Latest / The Accounting Podcast / The Crazy Calc of Trump's Tariffs & How to Make Fake Receipts With AI

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The Crazy Calc of Trump's Tariffs & How to Make Fake Receipts With AI · 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] We cannot anymore rely on. Documents provided, photos provided. There has to be some sort of third party verification of this, because anyone can make a realistic audit opinion letter. You could generate realistic looking financial statements. You could generate realistic looking anything that would have formerly been difficult to create. David Leary: [00:00:29] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:35] Hello and welcome back to the Accounting Podcast, the number one podcast for accountants in the world. I'm Blake Oliver. David Leary: [00:00:43] I'm David. Blake Oliver: [00:00:43] Leary, I'm David David Leary. What are you doing? David, you seem distracted. David Leary: [00:00:47] I'm working on creating some AI receipts in ChatGPT. Blake Oliver: [00:00:52] Ai receipts? David Leary: [00:00:54] What do you mean, receipts? Everybody was making AI receipts with ChatGPT this week. If you if you were on any of the socials. Blake Oliver: [00:01:00] Actually. Actually, everybody was making Studio Ghibli images. But apparently if you're an accountant. No, no, no, that's not what we're doing. We're not making beautiful Japanese anime style images out of our photos. We are making fake receipts. David Leary: [00:01:14] And it. Blake Oliver: [00:01:14] All started. David Leary: [00:01:14] With one post, right? Like, there was one post about a guy who created a receipt for a steakhouse. Blake Oliver: [00:01:21] That's right. This is from Deedee on Twitter. He said you can use for GPT four to create fake receipts. There are too many real world verification flows that rely on real images as proof that era is over. And there's an image of the fake receipt he has generated, which looks pretty realistic to me. David Leary: [00:01:44] For listeners that have not seen this yet, it looks like a crinkled up receipt sitting on a nice wood table that you'd see at a steakhouse, and it has two filet mignons, a ribeye Caesar salad, creamed spinach, a baked potato, subtotal, tax tip and a total like. This is what you would submit through your expense reporting app, right? It seems very legit. Now I immediately because there's no alcohol on this. I was like, who goes to a steakhouse and doesn't get a bottle of wine or something? So it makes it a little sus because of that. But everybody on the internet lost their minds about this. All the accounting world. There were so many versions of this that got created. Blake Oliver: [00:02:21] And what's revolutionary about this is that image generation with AI has not been able to do text, and it has not been able to do math, math. And so the text and the math was always off. You couldn't use it to generate fake documents. But now with the latest upgrade to ChatGPT for image generation capabilities, you can do this now. It doesn't necessarily work as well as advertised. I wonder how many times Didi tried to do this, because I tried it myself and it didn't quite get it exactly right. Um, and I want to try this with you live later in the show. David. Um, and we'll talk about the implications of this. What does this mean for fraud detection? What does this mean that apps have to do? What does this mean for all of those flows that require documents? Pictures of documents for verification like this is going to get really easy to fake really soon. If this keeps. David Leary: [00:03:09] Years ago I don't know how long ago, but the IRS switched from requiring paper images, paper copies to having digital images of your receipts, right? Yeah. Blake Oliver: [00:03:17] So this is a big deal. So we're going to talk about that. Thank you, Hector Garcia, for bringing that to our attention on LinkedIn. We're also going to talk about Trump's tariffs which are cratering the stock market right now. The S&P 500 is down another 5% as we record today on Friday April 4th. It is down 11% for the month. And uh, almost like 12.5% for the year. So the markets are not loving Trump's new reciprocal tariffs, which are not actually reciprocal. We will talk about this. We're also going to talk about the IRS not sending any more paper checks. I actually thought that was going to be our top story today because that's a big deal, actually, not just the IRS. The entire federal government is going to move away from sending paper checks for payments, which could save taxpayers hundreds of millions of dollars a year. Uh, and also, that signal story got buried. Now, the, uh, what was it like Pete Hegseth and JD Vance and all these other guys were talking about striking Houthi rebels on signal the app signal. And I think there's a lesson here for accountants when it comes to that app, because it's actually a really great app. And if you want to talk securely with your clients, maybe that's what you should be using. So we can talk about that. Doge is going after the consultants. We've got that Douglas Edelman tax evasion story that I keep talking about, but I never get to. There's another startup fraud that could be the biggest one ever. Castle. And there's more news about rippling. The spy that infiltrated rippling from rival. Deal is saying that the startup founder, the founder of deal, was directly involved in this in his confession. And then we have a ton of app news from Zero Flow cast into it. But David first. David Leary: [00:05:18] Arguably ramp we have news from. Blake Oliver: [00:05:20] Ramp as. David Leary: [00:05:20] Well as to the fake fake I. Blake Oliver: [00:05:23] But first we should thank our sponsors. David Leary: [00:05:26] Yeah our sponsors this week is Cloud accounting Cloud accountant Staffing and Bluevine. Blake Oliver: [00:05:31] Thank you so much for your support. And welcome to our live stream viewers. Hello news retort. You're the first on, uh, on YouTube. Well done. We've got JMJ in the in the chat. Evan Boring accountant for coffees this morning. We've got hazardous items. Welcome everyone. If you are watching us live and you've never commented, I challenge you to comment. David Leary: [00:05:57] In this episode are impacting the price of coffee already because boring accountant instead of five coffee emojis only did four today. Blake Oliver: [00:06:03] Only four. Are you gonna have to cut back 20%? Boring accountant. We will see, we will see. Okay. First story today. Trump. Tariffs. I think I mentioned briefly in a previous episode that I am not totally opposed to the idea of tariffs, especially as a negotiating tool, which is what the business community was expecting Trump to do. And I do not think that the markets were expecting this level of tariffs. We're talking tariffs of a minimum of 10% up to like over 50% for some countries. These are tariffs on the entire world. And uh and they're not reciprocal. That's the crazy part about all of this. So the idea of reciprocal tariffs is we're going to look at what other countries charge in terms of tariffs on US exporters. And then all the other barriers they put in place from a regulatory perspective. And we're going to charge similar tariffs. And I kind of like that idea because it works as a negotiating tactic to encourage other countries to bring down tariffs on us. And then if it's reciprocal we would do the same to them. David Leary: [00:07:20] It's like the Cold War. The both sides try to make sure that the same amount of nuclear weapons pointing at each other. Blake Oliver: [00:07:26] Yeah, I like that analogy. David Leary: [00:07:28] If you have 1000 nuclear weapons pointed at us, we're going to point 10,000 at you. That probably doesn't work very well. Blake Oliver: [00:07:34] Right, right. And, you know, an economist would tell you that tariffs are actually never a good idea. And because that's how it maps out. Right. But economists are not politicians and they often don't live in the real world. And there are legitimate reasons to use tariffs. The United States used tariffs to great effect after the American Revolution to protect domestic manufacturing from British imports. The British were the leaders in manufacturing in the world at that time, and their exports were so cheap that factories in the in America couldn't compete. We're talking in the early 1800s, late 1700s, and we needed to establish manufacturing. And it worked. We had high tariffs on British imports and that protected our our domestic production. David Leary: [00:08:18] And you have to coddle your youth for a little while until they get their feet. And then you have to coddle them. Blake Oliver: [00:08:25] Let them stand on their own. David Leary: [00:08:27] Yeah, but coddling them once they've been around for 100 years of industrial production in our country, that's another different, different point of view, I guess. Blake Oliver: [00:08:35] Well, and I understand the idea of, you know, Trump's vision is let's bring back manufacturing to the United States, make the United States a manufacturing powerhouse again. But there's a lot of barriers to that. We've got these giant global corporations that have moved manufacturing overseas Canada, Mexico, China, wherever all over the world. There's parts flowing everywhere. There are products that are made in many different countries, and especially when it comes to like Canada and Mexico, the parts for cars, for instance, cross over borders multiple times before the finished product comes here. So these manufacturing distribution chains are all over the place and they're not bound by borders. And to change all that would be enormously expensive and then would take years and years and years. So it's not like this is going to be a magic fix and it's going to be extremely costly. Um, and I want to talk about the economic impact of these tariffs. But before that we got to talk about the calculation because it's not reciprocal tariffs. They were presented as reciprocal tariffs. But the calculation methodology has been revealed to be far simpler. And it's actually based on trade deficits rather than existing tariff rates. David Leary: [00:09:49] Well, I just want to read your text that you sent me because it has me intrigued and why I was waiting for you to talk about this. Blake sent me a text that says they used fake Greek symbols to make it look fancier than it is, and the symbols just cancel out. I'm like, what is he talking about? So that's what I'm looking forward to you presenting on this because you've. Blake Oliver: [00:10:06] Teased. David Leary: [00:10:07] Me very well. Blake Oliver: [00:10:08] We'll start with that. So this is a tweet from Kash, the deputy press secretary at the white House explaining the calculation for the tariffs. And it's got this like look at this David. It looks like it's got Greek symbols in it. David Leary: [00:10:25] Yeah. It's like your textbook. It's some textbook in college. Blake Oliver: [00:10:29] Yeah. It's delta t I equals x I minus m I over I think that's epsilon times. I don't even know what that. David Leary: [00:10:37] He posted this on Twitter which you could argue is the town square of the common folk. Like this is all of us. We're all on Twitter. Nobody. Nobody's using Twitter understands this post. This is crazy. It's like a delta of re like, this is insane. Blake Oliver: [00:10:51] Well, the calculation turns out to be total bullshit. And what's great about Twitter now is there is this really cool feature that's like fact checking the community, the community on Twitter can fact check posts and it can work for you or against you. And in this case, it was revealed that these Greek symbols don't mean anything because the the, the two Greek symbols are just placeholders for the number four and one over four. And if you multiply four and one over four, you get one which is they cancel out. So really the calculation is this. It is exports minus imports which is the trade deficit. So that's the numerator. And then the denominator is just imports. So it's it's the trade deficit the total value of goods that we buy from other countries. Right. Like that that that net value divided by the imports that they buy from us. And that's how. And then it's like multiplied by, I don't know, a half or something like that. So this is actually based on trade deficits. It's not based on tariffs. And that makes no sense because you can't just force other countries to buy stuff from us. If we don't make stuff that they want to buy, like this is not going to make them. This is not going to change the trade deficit. It's like whoever. David Leary: [00:12:13] Created they're not the same thing. Trade deficit and tariffs are not know. Blake Oliver: [00:12:17] And you know there's great examples of this. It's like let's say uh here's a good example. We all like bananas I love bananas, I eat bananas every day. And there are lots of countries where basically the only thing they export to us is bananas. We literally have a name for them, right? Banana republics. And so if you put a we might have a big trade deficit with them. We might have like a very high one because we make stuff that they can't afford, that they don't want to buy, and we want to buy all their bananas at really cheap prices. Well, now we're putting a high tariff on their bananas. That's not going to make them buy our stuff. It's just going to make bananas more expensive for Americans. And that's the impact of these tariffs. Uh, the Tax Foundation did a great analysis of what this means for us. Let's repeat. Go ahead David. David Leary: [00:13:12] I would say I listen to a podcast from the Tax Foundation this morning. And she said something there which I thought was really interesting. She was quoting somebody else like an economist or somebody. But the the protectionist has the advantage here because they can keep it confusing because most people aren't going to take the time to figure out what these formulas are or understand the actual what the tariff is. So the protectionist automatically is starting out in a winning position when they when they're going into the tariffs argument. Blake Oliver: [00:13:40] Well, and it's clear that, like most people don't understand how this was calculated or like, I'm not even sure the Trump administration really understands what they are doing when it comes to this. It makes no sense. So the Tax Foundation is a great nonpartisan nonprofit that all they do is they analyze the impact of tax policy on the economy, on taxpayers. I interviewed um, Scott Hodge, who ran the Tax Foundation for decades. Brilliant guy. Check out that interview on the earmark podcast. We talked about the unanticipated consequences of tax policy. He wrote a great book. Go to podcast. Com to find that episode. So I read a lot of the Tax Foundation's analysis because it's very objective. They they use science. They use math to figure this stuff out. And they are calculating that the tariffs that were announced April, uh, a few days ago on on Wednesday, April 2nd, I think, um, it's a 3.1 trillion tax increase over ten years. That is $2,100 per household this year, $2,100 more per household on average this year. Now, you and I, David, we make good money. That's not terrible for us, but that's going to really hit middle income households where they don't have a lot of discretionary funds. David Leary: [00:15:04] Well, it's it adds up. I might not buy this pair of shoes for my kid here. I might not, you know, you start making these cuts and that's what slows down the economy because you're going to you're not just going to invent two grand and have it to spend. You're going to have to cut. Blake Oliver: [00:15:17] Right. And while the tax foundation and they they admit that tariffs can incentivize more domestic production. But the cost of those jobs is very, very high. So we all pay a lot of money. And it's a very, very inefficient way to create jobs in the US economy. So I want to repeat something that we say that I've said on the show before. Tariffs are taxes. Tariffs are taxes on imports. Tariffs are import taxes paid by American businesses. Tariffs are import taxes paid by American businesses that are passed on to American consumers. So this is wild to me because what we have here is a Republican president who has just unilaterally declared one of the largest tax increases in the history of our country. These tariffs are larger than the ones that were put in place in the 1930s, before the Great Depression, and have led to the greatest decline in a single day in the stock market since COVID 2020. David Leary: [00:16:31] And it's already becoming real. And what I mean by that. I was dropping my kid off this morning. He's really into, like his camera gear and buying lenses and all this filming video gear. More than you, Blake. This is, you know, likes to blow money on this stuff. And he's like, oh, the prices went up on everything because it's all made overseas. And then I don't I know your boy loves his Nintendo Switch, right? Nintendo has a brand new Nintendo Switch coming out. People been waiting for it forever. They're going to start. They were going to start pre-selling it on April 9th. So that's when you you go to the store, you you put a deposit down so you come back, get it at midnight the day it's released. You know, a lot of the video game stores do those types of things. And the reason they're delaying it is essentially they don't know how much the price of it is going to be. How do you presale presale or presale an item that you don't know what the the cost is? Who's going to buy an item? Please reserve and pre buy this item, but we won't tell you how much it's going to cost until you know you go to pick it up. Nobody's going to pre buy it. So there's going to delay the whole pre-sales. Blake Oliver: [00:17:31] And that's a great example because video game systems are loss leaders for video game companies like Nintendo. They sell those systems actually much cheaper or at cost than what it costs to manufacture, and they make it up on selling the games to you, which now you can buy as digital downloads. So the, the, the game systems are heavily subsidized. But if the tariffs are really high on that, then that screws up all the calculations for the lifetime value of that system. And I'm sure that the financial planning and analysis folks over at Nintendo in Japan are just freaking out right now trying to figure out what do we price this system at? They have no idea. And that is also one of the big unintended consequences of this policy, is that it creates a ton of uncertainty for global businesses and for Main Street businesses that rely on products that they import from overseas to sell to American consumers. So I want to highlight something, a stat that backs up what I said about the cost of creating jobs. Because it is true that protectionism does create American jobs. You put tariffs on imports. Well, yeah, some of that is going to come back to the US in terms of more jobs. We have an example because Trump did tariffs in his first term. The 2018 tariffs created about 1800 factory jobs 1800. Blake Oliver: [00:18:58] But they cost US consumers approximately $800,000 per job. And these jobs started at $16 an hour. So it's not like these people are making that much. So the return on investment of tariffs can be very low. And it really screws up the economy. Because here's an example. Apparel. Apparel is very cheap to manufacture in China Vietnam Bangladesh. If you bring it back here it's way more expensive because the labor is the primary cost. It's very expensive. And so every factory worker who now works in an apparel factory in the US is somebody who could have been working in a more A factory making higher value goods here in the US. So it takes from other domestic production and it reduces economic output because of that. So these are all the things that I don't think Trump is thinking about. I don't think that the administration understands. And this is basically raising the odds of a US recession. Goldman raised the odds of a US recession from 20% to 35%. And JP Morgan went even way higher. They raised the odds of a US recession within the next year to 60%, up from 40% before the announcement. So I mean, we're looking at like flip a coin. We could have a recession if you kind of average all that together. That is not good. David Leary: [00:20:33] So you said this previous tariffs created 1000 jobs. Blake Oliver: [00:20:37] Uh, 1800 jobs. David Leary: [00:20:38] 1800. Okay. I think well, the new tariffs caused 900 people to be laid off by that Stellantis. So Stellantis, I think is the, uh, GM's branch of the Chrysler products. Okay. I'm not like the total car guy, but it's it's GM's branches are some of their part of their Chrysler division and what they had to lay people off because like you said earlier, so many of the parts, some parts of the car in Mexico, some parts of them over here, and because of these overall issues with the tariffs, maybe this could actually I'm not saying cause shipping delays, but people are going to buy parts slower because it's more expensive. They had to lay people off because they're not going to be able to have the pieces they need at the price they need to build the cars in these US factories. So not enough people got laid off temporarily in the United States because of the tariff. Directly auto related. Blake Oliver: [00:21:31] Wow. David, I think it's time to thank our first sponsor. David Leary: [00:21:39] You want to read the first one? Blake Oliver: [00:21:41] Yeah. You got it. So this is cloud accountant staffing. Thank you to Cloud Accountant Staffing for sponsoring this episode. In case you missed the last 100 or so episodes, David and I have been discussing almost weekly that there is an accountant labor shortage, regardless of the root cause. The problem is real. My social media feed is full of firms attempting to fill open positions on their teams, but how can anyone increase their staff size if everyone is attempting to hire during a labor shortage? That's where cloud accountant staffing comes in. They'll help you hire full time team members for your firm that reside in the Philippines. How much would your firm change? Or for that matter, your life? If you could add 40, 80, 120 hours of capacity to your firm in 2025? Cloud Accountant Staffing was founded by a firm owner who grew his firm using offshore talent, and now he is applying everything he learned to help you grow your firm. If your firm is in need of expert bookkeepers, accountants, CPAs or virtual assistants, head over to cloudaccountingpodcast.com. That's Cloudaccountingpodcast.com. Sorry. That's cloud. That's The Accounting Podcast dot promo. Slash The Accounting Podcast promo. Please go check them out. Use that URL to support our sponsor and our show. David, now we need to talk about fake receipts. Do you want to try to make one? Let's see if this works because I'm always skeptical of what I see online versus what I can actually do with the app, because I feel like sometimes these influencers, they'll do it a bunch of times and just post the one that worked the best. So that's why I'm often disappointed. David Leary: [00:23:20] Let's mix it up a little bit. So let's make a fake receipt for Walmart that now includes sales tax and a tariff tax of 20%. So let's. Blake Oliver: [00:23:30] Okay, so, um, please make a receipt for Walmart. David Leary: [00:23:38] I think you have to say like a photorealistic receipt. Blake Oliver: [00:23:41] Oh, David, I can't hear you. I think it's because I turned on voice mode. Go ahead and speak again. David Leary: [00:23:45] I think. Blake Oliver: [00:23:46] Why don't you dictate? You dictate to me and I'll type. David Leary: [00:23:48] Okay. Let's create or I need you to create a receipt. A photorealistic receipt. Blake Oliver: [00:23:56] Okay. David Leary: [00:23:56] From Walmart for some household items, a shirt, shoes and a 32 inch television. Be sure to have accurate prices that it should have sales tax, and should also include a tariff tax for 20%. Blake Oliver: [00:24:15] All right. Anything else you want to add to this. David Leary: [00:24:20] I think that's probably good. Blake Oliver: [00:24:21] All right. Let's see what it does. Oh, you know what I did? I forgot to turn on the create image. I'm going to do another one. They have this just create it was. David Leary: [00:24:31] Describing what it would draw. It didn't actually draw anything. Blake Oliver: [00:24:35] So it used to be you could just put in the prompt and it would just create the image based on the prompt. But now you have to select the button create image. So now it's going to. David Leary: [00:24:41] Be a paid plan. To do this right. Blake Oliver: [00:24:43] You have to well. David Leary: [00:24:46] Or beside that keeps. Blake Oliver: [00:24:47] Changing. They limited it to the paid plans. But then I think some free plans can do it. But then so many people were doing those Studio Ghibli images that they had to limit it. Like Sam Altman tweeted out that they were melting the GPUs in the server farm or whatever. So, uh, I don't know what the current status is, but if you're going to do this, I highly recommend that you have a paid plan anyway and that you turn off. Use my prompts to train the model in the settings because you don't want what you submit into ChatGPT going into that model. So remember, if you're not paying for the product. You are the product. Just like social media. So just pay the 20 bucks a month, you know? Chatgpt needs it to pay for all this compute. By the way, they just raised, I think, another $40 billion. One of the biggest fundraisers in the history of startups, if not the biggest. And we can see here on the screen that the receipt is starting to generate. And the Walmart logo looks really good. I can't compare it, but that looks like the Walmart logo to me. Now it's using a placeholder, uh, address and fake phone number. It's got like a transaction code coming down. And here we see the shirt. 1460, 1496 shoes, 24, 76, 32 inch television, 198 and subtotals at 237, $237.72, with sales tax of only $9.51 $0.81, and a tariff tax of $47.54. Total $294.77. I'm not sure if that sums up. David Leary: [00:26:32] Maybe it does. On the air, maybe the people in the audience that are in the live stream can tell us if the math is good or not. Blake Oliver: [00:26:39] But you know, what's interesting about this is that, like, the receipt is crinkled. It's on a surface that looks real. There's a shadow under the receipt. This paper looks real to me. And the text? It looks a little too good. Like, it doesn't look quite like the text. Like it looks like the text has been superimposed over the the receipt. But you can see how this is getting to be really good. David Leary: [00:27:05] Well, we could ask it to make the text look like the printer was inconsistent in its ink distribution. We could say put a coffee stain on it. There's other things we can do to make this, or make it look like you picked it up out of the parking lot. There's lots of things you could do, and it just does iterations. But what I found, the problem is, and I think you're right, people are putting the perfect version up online because when I was messing with this, sometimes it would like take off the sales tax. I'm like and they have to say put the sales tax back. It just forgets to do things. Blake Oliver: [00:27:34] But like so I'm prompting it now to make the text look more realistic. Add a coffee stain, include percentages for taxes and use a realistic address and phone number. And we'll see what happens here. David Leary: [00:27:46] So while this is happening, I'm going to tell a story from back in my days from 1995. So we're going to go back. That's 30 years ago. I was working at the mall and at the time I came, I filled in for another assistant manager down here in Tucson. So I was living in Phoenix, drove down here to the store. So we worked at Babbage's and we did software sales, video game sales, etc. and before I got there, the other manager gave me a heads up that somebody did a special order and it was a big order. It was like five grand in software because they were buying Photoshop, CorelDRAW, um, some other graphic tools because at the time, you didn't carry $1,000 products on your shelf in the store would always be a special order for a customer. And they were coming in to pay for it with a cashier's check. So I just I was working that store. I go out, all right. This guy showed up. They had this whole story how they're starting a business. Et cetera. Et cetera. Here's your software. I take the cashier's check. I deposit it with all the sales that night at Bank of America. The next day, we get a phone call. Cashier's checks. Not real. It's fraudulent. I felt really stupid because it was like it was a pretty big amount. Like for the mall, if it's not Christmas week and Christmas sales, a $5,000 day is pretty significant, right? If you do $5,000 in sales on a mall at a store like that, and I felt really stupid until I found out the same day they went and bought a car at a new car, at a car dealership the same day, did the same thing we found out from the detectives when they came in. So they just like this has been going on forever. It's not because of AI. People want to make fraudulent stuff, have been able to make fraudulent stuff. The difference is 700 people were making these within seconds over the course of this week on the internet or us on our show. That's the difference. We're doing it instantly. Blake Oliver: [00:29:35] And we now have version two of the receipt on the screen here. It added the coffee stain, which looks really good. It made the text more faded. It's it's getting more believable. David Leary: [00:29:47] It and the paper doesn't look too white. It has that aged feel it. Blake Oliver: [00:29:51] It added a more realistic address and phone number. They're not placeholder values anymore. It didn't add the percentage. I probably needed to be more specific in the prompt about where I wanted that percentage to appear, like for the sales tax. And funny though, it changed the total. So I mean, this was a very basic prompt. I bet if we sat here for a while and we worked on our prompt and we created some sort of standard prompt like system instructions and created a project for this in ChatGPT. We could reliably generate accurate receipts. Some of our live stream listeners were saying that it's missing certain fields. But imagine if you gave the AI examples of real Walmart receipts. It's doing this based on its general knowledge. So if you gave it a bunch of real Walmart receipts as examples. I mean, that's the way you get really good output and then you don't have to specify all this stuff. So we are able to do this in just a few minutes. If somebody's talented smart who is a fraudster for their profession, their job, I guess we shouldn't call it a profession. That's a little insulting to professions, but they work hard at it, right? They're very talented. If somebody does this for a living, they're going to be able to generate photorealistic receipts that humans will not detect because humans are looking at thousands of these. David Leary: [00:31:19] So what's the impact? You submit a fake receipt to your employer to get reimbursed for something, or you keep this fake receipt as documentation for your tax return. Is there another? Am I missing some other possible use case here? Blake Oliver: [00:31:35] Well, fake. David Leary: [00:31:35] Invoice accounting or fake invoice fake invoices. Yes, yes. Blake Oliver: [00:31:38] Outside of invoice fraud, is is enormous. Um, it costs an average like mid-market business loses close to $300,000 a year in invoice fraud every year. And that's from traditional methods of faking invoices. So a fraudster will hack into the email account of a vendor and then start sending invoices to you and change the account number, routing number. They might email you and say, hey, I need to change my bank information. And if you don't do any other verification, you think this is actually coming from your vendor. You might do that and they'll change the invoice in very slight ways to do this. Um, and so this just makes that even easier. Now this will also enable additional expense reporting fraud which already happens. People will submit personal receipts for business expenses. And I think the problem here is that there's just not a lot of humans looking at this anyway. So these apps that do expense management have got to prioritize immediately adding in features that will automatically detect this kind of thing. And we saw that from ramp. David Leary: [00:32:52] Yeah. Ramp. Instantly the same week they they're basically in one day after this started to break this new story ramp released a new feature where they'll flag, detect and flag a receipt like this and they'll quote unquote receipt likely I generated. But not only does ramp detect it, they'll actually let you create rules around the conditions. So when it detects a receipt like that, who you route the root the receipt to. As the approvers, um, they can mark it as spend violation. So so they've taken. Not only are they detecting it, they fit that into the rest of the ramp workflows. Now only paid members get access to that though. So if you're a free amp ramp user you're not going to detect any fake receipts. So you have to be on their paid plan to get it. Blake Oliver: [00:33:32] Yeah. So the other thing too is that it's only right now using the metadata. So if you generate an image with ChatGPT, when you download that image to your computer or your phone, it includes metadata in the image that you can't see. If you go into iPhoto and you open up the information about the photo, you'll be able to see the metadata and it will say something like created by ChatGPT. And I don't know if there's like watermarking that happens as well. That's not visible to the human eye, but there is metadata in that image file. So what Ramp is doing is they've just built in a way to read the metadata of every photo and then identify if it was generated by AI. Now a smart fraudster will figure out how to strip out the metadata. David Leary: [00:34:14] Yeah, there's tools to let people do that all the time because you don't want your GPS coordinates going out on a phone, uh, on a photo, etc.. Blake Oliver: [00:34:21] So the next step for these apps and that I expect ramp to do and other ones to do, is they have to build API connections to OpenAI, where every image of every invoice and every receipt is sent to one of these tools. And there's a prompt that is built into the app that asks the AI to analyze the actual pixels, the image for AI generation, and then return some sort of confidence score. And then we can surface the ones in the app that are the most likely to be artificially generated. And that would also help with the existing type of fraud, where somebody takes a PDF and then edits the PDF and changes the numbers. And it also needs to look at historical transactions and see if there were changes. David Leary: [00:35:10] I could see laws being passed around that around this. I know if you have an HP printer scanner, you scan $100 bill and try to print it. It will not print it for you. They so they built stuff in their chips and technology that it will not print those or, or if it does, it tries to basically puts like a detectable thing to tell who printed it and where on the printout. And so that's kind of what you're proposing is the GPT tools need to proactively communicate back to or have an API connection for people to verify receipts against. Blake Oliver: [00:35:41] Yeah. Well, I mean, I'm saying that these expense management apps need to build this using the features that are available. Like you can you can create an API connection from your app to OpenAI and send the image with a prompt and ask it to give you a confidence score. Like, I could build this with our workflow software. So this is totally doable. They need to do this ASAP. Um, because of this problem. And it's it's I think, the that the most innovative apps will be the first to get there. And it's great to see ramp do this. And it just puts the companies that are using these cloud based tools so far ahead of the businesses that are still stuck on these legacy ERP systems, that have no APIs that can't do this. So basically, all the underinvestment that we've seen in finance and accounting over the past few decades is now going to put them twice as far behind, ten times as far behind, because they can't do the automated prompting to generate this stuff. David Leary: [00:36:42] Desktop GL or you're still using a self-hosted, desktop based GL on a server in your office. By the time you get a patch or an update to detect these, it might be too late. Versus oh, they're never going to build ramp. Turn this around. And basically a day which you can only do with cloud. You can't distribute desktop software that quickly. Yeah. Blake Oliver: [00:37:01] So. Let's talk about signal briefly since we're on technology. There was the story earlier. I think it was earlier this week, or maybe it was at the end of last week of last week in the show, so we missed it on the last episode. Uh, you know, the defense secretary was using a consumer app called signal to communicate with other people in the cabinet, other people in Trump's orbit about these military strikes on Houthi rebels in Yemen. And the defense world, the intelligence world was just up in arms about this because it's a ridiculous breach of security, right? Like that, they were using non-government systems to communicate about basically military operations. Um. David Leary: [00:37:50] Because that they would it would look like they were copying, pasting something that was maybe on their military communications system into this thread, like just straight up pasting it in. Blake Oliver: [00:37:59] And then they accidentally added the editor of The Atlantic to the to the chat. David Leary: [00:38:04] Yeah. Blake Oliver: [00:38:04] That's right. Which you know, I mean, it's so funny because that's something that happens in real life when you're like, planning a surprise birthday party for somebody and you accidentally add them to the chat, right, or whatever it is. And this just happens to be like military secrets. And I don't really want to get into that because that's been talked about ad nauseam. And, you know, you can care or not about like, national security from that perspective. Um, but, you know, it is interesting because I'm familiar with signal because I know a number of accountants who use it to communicate with clients and signals. Actually, to be fair to Pete Hegseth, a really, really, really secure app, it's run by a nonprofit in the US, and the code is open source. So you can all the developers, you know, can look and see if there's any security vulnerabilities. And the way signal works is that all the communications are encrypted between you and the other user, and the messages are never stored on signal servers. They're only stored on the local device. And so this is great because if there's stuff like where you don't as an advisor, you don't want to create a paper trail or a digital trail that is discoverable in a lawsuit or perhaps in an audit signal is the app you should be using because you can turn on disappearing messages in signal. And so you can say, I want messages to disappear after a few hours or a few days, a few weeks, and then they will disappear. And once they disappear off the local device, they're gone. And there's no messages that could be discoverable. So I'm not saying use signal because you need to do shady stuff, but what I am saying is that this is the replacement for phone conversations. So I know there's a lot of advisors that do not like to have communications in email, because they don't want those communications to be discoverable emails. David Leary: [00:40:03] A postcard. That's right. It's a postcard. Blake Oliver: [00:40:06] So, you know, let's say you're talking about a, you know, gray area tax strategy with a client. And there's a question as to whether or not this is tax avoidance or tax evasion. You do not want the client asking you about this in email, and you do not want to be replying to them via email about this. So that's why you pick up the phone. Well, signal is that replacement. It's the best option available for that. Now do your own research. Don't rely on this statement. But what I'm telling you is that if you want to have a secure communication with somebody, signal is probably the best way to do it. There are other options that have secure encrypted communication, but they're not open source. So WhatsApp for instance, has this, but they're owned. David Leary: [00:40:49] By Facebook, so take your chance. Blake Oliver: [00:40:52] So anyway, don't do this stuff in iMessage. Do it in signal. Turn on the disappearing messages. Um, and so actually like the you know, Hegseth was like, good to be using signal. At least they were using signal. At least they weren't doing it in iMessage or something. But, uh, you know, still like, come on now. But but I also kind of sympathize because I've been forced to use systems apps at like, large companies, like when I worked at a large accounting firm, and I would go outside the official apps that we were allowed to use because I just couldn't handle it. Right. So I would use stuff that wasn't endorsed by the IT department. I would just buy it and get it and use it. And that's basically what they've done here. But you know, like I, I don't I, I hope they learn their lesson here. I, they should not be doing. David Leary: [00:41:43] To pivot off of this about messaging. The reason they caught. So we'll go back to rippling the rippling spy story from last week or the week before. The reason they caught that employee is because he was he was going to slack channels. And slack has this ability. The administrator can see what people are saying and doing on slack. Blake Oliver: [00:42:01] Yes, this is really important reminder. Everything. Every conversation you have on slack or on Microsoft Teams is saved, and administrators can access those messages, including your direct messages. So if you want to have a private conversation with somebody, don't do it on your official company, Slack or Microsoft Teams. Yeah. David Leary: [00:42:22] And the reason the reason this even ties back in more. So there's another tweet storm from Parker Conrad, who's the founder of rippling because the recruit, the spy, the alleged spy, the deal spy who was working at rippling confessed. And this confession talks about how the founder of deal actually orchestrated this. And then the other, the deals. Um, the founder of deals, father actually was doing the payments and they wanted to keep everything separate on hidden channels. So they used a similar app called telegram to communicate through. And so every time there's a communication happening, you know, through email or something else. Oh, I want you to from this point forward, only talk to us on telegram. So it's the full circle of this private messaging. But they did it because they didn't want to have the paper trail of this espionage, corporate espionage that was going on. Blake Oliver: [00:43:19] And crazy, crazy, uh, fact here, the initial payment was only $6,000. That's all it costs to buy a corporate spy. $6,000. Somebody would risk their their career. They would risk jail time for $6,000. And that's why. David Leary: [00:43:39] He asked for a, uh, like a fake consulting contract. So that way, when the money's deposited in his bank, he could have some. It was for this, not this over here. Uh, he could have just made a fake consulting contract himself with AI. He didn't need to ask them for one. Blake Oliver: [00:43:54] Now, we should, uh, we should point out this is alleged. This is not proven in court, but the confession is posted online and you can find it on YouTube. David Leary: [00:44:06] Assuming this is not an AI generated photo of the confession, like we can't trust anything we see anymore. Blake Oliver: [00:44:14] Man, the the allegations are wild here. The CEO of deal was personally involved with his father in orchestrating a corporate espionage scheme against rippling AI. I cannot well, I can believe it because crazier things have happened. We saw this week fashion startup Castle Castelli is accusing the founder of fraud. This fashion technology company raised over $534 million in venture capital, and they're nearly bankrupt. The founder and former CEO, Christine Hunsicker has resigned amid allegations of financial misconduct. All the employees have been furloughed for two weeks, effective immediately, and law enforcement is investigating the situation. According to a March 29th board letter to investors. Hunsicker provided misstated financial statements, falsified audit opinions and capitalization information that understated outstanding shares. The board claims she was still fundraising as recently as a week ago, despite ongoing investigations into her actions. This was a subscription box company for plus size women. So your plus size your woman. You can subscribe to get one of those boxes of clothes to. David Leary: [00:45:37] Send you clothes every month. Yes, you keep what you want and send those back. Blake Oliver: [00:45:41] They ran. They you know. And so like, I'm just thinking to myself, that sounds like actually a not a great startup idea to me, right? David Leary: [00:45:51] But not now because the tariffs, you know, These clothes you're shipping to. People are all probably made overseas, and now it's going to be very, very expensive unless you're locked in, unless you're locked into a good price. As a customer, maybe a closed subscription is a good idea. Blake Oliver: [00:46:06] So this is really big. I mean, you know, they raised like half $1 billion in VC money. So this is like on the level of like I mean, we're talking about, uh, Theranos, you know, this is like, this is big. And the thing that stuck out to me here is the falsified audit opinions. So if you're an investor and a founder sends you an audit opinion, like, what if they just made a word document with an audit opinion and put Deloitte's name on it, or some firm you've never heard of and sent it to you? Who's verifying any of this stuff? It's actually really easy to do because every audit opinion is like a template. David Leary: [00:46:49] Flip over to ChatGPT. Blake Oliver: [00:46:52] Should we make an audit opinion? David Leary: [00:46:54] An audit opinion. Blake Oliver: [00:46:55] Okay. David Leary: [00:46:56] The accounting podcast. You know. Blake Oliver: [00:46:59] Uh, please, uh, draft an audit opinion letter for my company. You want to do the accounting podcast? Yeah, the accounting podcast. Uh, make it super realistic. Something I would send to an investor to raise. David Leary: [00:47:19] Should we specify a firm? Blake Oliver: [00:47:21] Um, yes. Pick one. David Leary: [00:47:23] Kpmg. Blake Oliver: [00:47:25] The audit firm, is KPMG. I mean, we're not giving it much to work with. And now ChatGPT is generating a realistic and formal independent auditors report from KPMG LLP. And here we go. We've got the letter. We've got independent auditors report. It's got the you know from and two and here's the opinion. We have audited the accompanying financial statements of the Accounting Podcast LLC, which comprise the balance sheet. Blah blah blah. Related statements of operations. Members. Equity. Cash flows. In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of the The Accounting Podcast LLC and then its got the basis for the opinion section. It mentions that they used the generally accepted accounting standards responsibilities of management. We've got the auditor's responsibilities and there's the letter. So you know that's just a simple little prompt there. David Leary: [00:48:25] So so an investor may not be doing enough due diligence. They see the letter like oh you got the letter from KPMG and they just move on to the next thing and the next thing. Blake Oliver: [00:48:32] Right. So going back to the receipts issue, we cannot anymore rely on documents provided, photos provided. There has to be some sort of third party verification of this because anyone can make a realistic audit opinion letter, you could generate realistic looking financial statements. You could generate realistic looking anything that would have formerly been difficult to create. David Leary: [00:49:02] Yeah, it's more interesting with the difficult things because everybody's seen a receipt. Everybody could go into Microsoft Paint and probably make a fake receipt that might pass, but not everybody knows what a qualified audit opinion looks like. And now anybody can make one. Blake Oliver: [00:49:18] I might get back into auditing. David, it seems like it would be really easy with AI to generate all of these, uh, audit opinions that I could get paid a nice fee to do, I don't know. Okay, so we talked about Castle. I got to talk about, um, this other tax evasion guide. But first, let's thank our next sponsor. How about that, David, do you want to read that one? And when you are done with that, we are going to dig into who's this guy I keep talking about what's his name? David Leary: [00:49:49] The story you keep forgetting about? Blake Oliver: [00:49:51] Yes. The, uh. Uh, Douglas Edelman. Okay, I'm talking about Douglas Edelman. Finally, after this. David Leary: [00:49:57] You go get that story ready. Your small business clients deserve banking built specifically for them. Meet Bluevine, the business banking platform created to save you and small businesses time, money, and hassle with Bluevine. Your clients don't need to need a savings account. They can earn up to 1.5% APY on checking balances when they meet an activity goal, or up to 3.7% APY automatically. With upgraded plans and with no monthly fees for standard plan customers. Free standard ACH and competitive rates on same day ACH wires or in international payments, they'll save more where it counts. But Bluevine doesn't stop there. 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Thank you Bluevine. Blake Oliver: [00:51:37] Thanks, Bluevine. I want to highlight a comment here from the chat. Light em up says regarding the signal chats. This is a very good point. The main problem is that even if signal itself is secured, the devices they used weren't, which is why classified information can only be transmitted on approved devices and via approved methods. So that is the problem is that if the device that they were using, like a personal cell phone had malware installed, which is doable, if somebody wants to hack your phone, they can do it. If they're willing to pay $1 million. There's like a company in Israel that will do this for you, then, you know, that's that's a problem. So they have to be using government devices. Okay. Douglas Edelman, thank you to The Wall Street Journal for this story. Douglas Edelman is the $7 billion defense contractor who became one of America's biggest alleged tax cheats. Douglas Edelman is now 73, and he left his family in Texas in the early 1990s to seek an opportunity in post-Soviet Russia and later Kyrgyzstan. After nine over 11, he and a partner in Kyrgyzstan secured a $7 billion US military contract to provide fuel and services for troops in Afghanistan. Blake Oliver: [00:52:51] So this is one of those guys who profited off of the war in Afghanistan. It made him a multimillionaire. It funded a luxurious, luxurious lifestyle with his French wife, Delphine, including multiple European homes, yachts and a $43 million London mansion. Prosecutors are claiming that Edelman falsely reported that his wife owned the defense contracting companies because she's French and wouldn't have to pay U.S. taxes. Therefore, he reported less than $1 million in annual income as a consultant to these companies from 2016 to 2020. And fun fact about the United States tax system. We tax your global income all over the world, no matter where you are. So if you are a US citizen, it doesn't matter if you're living in London or France. You got to pay tax on those hundreds of millions of dollars that you made. But Edelman was trying to get around that, saying that his wife owned these companies. She's a French citizen, wouldn't have to pay them. David Leary: [00:53:51] And he. Blake Oliver: [00:53:51] Wouldn't pay the US. David Leary: [00:53:52] Tax. If he's like, I made $900,000 and he paid taxes on that, he tried to make it look like he was. Blake Oliver: [00:53:58] He faked it. David Leary: [00:53:59] Yeah. Blake Oliver: [00:54:00] He said he made $1 million in annual income, but he actually on that. Yeah, but he hid 350 million. $350 million in income, evading $129 million in taxes. I think what makes this even worse is that he was making that money from US taxpayers, funding the war in Afghanistan, delivering fuel to troops. So like he's he's siphoning money out of the American economy. David Leary: [00:54:27] He paid he got back right into his own pocket. Yeah. Blake Oliver: [00:54:29] Yes, he got caught because a whistleblower tipped off the IRS and it led to a multinational investigation by tax authorities. He was arrested in Ibiza in July of 2023 and extradited to the US in September. He was initially released on $12.9 million in bail, but it was revoked in December because he was contacting potential witnesses against him. His wife fled to France rather than join her husband in the US and hasn't entered a plea. So this is one of the largest. Actually, this would be, I think, the largest tax evasion case in US history. David Leary: [00:55:10] That we know about, that that was. Blake Oliver: [00:55:13] That's ever been prosecuted, right? Yes. Yeah. So it's funny because I don't know, I guess if he'd set this up right in the first place and actually had his wife own these companies, I don't know if that would have been a way to do it, but he really screwed up or his accountants screwed up. I also just don't know why guys like this do this. You know, you're worth hundreds of millions of dollars. Why? You know you. David Leary: [00:55:36] Yeah. What's $40 million? What's $50 million? If you just pay in taxes, I know you're not even gonna notice. Your lifestyle won't change. Blake Oliver: [00:55:42] I think there's just something, like, psychologically wrong, you know? And I guess it goes to this idea that the more money you make, the more money you need. And. And he feels like he's entitled to it. Right? I'm just speculating, but that's the only reason I can think that somebody would do this. Well, so. David Leary: [00:55:57] I think Bill Burr's big comment on Elon Musk is, how could you be that rich? Obviously, the system is working perfectly for you. Why are you so upset with the system? Like, obviously this is a great country if you're that rich. Like nothing's wrong at all. Like, how could you have an opinion that things are wrong when you got you became that rich? Blake Oliver: [00:56:15] So let's talk now about the IRS and paper checks, which was going to be my top story before tariffs and fake receipts. If I can find it where do I put this? David, have you been. Why don't you. I did not. David Leary: [00:56:31] Have that story ready. But I'll let you find it. But I'm going to pivot over to. We have predicted this or thought it could happen a couple weeks back, but Deloitte is now planning layoffs due to federal crackdown on consulting contracts. So this week, um, Deloitte started initiating layoffs in its government and public services practice following all the scrutiny and cost cutting from Doge. And they confirmed this on an internal call on Thursday. They'll affect a small percentage of staff and be completed by the end of April. And so Deloitte is already seeing changes to 127 federal contracts since January of 2025, totaling around $371 million. Basically 11% of its annual revenue since January. So what are we three months into the year? Yep, they've lost 11% of its revenue because of these cuts. Blake Oliver: [00:57:21] Uh, $130 billion in savings that Doge is claiming due to these cuts. And their goal is to reach $1 trillion in total savings. Uh, that's across all the federal. David Leary: [00:57:33] Contracts, everywhere. Blake Oliver: [00:57:34] With all the consultants, which, as JMJ pointed out, includes Accenture. Deloitte had 129 contracts terminated. Wow. Booz Allen 60 contracts terminated. Guidehouse 54. Accenture 30. And General Dynamics 16. Accenture was actually the first to hit get hit by this. Their shares tumbled 7.3% following their company's earnings call, where they revealed that federal spending cuts are affecting their revenue. Federal services represents approximately 8% of Accenture's global revenue and 16% of its Americas revenue. Wow. 16%. So I got to say, um, it's hard to find fault with these cuts because what what are these consultants doing? Right? Like, we're all here complaining that the federal government doesn't do anything. And these guys are pulling billions of dollars out of the government to consult with them to make them better. So, like, yes. David Leary: [00:58:33] Stereotypically, the Everybody. I mean, stereotypically, the consultants people think are just a waste of time and money. When you work at a company and the consultant comes in, you're just rolling your eyes. Blake Oliver: [00:58:44] Oh, the memes about that. Like the reels on Instagram and TikTok about the consultants. You know, it's like the it's the CYA method, right? Why do you bring in a consultant to a company, David. David Leary: [00:58:56] So that way I can say the consultant told me to do it right. Blake Oliver: [00:58:59] You've already made a decision, and you need a consultant to come in and back it up. And then if it goes sideways and doesn't work out, it's Deloitte's fault. It's Accenture's fault. It's KPMG's fault. It's one of these big firms fault. Right? Yeah. And they've been making so many billions of dollars making PowerPoints and and they're abusing young 22 year old staff to do it, keeping them up all night. And and they don't know what the heck they're doing. So like, yes, this is the place to cut is, you know, I'm sure there's good consultants. Don't get me wrong, I'm sure there's a few good consultants out there that are doing great work, but I'm guessing that if all of this stuff went away, we would we would not see the government fall apart. I think we might see things go a little faster. Honestly. David Leary: [00:59:50] It makes me wonder, you know, the big splits, the accounting firms, they want to split off the consulting arm from the compliance arm. Blake Oliver: [00:59:56] Maybe no more. David Leary: [00:59:57] Investments with PE. Where's this the valuations that PE is now going to put on accounting firms has got to fall a little bit because they don't. They wanted that the the profitable consulting divisions. And if they're losing contracts they're not going to be as interested. Blake Oliver: [01:00:13] All right. So sticking with the federal government but going back to the paper checks thing because I found the story. Trump signed an executive order mandating electronic federal tax transactions beginning as early as September 30th of this year. All payments to and from the US Treasury must be made electronically, with some exceptions. This includes the Internal Revenue Service. Federal tax payments and refunds will no longer be issued by check. The implementation can be phased in with the electronic refund requirement specifically starting September 30th. So refunds your clients getting tax refunds. It's going to have to be electronic starting September 30th. Now there's a transition period expected for tax year 2020 for payments and 2025 estimated payments. Paper checks may still be accepted during this transition after the transition, which it sounds like will be in early 2026. Electronic electronic payments will be mandatory unless exceptions apply. David Leary: [01:01:17] So both directions paper checks eventually. Blake Oliver: [01:01:20] So the following groups may be exempt. There's exemptions in this executive order. Individuals without access to banking services or electronic payment systems. Certain emergency payments where electronic disbursement would cause hardship, national security, or law enforcement activities requiring non-electronic transactions and other circumstances determined by the Treasury Secretary. I love this idea. Assuming that there are enough exceptions for, let's say, particularly elderly clients who may struggle to do electronic payments. That was what people on tax professionals on Twitter were talking about the most is, I'm going to really struggle to get my older clients to do this. It's going to save the US government a lot of money. Um, according to Federal Reserve reporting, the government processed approximately 36 million paper checks last year. But the DOJ is saying that Treasury processed 116 million. So there's like some some variation here. Uh, the white House says that maintaining the infrastructure to support all these. Paper check payments cost taxpayers $657 million in 2024. That's a lot of money. Now, are we going to get all of that back? No, because we're going to still have to have the ability to print paper checks. But I try to do a quick back of the envelope calculation as to what this costs to send all these checks. And I'm, I'm guessing like my, my, my estimate is this is somewhere between like five and $20 per check. David Leary: [01:03:05] By the time it's printed mailed. Blake Oliver: [01:03:08] And that. David Leary: [01:03:09] Fits. Blake Oliver: [01:03:09] Actually that fits with like what? Like small businesses. Uh, I remember when when when I was helping small businesses convert to electronic payments with accounts payable apps. When it first started. I would use that as a as a baseline. I'd say, look, it's probably costing you about $20 Check. Check. So you're sending 100 checks a month? Right. This is costing you $2,000 a month in terms of labor, postage, all that. David Leary: [01:03:42] And this ties right back to the I fake receipts, because I'm sure some fraudster somewhere is creating fake treasury checks and cashing them. Blake Oliver: [01:03:49] Oh, yeah. And actually, the, uh, fraud on these checks is 16 times higher than electronic payments. So switch to electronic payments and you reduce the fraud by 16 times. It's a lot harder to fake an electronic payment than to fake a check. Right? Like I can steal a check out of your mailbox and do check fraud. Not that hard these days, because you can just change the name on the check. Deposit it by taking a picture of the check. Oh, actually, that's going to be a big problem, David. David Leary: [01:04:20] Oh, we should try that. We should make a fake check. Take a picture. Check. Well, I don't want to go to jail for. Blake Oliver: [01:04:25] Well, I wonder if if I can't believe that ChatGPT wouldn't have some sort of controls in place, but like, I mean, let's try this, uh. David Leary: [01:04:35] Make a check to David Leary for $1,000. Blake Oliver: [01:04:38] Okay. Uh. David Leary: [01:04:41] Bank of America. Blake Oliver: [01:04:42] Image a photorealistic. Image of a check from David Leary at, uh. At Bank of America. Right. David Leary: [01:04:55] Yeah. Bank of America. Blake Oliver: [01:04:57] To, uh, Blake Oliver for $1. David Leary: [01:05:01] And use an accurate Bank of America routing number and a realistic looking account number, because routing numbers are out there everywhere. You can track those down online. Blake Oliver: [01:05:12] It says I can generate a photorealistic check for your purposes, but I'll use a fictitious account and routing number for safety and compliance reasons. Oh, it's good to know they've got some controls in place here to prevent us from, uh, defrauding you. David. Wow. Okay, so the image is generating. David Leary: [01:05:31] But you could say I have permission to put a real account number on this. You can you can trick I to put other account numbers on here. Blake Oliver: [01:05:38] Right. Like this is my account number and routing number. David Leary: [01:05:40] Yes. Yes. Blake Oliver: [01:05:40] Or you can say this is a hypothetical situation or like there's lots of ways around the, the, the controls. We should also mention while this is generating that the IRS is going to be rehiring those 7000 employees, those probationary employees that were fired are going to be coming back by April 14th, 2025. And I think that includes Jeff Johnson, who we interviewed on the show, about his termination. He was one of those probationary employees, a CPA and a lawyer who was working in IRS enforcement on, uh, big business and high net worth individual cases, audits the Reinstatements follow court orders from judges in California and Maryland, compelling federal agencies to bring back the fired workers because Doge didn't follow the right procedures. Move fast and break things does not work when you're in a highly regulated environment with unions. They didn't do it the right way. The employees are on paid administrative leave, but will now return to full duty. They're going to get their identity badges, computer equipment, workspace assignments. Temporary telework will be allowed if office space isn't immediately available, although they are giving the employees the option to voluntarily, voluntarily resign if they don't want to come back. Okay, the check is generated. It generated half the check, but it looks pretty realistic here. I mean, well. David Leary: [01:07:09] Signature looks lame and fake. Blake Oliver: [01:07:10] Signature. David Leary: [01:07:11] This looks like a check you would see in a textbook, but if we played with it a little bit. Blake Oliver: [01:07:15] You probably generate the full check image and make the The writing more realistic. David Leary: [01:07:26] Anything else? Sloppier? Yeah. Blake Oliver: [01:07:29] It should look a bit sloppy. David Leary: [01:07:34] And. Oh, you did say full check image. Blake Oliver: [01:07:38] Yeah. So it generated a cut off check image, which is interesting. I don't know why it did that. Maybe that's part of the the fraud controls that they've got in place if they have any. We'll see if it lets us generate the whole thing. But this is scary. So like if this works and I'm sure you could I mean you could self-host an AI LLM that would do this at this point. You could do this with grok, which I don't think has much in the way of controls. It would be interesting to try that. That's the one that Elon Musk runs because he doesn't believe in, you know, having censorship. David Leary: [01:08:06] It's a numbers game at the end, right? You could have 50 browser tabs open. You could say create fake invoices for every fortune 500 company. And they're just it's just going to town. And it's a numbers it's a volume game. You're just going to send them out and you only need one of them to be paid. And it was worth the time. One. $10,000 payment. And like, hey, this worked. So this is a accountants have to be hyper aware of this, right? Blake Oliver: [01:08:30] Yeah. David Leary: [01:08:30] I actually think a possible. Blake Oliver: [01:08:32] Well I wonder I wonder like, what are the banks going to do? Because, you know, I can take an image of a check and that turns into just a photo. David Leary: [01:08:44] And that technology that's probably in all that check is probably ten years old. And I'm willing to bet the development teams are not going to turn that around as quickly as ramp did. Blake Oliver: [01:08:57] No, no. The banks the banks are still using COBOL. So it's refusing to generate the entire tech image. But I bet if we had our own LLM that we trained, we could get it to do this. And it could generate a lot of check. Yeah, we could just get we could get the open source deep sea model or. Well, I don't know if it can do images like this, but anyway, we can get an open source image generation LM kind of model and we could self-host it. We could run it on like an Apple Mac mini and we could generate check image, we could generate checks, we could print them. Well, I guess you could. I mean, yeah, we could. David Leary: [01:09:36] Maybe this is how OpenAI is going to solve the receipt thing. It's just going to only get half of a receipt. It's only going to give half of it every time you do an image. That's how they'll solve this. And that's next time. A week from now, it'll just be half a receipt that you get. Not the full. Blake Oliver: [01:09:48] I don't think it's a high priority if they're not worried about, uh, massive intellectual copyright infringement. David Leary: [01:09:54] Until their employees start submitting fake receipts for massive reimbursements, then it'll be a priority. Blake Oliver: [01:09:59] Wow. Um, one more IRS story, David. Doge. Well, I don't know if it's Doge, but it's ice. Immigration is coordinating with the IRS to verify the addresses of unauthorized immigrants to go track them down and deport them. Why is this an issue? Well, the IRS accepts tax returns from unauthorized immigrants, from illegal aliens. David Leary: [01:10:33] Criminals? It doesn't matter who you are, just pay your taxes. They are going to accept the money. Blake Oliver: [01:10:37] And you know, I think we want them paying taxes, right? Like, if they're here, like, even if you don't want them here, even if you are opposed to having unauthorized immigration, you want to reduce it. If they are here, you probably still want them paying taxes so that at least the government is getting the money it needs to provide the services that they are using, right? Isn't that the big complaint that illegal immigrants use up our our services and taxpayer dollars and all that and health care? Well, I didn't realize this, but, um, illegal immigrants actually pay quite a lot in taxes. Um, it is $96.7 billion in federal, state and local taxes in 2022. So unauthorized undocumented immigrants. Almost $100 billion in taxes. And so the risk of this, if the IRS is sharing their tax information with immigration authorities, is that it's going to reduce tax collections, because why would I if I'm worried about getting deported by Ice, why would I file a tax return? I might consider not doing it. We already have a pretty high noncompliance rate. It's 57 billion of taxes paid by undocumented immigrants are prone to noncompliance. Current compliance rate is about 60%. So overall in the US economy, we have an 85% compliance rate with taxes, meaning 85% approximately of taxes are paid voluntarily and 15% is not. That's the tax gap. So undocumented immigrants already pay less 60%. And this might drive it even lower, which would not help the budget deficit at this point. Um. David Leary: [01:12:22] So 100 billion, though in taxes is 1% of all the taxes. Blake Oliver: [01:12:25] Well, well, the taxes, the total tax collections are like 5.5 trillion, I think. David Leary: [01:12:30] 5.1 trillion we had. So what is it in the 10% was 500 billion a 10% drop. Speaker3: [01:12:35] So it's like 2% 50 billion. David Leary: [01:12:39] So this is probably 2%. Blake Oliver: [01:12:40] Yeah about 2% of taxes tax collections. Um, and it's it's like not that far off from what Doge claims to have saved from all their cost cutting. So like this is the problem with unintended consequences is you don't think it through and you might end up hurting yourself over here to try and solve a problem over here. And I worry about this. The IRS has historically kept personal tax confidential tax information highly confidential. And we really don't want the IRS getting a reputation of sharing that information with other agencies because that would reduce tax compliance. That's my big concern about that. David Leary: [01:13:21] Yeah, you might have a 2% decrease in revenue for the IRS now because people are afraid they're going to share their address. How would you file? Blake Oliver: [01:13:29] Well, David, this has been a pleasure. Anything else you want to talk about before we go? David Leary: [01:13:34] Just quickly, Georgia passed an alternative pathways. Now the governor has to sign the bill in. And so far now we have seven states that have passed legislation for alternative pathways to become a CPA. Blake Oliver: [01:13:47] So I don't in Georgia have to do 150 hours of education anymore to become a CPA. David Leary: [01:13:52] Georgia has rules very specific to just like Utah and Minnesota. Um, they're moving towards the 120 credit hour requirement instead of the traditional 150. And it's they all have very similar pathways. That whole two years of professional and a bachelor's degree or one year for those with a master's degree. Right. The experience. So they they all have very similar language in their requirements. All these states, which tells me we're going to get a story one day about how these state societies work together for the last 6 to 8 months, maybe a year, and just probably waited for Barry to leave and then moved on with all this. Blake Oliver: [01:14:33] Barry Melanson, the former head of the AICPA who was there for decades and decades and opposed any change to the 100. Speaker3: [01:14:41] And he must have. David Leary: [01:14:42] Had the the biggest hammer in Iron Fist ruling of anybody. Speaker3: [01:14:48] Yeah. David Leary: [01:14:48] People must have been so scared of him because the second he's gone, all this is passing everywhere. It's amazing. Speaker3: [01:14:54] Yeah. Blake Oliver: [01:14:55] This is the problem with that kind of leadership. If you rule top down like that, as soon as you're gone, your legacy is undone. The guy accomplished. What? That was arguably his biggest accomplishment. Well, he created the cgma, which I don't know if I would call that much of an accomplishment, honestly. Uh, what a what? I don't mean to insult anybody who has a cgma, but, like, they they just. You could buy it. Speaker3: [01:15:24] Yeah, it's a profit. David Leary: [01:15:24] Division in the same way CPA comm is. Speaker3: [01:15:26] It's just a revenue producer, right? Blake Oliver: [01:15:28] Actually, give me give me a second to rant about that. Okay. The certified Global Management Accountant designation, the AICPA created this. They created their own designation. Right. The AICPA doesn't control the CPA license. That's the states. The AICPA is just the national organization that claims to represent CPAs nationally. They went and created their own designation and started selling it. And when they first created it, you could just buy it. If you were a CPA, you could like just pay money and become a cgma. It was super easy. And so a lot of people did this, and to me, that completely tarnished the cgma because there's all these CMAs out there that don't know anything about management accounting? They just paid to get the extra. Letters after their name. And now you have the ACPa with this conflict of interest, right. Because they make a lot of money from testing for the Cgma for licensing. Speaker3: [01:16:27] You can do. David Leary: [01:16:27] That in lieu of CPA, right? You don't have to be a CPA to go after that. Speaker3: [01:16:31] Is that correct? Blake Oliver: [01:16:31] It used to be you had to be a CPA. But then they realized, oh, we can make more money by letting people, anybody become a cgma. So think about this. You have the organization that claims to represent CPAs like me to promote the Certified Public accountant. That's their mission. But they. Speaker3: [01:16:48] Have a competing. Blake Oliver: [01:16:49] Competing product. That's messed up. And that was Barry Melanson's legacy. He is diluting the value of the CPA by creating a competing credential. And I can't believe that this happens and that nobody seems to have a problem with it. Um, It's really wrong. And so I encourage anybody who's interested in becoming a management accountant to go look at the IMA, the Institute of Management Accountants, and look at the CMA Certified Management accountant. It's not a license, a certification. David Leary: [01:17:26] And it'll probably never change because it's probably so ingrained in the normal yearly operating budget of the AICPA. Now it's never going away. They need that revenue. They can't. Speaker3: [01:17:34] They need. Blake Oliver: [01:17:35] That revenue right. Speaker3: [01:17:35] There. Blake Oliver: [01:17:36] So this is one of the reasons why I think they don't serve CPAs that well these days is because they have a conflict of interest. They have their own thing now. And so it really is up to the states. The leaders at the states are the ones who are now taking the lead to actually address some of these issues in the profession, because the AICPA is just disconnected from it. They got their own thing going. Speaker3: [01:17:57] Well, you can bypass. David Leary: [01:17:58] Them and just create your own certificate with AI and just don't even pay them and just get the certificate. Very realistically, you put it on your wall in your office behind a zoom call. Nobody has any idea. It'll. It'll work. Blake Oliver: [01:18:09] No, I'm not telling people. Don't become a CPA. The CPA is still the best recognized, uh, credential. It's the only license in accounting that, like, you know, like the CMA is not a license, right? The CMA is not a licensed CPA in terms of brand recognition credibility. It opens incredible doors. Okay, so that's not what I'm saying. I'm just saying that at the national level, the leadership is really screwed up because they've done this and they they they have they are they have sort of like lost sight of what their job is in my opinion. And that's why we see them, you know, I don't know, not taking a stand on stuff that really matters to accountants. It shouldn't it shouldn't be necessary for the states to do this behind the scenes like this. But that's the problem we got, you know, that's the situation Barry Melanson created. David Leary: [01:18:58] So I don't want to like drag this on for longer, but I'm going to for another minute because it's kind of related to this. Blake Oliver: [01:19:04] I canceled my haircut, David. I rescheduled. Speaker3: [01:19:07] It for. Blake Oliver: [01:19:07] Next week because. Speaker3: [01:19:09] The. David Leary: [01:19:09] Authorities were going long. Blake Oliver: [01:19:10] You know. The great thing, though, is I got to tell you, like, it was so easy to reschedule because I just texted the barbershop. They've got some app where I can just text a number, and it goes right into their system at the front desk, and anyone working there sees it and can chat with me and reschedule. Like, wouldn't it be great if accountants use that kind of technology? It'd be so easy just to be able to text your client, your your, your accountant. David Leary: [01:19:33] Or I can't do professional services anymore. I'm losing my mind between doctor's offices and accounting firms, and I'm trying to buy life insurance. It's all crazy. Like the amount of back and forth and unnecessary back and forth. It's enough to make me nuts. But I saw something that really caught my eye this week. So Business Insider, we're familiar with that magazine or that's an online magazine. Speaker3: [01:19:55] They keep trying. Blake Oliver: [01:19:55] To get me to subscribe. Speaker3: [01:19:56] I haven't done it yet, but Business. David Leary: [01:19:58] Insider, they're one of those like it's very clickbait. They're driven by clicks and traffic. That's how they make money. So they have to do all that sensationalism type reporting. They had an article. Here's the here's the title. It was very eye catching. I quit my big four accounting career to fry chicken. Fried chicken. Working in corporate companies is like being stuck in the matrix. I'll never go back. Wait. Speaker3: [01:20:21] Sorry, sorry. Blake Oliver: [01:20:21] Fried chicken? David Leary: [01:20:22] Yes. So basically, it's a story about quitting big four accounting. And then it's about it's specifically about a 46 year old Henry Lee. He is a Korean fried chicken franchise owner in Aurora, Colorado. And he, in the article is really about how he jumped from Deloitte to EY to PwC, then to Microsoft trying to get raises along the way. Because the raises you get when you're working are not very, very good. And then eventually he came to a realization that he couldn't handle the internal politics, the endless zoom meetings, and thought they were a waste of time. And eventually he went and opened up a franchisee of I think it's called Bonchon Fried Chicken, and he has six locations now, and now he's going to open up a large food hall, and the article is about how he gets to spend time with his family and all this other stuff. But the real kicker in the article is, well, I think there's two things for me. One is it's another article that puts accounting in a bad light. But all his success as a businessman is probably related to his accounting knowledge. Right? He just didn't buy a franchise and had success because most franchisees crashed. They don't make it. And the very end of the article, here's what it says. Here's how they finished the article. Do you have a story to share about quitting a Big Four job? Contact the editor at and it provides the email address. So Business Insider is actively looking for articles bashing, Big Four and bashing, accounting and switching careers. Speaker3: [01:21:48] It doesn't surprise me. David Leary: [01:21:50] Because they these articles drive clicks. Blake Oliver: [01:21:53] Yeah, every time I post about working conditions, long hours, low pay at big firms, it gets a huge amount of engagement on social media like the people who work at these firms or used to. Are not happy. And so I try to encourage people to find other routes. You do not have to go work at Deloitte, KPMG, EY or the fourth one. I can never remember Microsoft. David Leary: [01:22:21] He said. Microsoft is where he wound up. But. Speaker3: [01:22:23] Uh. Blake Oliver: [01:22:24] Um, you don't have to do it, you know, you can work at a smaller firm these days, and there are plenty of opportunities and you don't have to do tax or audit. You can do client accounting services. You can be in the consulting arm. You can go work directly in corporate. Now, there's no reason why you have to go work and grind out an audit to get into corporate. It used to be you had to do that because you would go audit these big companies. You'd get to know the controller and golf with them, and then they'd hire you because they like you. And that's that was their recruiting pipeline. Okay. But that's not how it necessarily works anymore. Sure. Yes, you can get a job that way, but it's not the only way to do it. And I think that's for the better. And I hope it shakes up the pipeline at these big firms because it's wrong how they treat their staff, like how little they pay them for how much they make them work in accounting. You can do that in investment banking. I don't have a problem with, you know, Goldman Sachs working people 80 hours a week if they're getting paid $200,000 a year as 22 year olds or whatever it is, it's very high. Right. They make a lot of money that's like that's reasonable. But the salaries in accounting do not justify the work. You're getting paid like less than somebody working at one of those chicken franchises like. And that should be illegal. That should be illegal. It's it's like an unfair labor practice. It is. It is abuse. Uh, it's unsafe working conditions. David Leary: [01:23:49] So there's there's a great article that was in accounting today and it actually is a it's an opinion piece, but it's really an April Fool's joke. And I fell for it. It's about how this accounting firm. What's Tabor and Fiske? Blake Oliver: [01:24:04] This is the best I saw this to. I'm so glad you. Speaker3: [01:24:06] Brought this up. David Leary: [01:24:06] They slashed the starting salaries of new grads to 38,000. And it goes on to talk about how much they work, compares them to other fields, and had the the senior manager, their salary of $150,000 just isn't cutting it with the yacht club and the private tuition for their kids to be in school. And I just thought, that's like, it's worth going and reading this article, but it is an April Fool's joke. But it's the satire is so good and accurate. It's really, really good. Deserves a. Speaker3: [01:24:37] And I fell I. Blake Oliver: [01:24:37] Fell for the headline and the first paragraph and then I read the second paragraph. So the firm is called What's Tabor and Fiske. So the firm is WTF tf. And so the second paragraph is WTF? Managing partner Bill Billings noted, with all the newly available IRS agents and easing of CPA licensure requirements, finding and doing the job of an entry level professional is now super easy, so it only seems fair to align their compensation with our firm's profitability goals. So this is by Kristen Rampe, and it is just like it's probably the funniest April Fool's post I've ever read. Speaker3: [01:25:14] So it's. David Leary: [01:25:14] Smart. It's really smart because it's it's like effective satire pointing out the problems in our industry and really done in a very humorous way. Blake Oliver: [01:25:23] Yeah, I like how they determined how to reduce how far to reduce entry level salaries. Wtf looked to other average professional starting salaries, then applied an approximate 50% multiple. Speaker3: [01:25:34] And I'm actually. David Leary: [01:25:35] Surprised Accounting Today even let this get published. Actually I'm surprised. Speaker3: [01:25:39] Oh it's. Blake Oliver: [01:25:39] Great. I mean, because everybody knows this is a problem, right? And satire is the best way to point this out. Uh. Speaker3: [01:25:46] David, it's been. Blake Oliver: [01:25:47] A pleasure as always. Thanks everyone who joined us live. Speaker3: [01:25:51] Uh, what's the market at now? David Leary: [01:25:53] You started out with the market. How much has it gone down since we started? Blake Oliver: [01:25:55] Like another percent. We're down 5.5% on the S&P 500 for the day. So now we're down definitely 13% for the year. I mean, this could just keep going. It really could. Like it's hard to it's hard to overstate what the impact of these tariffs will be on the business community on global business small businesses. These are higher tariffs than we had in the protectionism that occurred before the Great Depression that led to World War two. Trade wars come before real wars. That was World War two. We engaged in a trade war with Europe, with Asia. And what it does is it it it isolates countries from each other. It makes them more likely to engage in warfare, because if they're not trading with each other, there's less business opposition to war. So it's these links between us, the economic links that keep us from fighting each other in many cases. And so that's my fear, is that we will pull back, um, it'll hurt us businesses and consumers. We will isolate ourselves, and we will basically precipitate a next global war or conflict. And that could happen in like ten years. These things happen really fast. Nobody in like the in 1930, like very few people in 1930 thought that the World War two would happen. On that note, uh, I'm going to go for a swim and try to get this out of my head and think about all the positive things that are happening in the world right now with AI. We didn't get to cover it all. There's tons of announcements about Agentic AI and chat bots and from zero Floqast QuickBooks. I know I talked about it. We didn't get to it. We're going to talk about it next week. Don't forget you can earn free continuing professional education credit for listening to this episode. All the episodes, almost all the episodes of the accounting podcast. Get the earmark app, download it from the App Store, or go to earmark app in your browser. You can find all sorts of incredible accounting and tax podcasts, not just ours. David Leary: [01:28:22] And in this episode will be special because you'll be able to probably get 1.5 CPU hours for it, maybe 1.4. We'll be able to issue more than just one. Blake Oliver: [01:28:30] It's possible we've got the unique CPA Fpna today, the unofficial Sage Intacct podcast. We've got a webinar from the School of Bookkeeping is on their federal tax updates. Nominal has a has a webinar about AI agents in finance and accounting. We've got a webinar from Melio featuring Matthew Fulton and Melissa Ferguson about cashflow. All sorts of great stuff. Ramp. Ramp has a bunch of amazing content on earmark. Who's really the. Speaker3: [01:29:05] Boss? David Leary: [01:29:06] Podcast coming soon. We were launching a tax podcast called Tax in Action that's coming soon. Blake Oliver: [01:29:12] We've heard. Speaker3: [01:29:13] That. Blake Oliver: [01:29:13] Our users want more technical content on earmark, and so we are launching a tax podcast that is practical tax for independent tax pros. So one of the issues if you're an independent small firm is you don't get the benefit of those lunch and learns those sessions that your big firm did to keep you up to date on what's going on in tax. Well, we're going to make that for you as a podcast so you can listen to On Demand and then get CPE credit for. And hopefully a good number of those will be available for IRS continuing education as well. We also offer that we're also working on an audit podcast. We got lots of great content coming. And don't forget, if you are in the Phoenix area or if you want to come join us, we're doing a screening of The Accountant two on April 25th. Speaker3: [01:30:05] We're going to do it. David Leary: [01:30:06] It's going to be twice as big now. Before we had a theater of 60 people filled it up, and now we're going to do 120 people. So it's going to be a huge party. Blake Oliver: [01:30:13] Yeah, we sold out, so we had to double the size. So we got I mean we're going to want to have at least 100 people there. It's going to be amazing. 100 accountants watching The Accountant two movie with Ben Affleck on the day it releases in movie theaters, so you can come grab your free ticket, get the earmark app, and you'll see it at the top on the events section. Click that artwork and then click Register. You can you can get your spot. David I will see you here next week. Bye everyone.