all the things on the website about they have high quality standards, etc., etc. and I'm going to skip to 321 and he gets into, uh, PCAOB findings. Chris Vanover: [00:07:31] So what you see here is an actual screenshot from the Pcaob's most recent inspection report of BF Borgers that was made public back on November 7th, 2023 for the 2022 inspection. The nice thing about the report is that it actually provides a historical snapshot too. And as you can see, Borgers is batting a thousand, but not in a good way. The PCAOB inspected nine issuer audits in 2019 and found that eight of them actually had part one A deficiencies. In other words, they didn't have sufficient audit evidence in order to render the opinion they did at the time they did. The PCAOB came back two years later and inspected another ten issuer audits, but it got worse. All ten of those had deficiencies. And so the PCAOB oh man, made another visit a year later. And this time they looked at 11 engagements. And yep, they found deficiencies in all 11 issuer audits that Borgers had performed that were selected for inspection by the PCAOB. But that's just the overview. Blake Oliver: [00:08:38] And these are part one A deficiencies, which we cannot understate how bad that is. That means that the auditor did not collect sufficient evidence to issue the opinion that they issued at the time they did. Like you didn't collect enough evidence? Yes. Should not have issued the opinion. David Leary: [00:08:56] And he goes into the details for the next seven minutes because all this is public on the PCAOB website. And so he goes into all the detail on all that. I'm going to skip all that for the show, but everybody should go and watch that. Skip to the nine minute mark here. Chris Vanover: [00:09:10] Revealing facts revealed by the PCAOB and its publicly available expanded inspection report of forgers. But our friends north of the border and the US equivalent of the PCAOB up in Canada, the Canadian Public Accountability Board actually took it a step further back in January of this year. What they did was they actually banned BF Borgers from accepting new audit clients in Canada. And Canadian accountant, in their article shows information from Audit Analytics that talks about BF Borgers as having the distinction of acquiring the highest number of new engagements in Canada in 2022. And they also talked down below. In addition to the band, which includes public companies and any existing private company audit client seeking to become a reporting issuer through initial public offering. Reverse takeover, the firm is prohibited from assigning an unidentified partner A to Canadian engagements. David Leary: [00:10:18] So if I'm understanding correctly going the public through a reverse merger, it's basically a Spac, right? Yeah. Okay. That's a Spac. So they got banned from Canada from doing SPACs. And now we'll skip a little bit more. Um, and it gets really into this form three alert. Chris Vanover: [00:10:39] B and after doing a quick auditor search of BF borgers on the Pcob website, I did uncover the fact that the firm recently filed a form three for the purpose of disclosing certain proceedings against the firm, and as you can see here in the extract on the screen, it's the state of Colorado against none other than Ben Borgers. Let's dive into the details a bit more. David Leary: [00:11:09] So we'll skip this. Basically, they admitted the fraud and paid a $5,000 fine. Blake Oliver: [00:11:15] Right. What was the fraud? David Leary: [00:11:18] Not. Not fraud. Sorry. Not fraud. I'm sorry. The deficiencies. Okay, so the state of. Blake Oliver: [00:11:22] Colorado, the state of Colorado came after this firm. Is that what we're talking about? David Leary: [00:11:26] Yes. It's disciplinary action. Okay. And fined them essentially. Blake Oliver: [00:11:30] What, $5,000? David Leary: [00:11:32] 5000. And now this all ties to skip to 15 minute mark. Chris Vanover: [00:11:38] Counted the number of form apps they filed since January 1st, 2023, and counted nearly 200. And guess what? Every single one of those had been borgers listed as the engagement partner. Now, we could also dig into each of these issuers and likely uncover the audit fees paid to be a forgers. But even if we assume an extremely conservative $10,000 per issuer audit engagement, that puts total revenues from these nearly 200 issuer audits at $2 million in the pocket of Ben Borgers. So I followed the trail. Blake Oliver: [00:12:19] So, 200 audits. In what time frame? A year, a couple of years, and the. David Leary: [00:12:26] Last 3 or 4 because they've led, uh, they were like the top of the SEC new filings list 2 or 3 years in a row, something like that. Okay. Blake Oliver: [00:12:34] So they've basically. Here's what I'm. This is what I'm hearing, okay? From from this video. Bf Borgers took on massive number of Spac audits for a small firm. They did not. David Leary: [00:12:49] All these may not all of them may be Spac audits, right? Blake Oliver: [00:12:52] They just took on a lot of audits, audits and of the audits and the same the same engagement partner Borgers on all of them. Of the audits that the Pcob inspected, almost all of them had major deficiencies, to the point where the auditors should not have issued the opinion. And did the Pcob fined this firm anything? David Leary: [00:13:15] Um, I'm that I wasn't clear on. Again, like without us watching the full video. Every single thing that Chris said everybody should go watch the full video. But but the gist of this is, is the revenue you make from an audit versus the fines you get for a bad audit don't matter. So and I think you said this last week, you're like, we're in the wrong business, right? Like like we should be issuing bad audits. Blake. We'd make a lot more money. Blake Oliver: [00:13:41] Right? So you can just take on a lot of audits, you can do a crappy job, you can make a ton of money, and the fines are just the cost of doing business. And you wonder why audit quality is so low. I was I was just actually listening to a Planet Money episode while I was traveling, and they did a whole episode recently about like, fines as the cost of doing business, not an audit, just in business in general. And there's a great example of, um, you know, a company dumping chemicals into a water supply. And the company actually had a meeting about, uh, about this. And they did like a whole cost benefit analysis. And they decided that it just made more sense to keep dumping the chemicals because of the time value of money and the amount of time it would take for the lawsuits to happen. You know, $1 billion in 20 years is nothing. David Leary: [00:14:29] Yeah. And that's where we're at. Blake Oliver: [00:14:31] But these fines aren't even enough to deter the conduct now. So yeah, it's like if if I just want if we want to make a lot of money, David, we should just open up a CPA firm in my name, take on a bunch of audit work, do a really shoddy job of it and get away with it for a long time. And then when we finally get inspected, you know, the fines are just a percentage, a small percentage of our total take. David Leary: [00:14:55] And we just sell our book of business. We make a bunch of money really fast, sell the book of business and move on. Yeah. Blake Oliver: [00:15:00] Now, boring accountant points out fairly that private lawsuits from stakeholders is still a concern for shady audits. Sort of. Think about it though. How long does it take for one of those lawsuits to work its way through the system? And how much money can I, as the managing partner, extract from my firm before it ever becomes an issue? Right. Like it's way out in the future, you know, just a cost of doing business, that too could be just a cost of doing business. And if you have enough insurance, will that cover your lawsuit? Probably, right. I guess it's just not enough of a deterrent, obviously. David Leary: [00:15:34] And obviously this goes back to your bigger point of view, which is nobody cares about the financial statements or the audits because the stock's doing great regardless. Blake Oliver: [00:15:44] And that's the crazy thing is like this DJT company like got a going concern warning and people still bought it. You know it has nothing to do with the financial statements. It's completely separated from reality with a stock valuation a valuation that's a thousand times earnings. David Leary: [00:16:01] It's just another use case of people don't look at the. Blake Oliver: [00:16:03] It's GameStop for politics. That's what it is. David Leary: [00:16:06] Gamestop for politics. Yeah. Blake Oliver: [00:16:08] Well thank you for bringing this to the to the show David. I think it exposes a serious issue in the audit profession. And it just questions the whole credibility of the system. If if bad actors can just go get an audit from any Joe Schmo auditor and that person, you know, doesn't suffer any consequences, how do you protect investors? The fraudster is just going to go get audits from silly little audit firms. Which puts the whole concept at risk. Like this is the problem. Like I get to pick my own auditor right as the business so I can just go pick a bad auditor. David Leary: [00:16:51] A cheap, easy guy, right? Pick somebody cheap and easy. Blake Oliver: [00:16:54] There's a real there's a real simple solution, which is don't allow companies to choose their own auditors. Come up with some sort of random selection process, I don't know, have a third party choose the auditor. There's lots of ways you could do it, but the current situation just, I imagine if restaurants chose their own health inspectors. Would you want to eat at those restaurants, necessarily? Would you trust that health inspection report? I wouldn't. Same thing with audits. Well, let's keep moving on. I think that's enough for audit for this week. Where do we go from here, David? Do we talk about app news? There was some big fundraising we should point out. Why not? Let's do it. Yeah. Jump in. Start up field guide I startup field guide. I feel like every startup is now an AI startup. David Leary: [00:17:42] Startup. Blake Oliver: [00:17:43] Yes, AI startup earmark is an AI startup. We use AI. If you have a ChatGPT subscription, you use AI. Um, this podcast is I know we're an AI podcast. Ai Startup Field Guide has secured $30 million in a series B funding round. This will enable the company to develop new AI features, broaden its market presence and expand its team. They aim to address the talent shortage in the Certified Public Accountant sector, which is experiencing a surge in demand for advisory and audit services. That's according to a press release that was posted on, uh, reposted on Payments Comm. Um Field Guide CEO Jin Chang believes their AI platform will revolutionize how audit and advisory firms manage the capacity shortage, which is true. I mean, I don't know how else we're going to do it. So, um, actually, this does tie in to AI because Field Guide is, as they say, the future of trust. And at a high. David Leary: [00:18:41] Level what is Field guide do. Blake Oliver: [00:18:43] So here I'll put this up on the screen and we can take a look. Because I think if you are not familiar with this kind of tool this is interesting. So this is the Field Guide Field Guide website. And they have a few different products here. Um they have an AI platform for audit and engagement hub. I think like a portal for audits basically document management request management. They have a client hub. Let's take a look at the engagement. David Leary: [00:19:15] If you're if you have an audit engagement you would use this to manage it all instead of managing it in Excel. Blake Oliver: [00:19:20] Yeah exactly. So you know here's a screenshot or there's a video. I'm not going to play the video, but it shows, you know, an engagement summary with a dashboard of requests. 50% I assume 50% of your PBC requests have been completed. Ro sign off 63% tasks, 74%. Document sign offs 89%. So yeah, all that stuff you would have been tracking in Excel or in some manual system. Now you have like a roll up dashboard. You can assign tasks. It's just project management for audit, right. But like from what I've heard, most of the tools out there are pretty shoddy. And this is a modern cloud based solution for it. So I think that's pretty neat. It really reminds me of what we were doing at Floqast. But on the audit side. So Floqast was closed management checklist software for the team doing the financials, doing the financial close. And this is the checklist document management system for the auditors who are reviewing that information. David Leary: [00:20:20] And I've seen other apps like this getting funding recently. And it's almost just like a decade ago was the finally cloud came to accounting software, right? The QuickBooks online, Xero. And now it feels like finally the audit part of the business is starting to move into the future with cloud apps, etc.. And finally, finally taking that next step. Blake Oliver: [00:20:40] There was another funding round over the last week or two. Fund Guard, an AI powered accounting platform for asset managers, secured a 100 million series C funding round. Key one capital Euclidean Capital and funds managed by Hamilton Lane participated in the round. So asset management is another one of those things that has been historically done in software or not in software, in Excel sheets, right? In this way you can manage it in a cloud based system. So you know what kind of assets though, are we talking about? I'm actually I'm curious. Let's take a look at the website here. All in one arbor. Ibar and nav contingency solutions. I have no idea what that is. Um. Let's see. Let's look at the products here. Platform. Investment accounting. Real time acknowledge date historical access Multi-book with single fund trade. Man. Maybe somebody needs to consult with them on translating this into plain English. Or maybe this is just too niche for me. David Leary: [00:21:51] Yeah, it might be really niche. Like I think it is it for brokerage houses like. Blake Oliver: [00:21:57] Well, it's investments I guess. So like let's say, you know, if you have a bunch of investments you have to track for your company, right? You got to report all that at the right value on the balance sheet. You could do this with this tool. David Leary: [00:22:10] And then I'm assuming it plugs into and syncs to your accounting system. Yeah. Theory. Blake Oliver: [00:22:14] Yeah. So you've got. Multi-book capabilities. You track all your trading. Interesting. What do you got, David? What's new for you? David Leary: [00:22:27] I wasn't gonna do this, but since we jumped into app news. Bot keeper. So you remember bot keeper? Yes, we have. We have to remember our history with Bot Keeper on the olden days of the Cloud Accounting podcast. Um, almost year one, I think it was early days of the Cloud Accounting podcast. Yes, at the time. Blake Oliver: [00:22:46] Do you want to give the background of. I think I'm gonna. David Leary: [00:22:48] Try and summarize it in a two sentence thing at the time. It was discovered, um, either by keeper emailed accountants to inform them, or an accountant discovered it. But apparently bot keeper which really played up that they had robots in AI doing all the work. So this is pre-COVID. So we're going back 2018, 2019 or somewhere in there. So pre chat GPT type tools obviously. And it was discovered that they were actually outsourcing a lot of the work to the Philippines. Blake Oliver: [00:23:19] Yeah there was no AI. David Leary: [00:23:20] There was. Blake Oliver: [00:23:20] It was all people in the Philippines as Michael Lee likes to say. It was uh, AI is it was Asian intelligence. David Leary: [00:23:28] Asian intelligence. Yes. But what they've done is they just announced they launched a new product called Bot Keeper Infinite, and it provides firms options to do automated bookkeeping and back office accounting without the need for outsourcing. So I'll. Blake Oliver: [00:23:42] See it when I I'll believe it when. David Leary: [00:23:44] I see it. They wanted to build six years ago. It sounds like it's here now. Finally. Blake Oliver: [00:23:48] Well, and now it's totally possible. So, um. That's great. Good for them. They did it. It's it's proof that if you, you know, fake it till you make it is a mantra in the startup world. And I guess they did it. David Leary: [00:24:06] In a way, you're right. This could wind up being a very successful story because the whole time they identified the problem, which is people don't have enough bandwidth to do the work. Right. And they just hacked is the wrong word or fake it. No, I think it's. Blake Oliver: [00:24:19] It's it's true. They hacked the solution. And this is actually a really common way to build a product in Silicon Valley is you identify the problem and you build a solution that doesn't use much tech at all. You build a super low tech solution that's just people copying and pasting. And then once you get that working and you get people buying that, then you invest all the money to automate it. David Leary: [00:24:40] Yeah, I mean, we're actually. Blake Oliver: [00:24:41] Doing that right now with some of the stuff we're working on. David and I got a lot of copy paste going on with ChatGPT and Intuit. David Leary: [00:24:48] When I built Vue my paycheck the very first week, I literally just hard coded the graphs and hard coded the pay stubs into a website and said, here, show this to your employees. Yeah, it was. And then the first customer to update their payroll, they sent us a CD like we had no no pipes connection. They sent us their backup. And then we took the CD and then we added their payroll data that way. But yeah, so you kind of have to fake it a little bit, which is smart because they don't spend a bunch of money on a product that may not. Blake Oliver: [00:25:10] Exactly. Yeah. Like because you don't know if it has product market fit yet. So don't spend a bunch of money building something that you don't know people want to buy. Yeah. Funny story. Um, giraffe. The very first version of the Fpna platform. Giraffe where I work. Yes, um, was an Excel model, and the front end for giraffe was simply a form. And you would. Enter your information, like to update the model right. And then it would go to like the founders who would then copy and paste your stuff into the Excel model, run the model, and then put the output into a form that delivered you the output. It was literally human powered financial planning and analysis. And then they went and they built the multidimensional, you know, modeling capability. But a lot of people don't realize this. David Leary: [00:26:01] But sometimes I think that that manual steps and the manual doing it helps you figure out what to build. Melio has a story like that. They the first versions of Melio didn't really exist. They just use WhatsApp and they had, hey customer, send us a picture with WhatsApp or the bill you want to pay. And then somebody physically wrote a check and mailed it off to pay the bill. That's amazing. And it kind of started out as that. And it's the simplest way to pay a bill and then learn, right? Yeah. Blake Oliver: [00:26:27] You learn what people value, what they need, and you build the minimum product to get that, to automate that. David Leary: [00:26:33] Another story like that is, uh, bookkeeper Jason Jason Richardson. He built bookkeep the whole thing in our table before it was actually an app. The whole thing functions like he basically built his entire company on Airtable, then turned it into a real customer facing app after that. Wow. Blake Oliver: [00:26:50] Well. Sticking with AI and technology, I spotted this research paper about the effectiveness of using chatbots, AI, large language models, blah blah blah to argue with people. Now, I have found AI to be really, really effective at helping me be more persuasive. If I want to convince somebody of something, if I want to make an argument, if I want to pitch a podcast, the way I do it now is I. I dictate my ideas into ChatGPT or into Claude, and then I ask it to help me, help me compose my argument, organize my thoughts, and. This study proves that it is extremely effective at doing this. Um, before. David Leary: [00:27:38] You jump in, I just want to pause and capture this moment here. For the audio only listeners, Blake has shared on his screen the stereotypical college research paper with the abstract. It is horribly visually. I don't even know why he's sharing it, actually. But continue on like you just talk about it. There's nothing visual to actually look at here. Yeah. Blake Oliver: [00:27:58] We've got the abstract here. We've got the researchers. So this was in Italy, in Trento, Italy and Switzerland. We got the researchers name Salvi, Ribeiro Gulati, Robert West. So what they what these researchers did is they had humans engage in online conversations. And the humans participating in the trial didn't know if they were conversing with a human or with an eye. An eye is good enough now where you don't know, right? It's passed the Turing test when it comes to chat in a lot of cases. Um, and they would engage in these short, multiple round debates. So, David, I would set you up to debate. Uh, Blake, or I'd set you up to debate an AI. And in some cases, the opponent was given access to the personal information of their opponent. So the AI would be given access to some details about you, David, perhaps your LinkedIn profile or something. And the human would be as well. And what they found is that participants who debated GPT four with personalization, where the GPT four was given information about you, they were 81.7% more likely to increase agreement with their opponent stance compared to those debating humans. So the AI can tailor its arguments to you, David, to make it more persuasive. David Leary: [00:29:26] So even if I was given this knowledge about you, I might not, as a human, may not have the skill set to utilize this knowledge about you to make my article or my argument, uh, more productive or. Right. Get you to. Blake Oliver: [00:29:39] Yes, exactly. It's it's tough to take to tailor your arguments to somebody else. Right. That's the hard thing to do. But the AI is really good about it. And by the way, even when ChatGPT or GPT four wasn't given the personal information, it's still outperformed humans. So what is what is the implication of this? If I can argue more persuasively online than humans, it means. Think about all those arguments that happen on Facebook or on Twitter or on LinkedIn. If I really want to change people's minds, if I want to persuade them of something, perhaps politically I should be using AI to do that and guaranteed it's already happening. So all these bots that have been spreading misinformation on the internet, or people are now going to be even more successful at doing that, especially if they have personal information about you. So think about I'm in. David Leary: [00:30:33] Trouble, my my LinkedIn inbox. Oh, I'm gonna I'm gonna be in trouble, Blake. I'm gonna be buying all kinds of stuff. I'm gonna be taking meetings with people. I'm gonna. Blake Oliver: [00:30:44] Harvey Blevins says chatbot, please help me social engineer my subscribers. That's right. Um, well, and this brings up, like, you know, really important questions, sort of beyond the scope of this show. But, you know, I just can't help but think about TikTok, for instance, has a lot of information about people based on what videos they watch and how they engage in the comments and what messages they send. So if you're the Chinese government and you have all this information about Americans, you could you could use that information to then persuade them to take certain action online. It's like the next. It's the next generation of propaganda is personalized propaganda. David Leary: [00:31:29] Very interesting. I mean. Blake Oliver: [00:31:30] You could do it in this country as well, but it's even more frightening when you think about a foreign actor doing it. David Leary: [00:31:34] Because TikTok knows. I watch a lot of videos about tight hips and low back pain, and it could target me politically, but then pull in like, I don't know, you're having some pain. Like, maybe you should get universal medical care, right? Blake Oliver: [00:31:47] Right, I see. Right. Um. So pulling this back though, to like our daily lives as accountants, as business people, how could you use this to your advantage? Well, the next time you need to make a business case for something, this. This is why you should be using AI to help make your arguments more persuasive. And. The thing to do is not just give it what you want to say, to ask it. How could I improve my arguments and then also give it information about the people who you are arguing to, who you need to persuade, because it will help you tailor your pitch to them. So you need to raise money, right? Give it information about the VC funds that you are raising money from. You should always tell your argument, your argument, or your presentation to the person you're talking to, right? And this will help you do that. Let's say you need to make an argument to get a new ERP system in your company. Give it information about your company's goals. Give it information about, um, you know, the CEO who's going to make this decision, perhaps did. David Leary: [00:32:50] Did it get into personal data? Or like, hey, here's the family situation, here's the hobbies, here's favorite movie, like like what kind of that kind of data? Blake Oliver: [00:33:00] Yeah, I did not dig into exactly what sort of personal information they were given. But from my own experience, I can tell you that whenever I'm trying to get an output from AI, I give it as much context as I can, and I think this is where people kind of screw up. And why they don't get good outputs is because they don't give the AI enough information. So I tell it who I am and what my goals are and what my objectives are. Before I say do this for me, it's the same with humans, right? If you give humans context, when you ask them to do a task, they tend to perform better and the AI is the same way. One. Welcome to the live stream, Juan says great podcast just started listening on Spotify on March 23rd. Great to have you. Welcome to the club. Um. You don't have to go back and listen to all 378 prior episodes, but if you want to download them all, we love getting our numbers boosted. That really helps. So subscribe, listen and subscribe on all platforms. Uh, and thanks to everyone who has joined the live stream. You can chat with us, let us know what is top of mind for you, what you think about any of these stories, and if you're listening on the podcast feed, do subscribe to us on YouTube. Blake Oliver: [00:34:11] You can see when we go live and join us and hang out with us. Giles is also listening. Giles says, listening in from Devon, England today. What better after a hard day of hiking? Oh Giles, I would love to go hiking in England. Um, I've watched plenty of YouTube videos about the trails that just go all over the place. And like, there's this rule I understand. There's this rule in the UK where it's illegal to block access to trails if through private property like so. You can basically hike everywhere. The property owners have to let you go through. And I think that's such a cool thing. It sort of reminds me of how in California there's no private ownership of beaches. And so while you can kind of play tricks to try to get people not to go to your beach, like if you get onto the beach as a hiker, you can go all the way up the coast and nobody is allowed to stop you. David Leary: [00:35:03] I have a story that had a great headline and could turn into a niche story. So this is a story that was in Ars Technica. And the headline is beautiful formula one chief appalled to find team using Excel to manage 20,000 car parts. So this Formula One team is called Williams. I'm not familiar with it. They're about 47 year old, uh, team. They've had some new leadership and they're starting to audit their processes and systems because at the end of the day, seconds count, right? It's a Formula One race car. And they they have this spreadsheet called the Car Build Workbook. And it has about 20,000 individual parts in there. And they track what's on order, what inventory is all of those types of things. And it's so big and so cumbersome that they almost missed, um, a start of a race because they had the wrong parts in the warehouse, those types of things. But apparently this isn't unique to them. There's a record in 2017 of Renault, which is another that's actually an F1 racing team. Blake Oliver: [00:36:03] Maybe you've heard of them. David Leary: [00:36:04] Yeah, they had a design and build spreadsheet with 77,000 lines in it. So it was three x bigger than the Williams spreadsheet. Blake Oliver: [00:36:12] So and there's got to be a market here for specialized software to manage car parts for formula one. David Leary: [00:36:20] Well they were hinting at like they need to move to cloud ERP things like that. For me though, I'm like, if you're an accountant, you're looking for a little niche, having some system expertise. You need the F1, CPA like that. That seems like a sweet spot niche to do. Blake Oliver: [00:36:35] I feel like you could build a fantastic Airtable that would replace this. That would do great, right? David? You've got the skills. You've built everything in Airtable. David Leary: [00:36:42] Yeah, but I don't know. My my dream isn't to go hang around at F1. But if you're but if you you do love F1 and you're an accountant or have system skills this is a really there's an opportunity here for sure. Blake Oliver: [00:36:55] Well, let's talk about client accounting services. Accounting Today. Does their annual survey of firms. And we have seen in previous years that client accounting services, also known as outsourced accounting, is the fastest growing line of service in most accounting firms. And that was evidenced again this year in this year's survey, approximately a quarter of the top 100 firms and over a third of all firms identified Cass as their fastest growing service. This is a significant increase compared to other service lines like attest and M&A. The current trend indicates that CAS has becoming a core service in the profession, potentially even the primary service. I always like to say it's time for accounting to get back to accounting. Right. Why why why why are we auditors and tax professionals? I mean, nothing wrong with that, don't get me wrong. But like you would think that public accounting firms would be doing more accounting. So we can take a look at the details in here. In the time that we have left, we got a few minutes. Oh, they don't have the charts in the article. I wanted to see what I wanted to share was the actual number. I guess I missed that, but I guess that'll be enough. It's the fastest growing service line. David Leary: [00:38:15] Um, I have some follow up on the, uh, actually, before I do follow up on, uh, South Carolina, $1.8 billion story, I have a question that I want you to clarify for me. Okay. So there was an article, uh, an opinion piece in CFO Dive by Martha Zywicki. Uh, it's the vice president of state and regulatory and legislative affairs at the EPA. Uh, essentially, it's an opinion piece that, um, the title of the article is how speeding to the path, how speeding the Path to CPA licensure hurts finance teams. What? And essentially, it's propaganda going after the bill in Minnesota. Right. And has all the typical AICPA mobility, uh, arguments, the firm arguing the world's going to end that type of stuff. But one example in there really stuck out in for in my head says it's incorrect. But I would love for you or our listeners to clarify. And it's in regards to CPAs that aren't working in public accounting. So I'll read you the the quote. This type of mobility offers advantages for both CPAs and their employers. For businesses, the chief ones are time and expense. For example, accountants on a CFOs finance team can now work on projects for business units located anywhere in the country. Without the current system that allows mobility, finance leaders would be constrained when assigning CPAs to projects. Blake Oliver: [00:39:38] That's not true. David Leary: [00:39:40] That's. I didn't think it was true either. That's Claude and Claude. Basically agreed and said, um, these corporate accountants are typically governed by the rules and regulations of their employer rather than the state CPA licensure boards. Blake Oliver: [00:39:54] Well, you need the CPA to sign a test reports and to represent taxpayers in tax court. But once you're in private industry, I don't know what you need the CPA for and why mobility matters. David Leary: [00:40:10] This is a problem I have with opinion pieces in general, because you can publish them and put anything you want in them, and then it's just irresponsible. Blake Oliver: [00:40:17] It's irresponsible. The AICPA to be spreading misinformation. And I don't understand why they're doing this when they're also saying that they're they they've got this committee that is going to make recommendations and is going to examine all the possibilities. But at the same time, you have the leadership of the CPA clearly against what Minnesota is doing. So how can they say that this committee is going to be objective and independent when they've already clearly formed an opinion, like the people at the executives at the CPA have? David Leary: [00:40:49] I have a new thought on this, because the last paragraph, it talks about what you just said. So I don't have to reinstate that. But the the National Pipeline Advisory Group has said nothing's off the table, including modifying 150 our rules. And they go on to talk about, you know, the CPA. We believe CPA mobility is at the heart of the accounting profession, blah, blah, blah. And then any changes, uh, that impact mobility must be shaped by broad consensus within the profession, not unilateral action, and informed by a thorough understanding of the cost and benefits of that approach. And if you really read between the lines on this, I think that the CPA knows this is going to happen no matter what. This is more about control. If we're going to change and modify the 150, it has to go through us. The AICPA, this is about control. It's not about the CPA being against 150 anymore. This is about because if if if the industry bypasses the CPA and changes this without their being in control, it's the end. The CPA. Blake Oliver: [00:41:51] Yeah. Right? Yeah, exactly. It it puts them in a box. It makes them irrelevant because it's the most critical issue affecting the profession is the talent shortage. And they are not leading on it. Yeah. Yeah. I think it makes sense to me. So they're against it. They're going to be against it until they're for it. David Leary: [00:42:11] Until they have control over it. Yes. Blake Oliver: [00:42:13] Right. But, you know, at the pace they're moving, it's taken them a year and they still haven't got this survey done. Like why does it take a year to put out a survey monkey. David Leary: [00:42:25] Or a Twitter survey. A LinkedIn survey, they take two seconds, right? Blake Oliver: [00:42:28] Yeah. I mean, I could do it in a day, you know? So it's just it's just so sad to me that, like. This is the problem. Most CPUs don't work in public accounting, but the AICPA is obsessed with public accounting. Because that's who controls the AICPA. Yeah, but two thirds or whatever. I don't know what the number is. Most accountants are only in public accounting for a few years. And then they go off and they do other stuff. And AICPA kind of ignores them, if you ask me. And mobility is a great example, like mobility doesn't matter to me in industry I can I'm licensed in California. I'm not doing anything in industry that requires the license. So I don't I can go work in another state. And, you know, as long as I don't hold myself out as a CPA. Doing services to the public. It doesn't matter. Right? Yeah. So. I think that's the best argument against like this. This whole mobility argument is really just protecting a very, very small sliver of the profession, but also a very powerful sliver of the profession. But also, there's lots of ways to get around mobility now, like firms, you know, can hire people anywhere. So let's say mobility goes away. And what does that mean? It means that the engagement partner has to be licensed in the state where the audit is happening. So if you're a Colorado CPA firm and you're auditing somebody in Nebraska, it just means that you got to get a partner who's licensed in Nebraska. It's not that hard. You go find somebody, hire somebody. Well, let them work remote, right? It's like, yeah, it's totally remote. Work solves the problem. David Leary: [00:44:13] That's that's a good argument you haven't brought up before. Yeah, maybe mobility doesn't matter in this world of remote work. Blake Oliver: [00:44:19] Yeah. And you know what? Mobility is good because it protects the CPAs in the small states and guarantees them employment, which isn't that the point of going into accounting is to have a steady job, right? Like licenses are supposed to be beneficial to the license holders. And in a way, mobility removes that because it allows big firms and big states to come in to all the smaller states and take the audit work away and outsource it to India and the Philippines. So. The only effect that the Aicpa's policies are having on the profession is to offshore work, to take good jobs away from Americans and give them to people who then get underpaid, even in their local market, because these firms are so greedy. You know. And then they do low quality audit work. Because there's no penalties. That's exactly what we saw with this, uh, firm in Colorado. Right. Offshoring the work to the Philippines, doing low quality work, and then, uh, you know, they're checking all the boxes, right? But in the end, they're not really doing what they should be doing. I'm going to get off my soapbox now and let our listeners know that if you have any thoughts, comments on what we've said today, you want to push back. Blake Oliver: [00:45:34] I love hearing other points of view. Email us at The Accounting Podcast. At earmarked me that's The Accounting Podcast at earmarked me. And you can earn free CPE credit for listening today. Go to earmarked app, sign up for a free account and you can earn CPE for listening to this show and many, many other fine shows. Um, our latest course that we just put up is a new channel Big Four transparency. Dominic Capisco. We were talking about him last week and all the great data he's been collecting. He just did a webinar for us on earmark webinars about how to, um, compensate your employees so that they'll stick around. And I think that's a great topic for any firm leader to listen to. So go to earmark Dot app. You can also download it on the App Store or the Google Play Store and get your continuing education for free. High quality continuing education. Do other stuff while you're listening. Be productive all the time. Get exercise. Uh, you know, don't sit in a conference room for two days to get your CPE. David Leary: [00:46:37] I'm going to remind everybody and drive them away from earmark property for a moment. This is the weekend. The UK postal scandal. That television show we talked about, Mr. Bates versus the post office is coming to PBS. So it goes on, uh, April 7th. It goes live. It looks like you can stream it on pbs.org. And it also looks like on Amazon Prime, you could subscribe to PBS masterpiece for 5.99 a month. And it should be. So it's four episodes. Um, if they do it weekly, you know, for six bucks, you get a great. I was thinking, Blake, how do we get that show into earmarks so people could watch it and then take a quiz and earmark, like, how do we make that happen? Blake Oliver: [00:47:15] And we got to reach out to the producers to see if we can make it happen. David, great chatting with you as always. Great to see all of our live stream viewers. Uh, see you around. See you next week. Bye, everyone.