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KPMG Lays Off 10% Audit Partners, Best AI Still Fails 1/5 Accounting Tasks · 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] Kpmg and EY in the UK have started quietly demoting equity partners, which is a big change because getting to partner at a big four used to mean a job for life. Well, at least until mandatory retirement. And now they are demoting these partners from equity to salaried partners. David Leary: [00:00:24] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:31] Hello and welcome back to the Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver. David Leary: [00:00:36] I'm David Leary. Blake Oliver: [00:00:38] David who are our sponsors this week? David Leary: [00:00:40] Sponsors. This week we have cloud accountants, staffing, earmark on pay and fishbowl. Blake Oliver: [00:00:46] Are you tired of the endless search for qualified accounting talent? 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To find, review and book interviews with potential team members, all in less than ten minutes, head over to The Accounting Podcast dot com slash The Accounting Podcast dot promo forward slash CPE. A s David, so much news to cover. This week, I want to talk about the least glamorous side of accounting that still can't be automated. We've got news about KPMG laying off 10% of audit partners in the US, and the best AI still fails at a fifth of accounting tasks. But I want to know first what's top of mind for you? David Leary: [00:02:06] Um, I think four stories that kind of tie together. So decimal is getting out of the, uh, Cass business and they're just going to have franchise, they're going to sell franchises of their tech. Um, collective is buying open ledger collective is one of these accounting firms with tech. H&r block wants to be more into the bookkeeping space and then, uh, fractional HR provider and, uh, called Austin Alliance. They want to get in the bookkeeping space. So there's a lot of jockeying and like, who's going to provide bookkeeping services or how they're going to deliver bookkeeping services. Blake Oliver: [00:02:38] Well, tell me about this decimal story. Um, I've heard of them before, but like, remind me who decimal is. David Leary: [00:02:44] Yeah. So decimal is an accounting firm with engineers. You know, I've kind of labeled these firms as this. They raised money. Um, they may have had multiple raises, but I think the latest I saw was like in 2022, they raised money. They actually. Do you remember KPMG spark? Blake Oliver: [00:02:58] Yes I do. David Leary: [00:02:59] That was that was wired. That from KPMG. And rolled those clients in. Blake Oliver: [00:03:03] Okay. Got it. David Leary: [00:03:04] Right. Um but they're going to pivot now. So so they raised money. They built decimal to provide accounting services. But what's the struggle with that? You've always said, right, you can't be a SaaS. You can't have SaaS valuations and raise money when you're a human service business. And we've seen the struggles, right? We've seen the struggles with Visor Tax bench scale factor, arguably bot keeper, even though they didn't really go directly to clients. Right. We've seen this over and over again. I'm probably forgetting a couple that have come and gone in De Niro, right? This model is really hard to do. Um, so what decimal is going to do now? They're going to pivot away from that. And they as of March 2026, they sold their services arm. So they're now not going to do any more client facing work. And they're just going to franchise out their tech, their workflows, their infrastructure to firm owners who basically want to have an independent firm but get that technology stack. Now, this is based. And so your franchise model is going to give you AI tools. It's going to give you automation Soc2 compliance, full operational system, sales, pricing, onboarding, QA. But it's very similar to pilot pilot, maybe about four months ago, maybe longer, six months ago, rolled out local partners. And that's kind of the same thing, even though it's not really a true franchise model. But if you if you're a small bookkeeping practice, cash practice, you can, uh, join pilots, local partners and just get all their tech. So instead of having. Right. So it's kind of, they're seeing this model happen more now. And so is the old model of like the bench model, the scale factor model. Now that decimals pivoted and feels like pilots pivoting is this over this, like we're just going to be an accounting firm and we're going to automate everything because we have lots of engineers. Is officially dead. Blake Oliver: [00:04:53] I don't know if it's dead yet, but there's still a gap. There's a gap between what you can automate and what you can't. And I have a story here from cfo.com that illustrates that gap and explains, I think might explain why these tech companies are moving to this model. So, David, the model you are talking about is AI powered human humans finish the rest of the work. Like that's why they're doing this because they, they can't do it themselves. Or they could, they could do it themselves, but they, they would then be a services business. And that's not what a tech company, you know, wants to be. They can't get the valuations they need. Right. Yeah. David Leary: [00:05:32] Because I think before it was we're going to get engineers and code our way to efficiency. Now there's new players like kick.ai who basically took over the bench client. I think who their bet is, we're going to use AI to bridge that gap. Blake Oliver: [00:05:45] Right. David Leary: [00:05:45] But it's the same model but different tech. Blake Oliver: [00:05:48] Yeah. And the problem is that the AI is just not there yet. And we know this from a study, a benchmark that a company called Dual Entry put together. And what they did is they evaluated 19 AI models across 101 real accounting workflows. And the top performer is Claude Opus 4.7. That makes a lot of sense. That's the one that is really hot right now. Everyone's switching over to Claude from ChatGPT because it's so good, but it still only achieves 79% accuracy on real world accounting tasks. So it's still failing at 1 in 5 of these tasks. And that's a problem because one out of five is not acceptable. Those errors cascade through financial statements. And if you add. David Leary: [00:06:38] An employee and ten hours of the week, right, approximately ten hours of the week, 8 to 10 hours of the week was just wrong. You'd probably freak out if it's a human employee, right? Blake Oliver: [00:06:49] Well, and then, you know, you got to clean up the mess, right? So it the efficiency is actually even lower. It's not like you're automated 80% of the work because you got to go clean up that other 20%. That's messed up. So examples of the, the stuff that AI was tested on include transaction classification, journal entry creation, bank recs, month end close work. And the other AIS are ranked in here. Right. Claude Opus 4.7 did the best 79%. Gpt 5.4 from open AI is slightly behind 77%. Gpt four, for comparison, scored about 40% on the same task set. So it's gotten a lot better, but we're still pretty far from 100% right. Going from 80% to 100%, I think is going to take a while. And so that's why in accounting, you just haven't seen AI taking over yet. Um, there's there's just too many mistakes for us to rely on it without safeguards. So, you know, I think that's like, it's fascinating. Um, and I've got another story here about one of those tasks that is definitely not going to get automated by AI anytime soon. And that's thanks to the Controllers Council. They published a story called The Least Glamorous Side of Accounting that still can't be automated. Any any guesses as to what that might be? Uh, never, never. Not going to be automated. It's it's not glamorous. David Leary: [00:08:28] Not glamorous. Can't be automated. Oh. Blake Oliver: [00:08:32] All right. I'm gonna I'm gonna give it to you. David Leary: [00:08:34] I just don't have I don't, I just don't have it. Blake Oliver: [00:08:36] Well, it's because you weren't an auditor, David. And, uh. David Leary: [00:08:39] That's true. Blake Oliver: [00:08:40] Physical inventory. Observation. David Leary: [00:08:43] Yes. Inventory retail at the mall. So I'm familiar. Blake Oliver: [00:08:46] Okay. So you know, you did you ever participate in an inventory count? David Leary: [00:08:50] Yes. I've had where, you know, the auditor came in and helped count. Yeah. I've done this and seen it. Yeah. Blake Oliver: [00:08:58] So regulations require the inventory accounts, you know, are done by people in person. And so there's some great examples in this story. Um, climbing into 90 foot grain bins to make sure the grain is in there counting rocks in snake infested quarries, spending all night manually counting frozen vegetables after barcode scanners fail in the cold. Here's a quote one auditor said after visiting a pig farm. It didn't matter how many times he washed his hair, he was still that guy everyone dreaded sitting next to on the plane. So that's something that is sort of like a what's the word for it? It's like a rite of passage. Rite of passage for accountants is those physical inventory accounts, you know, often right at the end of the year on New Year's or Christmas or something, when you, you know, you'd rather be with your family. It's not going to change any time soon. So now that doesn't mean that like some of it won't get automated, right? There's a you can use drones now to go physically observe the inventory from above, but I think an auditor still needs to be there to actually look at the, the footage and verify. David Leary: [00:10:12] Somebody's AI create a video and be like, look at our inventory. Blake Oliver: [00:10:15] Yeah, robotics, you know, barcode scanners, that's all sped it up. But junior auditors are going to be doing that for a while. So it's a good reminder that there's a gap there and that we're not going to be automating that anytime soon. So tell me more, David, about these, you know, stories you've got with these firms that are, um, uh, what was it like? David Leary: [00:10:35] H&r block is going to get into the bookkeeping space. So their new CEO, Curtis Campbell. Um, he's trying to shift H&R block to operate more like a tech company unless the historic, like once a year relationship. Right. Blake Oliver: [00:10:49] Oh, and they've really got to do that because like, that's what AI is coming for is those ten 40s. David Leary: [00:10:54] Yeah. And so they want to expand into services like bookkeeping, payroll, banking, small business support, and want to move to be a continuous year round partner instead of a once a year client engagement. Um, they want to use AI to automate routine tax work and then elevate the human advisory roles. So that you said that article of what accountants can't do. I'm still or I, I can't do, I still think AI is really good at the advisory stuff that this concept of like, oh, we're going to automate everything with AI and that's going to let all the humans be advisors. I think it's the opposite. I think humans are going to be more involved. They're going to be more involved in the data entry and the compiling of data. Then you are going forward versus. Blake Oliver: [00:11:41] Oh, interesting. David Leary: [00:11:43] Yeah, it's it's really good. Ai is really good at just taking scattered numbers and data, unstructured data and summarizing it, which arguably is advisory. I think it's going to be better at that than humans are. Blake Oliver: [00:11:55] See, I, I disagree actually, because the problem is that AI still makes errors and small errors in advisory compound into big strategic mistakes. And, and like AI doesn't think it's just it's, it's not aware. It's not. So it can't see the big picture and figure out when it's gone off the rails. And an example of that is this store in San Francisco where they made the CEO an AI. It's called. And in market, it's a boutique store in San Francisco's Cow Hollow neighborhood, and it's currently operated under the direction of an AI agent named Luna. This was a story in Bloomberg News. Luna functions like a CEO. It helps decide what products to stock, how to price them, and how staff should be deployed. Human workers are on site, but they have to take direction from Luna through Slack messages. It's a real world experiment in how AI agents can move beyond just narrow automation. Like you said, David, and take on management and decision making roles, which I would consider to be advisory. Maybe in an advisory engagement, you aren't actually making the decision, but you are helping the decision maker make a decision. So it's kind of like the same thing in a lot of ways. Um, and here's what happened is that, um, the Luna, the AI CEO. David Leary: [00:13:28] Rewind for a second because I think I heard this story a little bit. I know a little bit about it. So it was a challenge. Hey, we're gonna open up a retail location. But we want to have AI run the whole thing. And so they spun this store up basically. Blake Oliver: [00:13:40] Yeah. And they're human employees, but they aren't allowed to make decisions. It's the AI that makes the decisions or at least manages. So, um, here are some examples of mistakes. Luna decided against staffing during a busy weekend period. So the store was understaffed. It ordered too many varieties of scented candles, and it's generally struggling with the messiness of real world human interactions. And the store has reportedly lost about $13,000 so far. Um, so AI cannot yet make money managing a retail store. They they do better in simulations, not in the real world. At this point, operational complexity causes them to falter. Human behavior is unpredictable, right? Um, and really the big problem is like long term memory. Ai doesn't have memory. It can have reference materials, and it can kind of create a form of memory by documenting what has happened in a, in a, in a log or a creating instructions files for itself. But it doesn't have actual memory the way people do. David Leary: [00:14:53] So it's memory. You have perspective and experience, which. Yeah. Blake Oliver: [00:14:56] So it's, it's sort of operating like, you know, it's operating like that, you know, guy in the movie memento that has no memory. Yes. And he just has to write everything down. And then every decision has to be completely, you know, worked up again based on. David Leary: [00:15:11] Scratch. Blake Oliver: [00:15:11] The log. Yeah. So, um, yeah, there's still this gap here and that's, it's a good sign for us. And I don't know if that's ever going to be closed. I don't know if like, I don't see why without memory, true memory, like humans have AI can actually handle long term strategic decisions. And that's where advisory is really powerful. David Leary: [00:15:35] One thing AI can do bleak. So there was a conference call last Friday. And this is a customer's bank. This is the CEO, Sam Sidhu. He's having the conference call last Friday to discuss the first quarter results. And you know, he's yapping for about almost a half an hour. And then he just pauses and stops. And he said the prepared remarks you heard on my behalf today were delivered by my AI clone, not read by me. So, so, so CEOs that get cloned could regurgitate information, right? Well, which is what a lot of them do in these conference calls, right. Blake Oliver: [00:16:16] And not really answer any questions. David Leary: [00:16:18] Well, even all the answers are like pre like pre-written. What the question is the CEOs just regurgitate the same answer they already talked about before. There's no there's no actual answering of the question. They just regurgitate their their prepared statements anyways, so AI is perfect for that. Blake Oliver: [00:16:35] Let's go ahead and thank our next sponsor of this episode. And that happens to be earmark. And I'm sure many of our listeners are familiar with earmark, the free CPE platform. It's an app, it's a website, go to earmark.app, and you can get free CPE for listening to this podcast and many other fine accounting and tax and audit podcasts, all sorts of great shows, thousands of episodes, thousands of CPE available. Earn one free per week. It's free to create an account, free to earn CPE. And I want to take this time to read a letter that we received. David Earmark is registered with the National Association of Weight Nsba National Association of State Boards of Accountancy. They are essentially the Regulator for CPE for all the states you register with them, you become a sponsor of CPE, you get a number and you follow the guidelines and you can create CPE programs, and CPAs can earn CPE by taking your courses. David Leary: [00:17:44] And it lets you scale to all this. All the states that that recognize Nasba approved CPE recognize it for their state. So it's a neat. Instead of going to 50 states and getting 50 approvals, you can get Nasba and then do continuing education in all 50 states. Blake Oliver: [00:18:00] Which is very convenient because otherwise we would have to register with every state, every jurisdiction individually. It would be a huge hassle for all the CPE providers and all the state boards of accountancy. And this allows a startup like us to do that very efficiently. Um, so here is a letter. I got a demand letter from Nasba, and I want to read it for everyone because David, we need to respond to it. I have a deadline here of April 30th to get back to them, and we just haven't had time to connect. And so, yeah, I need to get your take on this and maybe our listeners will have something to say about it as well. So it says Mr. Oliver Nasba is writing regarding earmark CPE session build a high quality CPE course in 30 minutes, with AI delivered at the AICPA Lead Symposium on March 13th, 2026. This session aimed to demonstrate AI can take a podcast or a firm's in-house training course and convert that content into an earmark provided self-study course. That would be, quote, nasba approved, unquote. And that's true. That's what the session was about. This was at the AICPA Learning and Development Conference for Learning and Development Professionals. We exhibited there. I did the session because I wanted to show people how we use AI and how they can, too. It was very popular, full house. It was a lot of fun. Continuing on, the session referred to this approach as finding a loophole in the statement on standards for continuing professional education. The session also included several remarks on how the Nasba standards requirements for course development is wrong and backwards. The session also presented self-study course qualified assessments multiple choice questions as just a box that has to be checked, rather than a substantive aspect of legally mandated CPE compliance. Blake Oliver: [00:19:48] These remarks, and the approach that they represent, appear to violate the terms of earmarks sponsorship agreement specifically, and this is the section of the agreement that they're highlighting. The applicant slash sponsor completing this online application agrees to the following. To conduct learning programs and operations surrounding learning programs in a professional, appropriate, and ethical manner that represents the rights and worth of the individual served and in a manner that reflects favorably on Nasba and the National Registry of CPE sponsors. Accordingly, you are hereby directed to immediately cease making any unfavorable, unprofessional, or inappropriate comments about Nasba and or the National Registry of CPE sponsors in connection with your learning programs and related operations. Review your internal practices and communications to ensure full compliance with the ethical and professional standards outlined in your sponsor agreement. Take appropriate corrective action to prevent any recurrence of such conduct. We expect your prompt attention to this matter and your continued cooperation in upholding the tenets of your sponsor. Agreement with Nasba and the National Registry of CPE sponsors. Please provide written confirmation of the requested actions by April 30th, 2026. Please note that membership on the National Registry of CPE sponsors requires sponsors to comply with a sponsor agreement and acknowledge compliance with the terms of the agreement annually. Failure to comply with sponsor agreement or failure to meet acceptable standards in the conduct of CPE programs may result in the termination of the sponsor agreement by Nasba and removal of the sponsor from the National Registry of CPE sponsors. We appreciate your cooperation in this matter. Please let me know if you have any questions. Regards. Amy E Tongaat, MBA, director, Compliance Services. So David, there you have it. That's the letter. David Leary: [00:21:37] I. And if you just read the letter, it sounds kind of bad. Blake. Like, why are you saying things like backwards? They have these referring to nasba as backwards, but there's context that got lost in this. I sat in that session and there's first, let's just rewind. If there's going to be any place there should be a discussion about and have discourse over nasba policies, it should be at a conference with 200 of the L and D people from all the big accounting firms. Like if there's any place in any place on earth or forum, it would forum, it would be this conference, right where you can have differences of opinions and hash this out and be able to talk about that in a session. So that's one issue I have. But the other thing is there's lack of context. When you said things were backwards. It they they missed all the other parts of it, which is and it makes sense. So if you're an accounting firm and you have a senior partner or a senior tax strategist, somebody who has to teach other people in the firm, just let them teach, record it, then create the learning objectives and the description and the title after the fact. Blake Oliver: [00:22:52] Well, that was my that was and that was what I was showing how to do the current. David Leary: [00:22:55] The current model is before they're allowed to teach anything, you. You force them to sit in a room and come up with a title, come up with a description, come up with learning objectives. Now they got to go somehow create content that matches. And that's the backwards. All you're doing is saying if you attack it from the other direction, it's a little bit more logical, but arguably it is backwards, but. Blake Oliver: [00:23:17] Well, yeah. And so it wasn't backwards as like a, an insult. Right. I understand how you could say like, if I say your thinking is backwards, right, then, then you know that that's negative. But I was actually saying literally the, the method of creating content for self-study courses is backwards from what it could be and what I think it should be. And that's just my opinion. And apparently that is, I guess, unfavorable or unprofessional or inappropriate to disagree with, you know, pedagogical theory. And I don't know, I, I, I guess I know where they're coming from because when, you know, these, these standards were created, right? They had this theory of education that you need to do these things, you need to make these learning objectives. And then you design the course around the learning objectives. But like you said, David, you and I have a different theory, which is that let the expert teach and trust that they know what they're talking about. They don't. They don't need to like write down learning objectives before they teach. If they're doing, you know, a 50 minute session, they're filling it with educational content. Like, why do we require that? Why does that have to happen first? So, um, yeah, I just, I guess I'm, I'm disappointed to get this letter because apparently somebody from Nasba must have been in our session or something like that. My session and nobody talked to me, nobody came up and asked any questions like, I just got this letter, this, this legal demand letter. And I would love to help Nasba figure out how to modernize. Cpe. You know, I mean, it's kind of. David Leary: [00:25:04] I went to both sessions the year before and this year, they, they basically have the, uh, if I had to give the session name, I name, I don't know what it's called, but like how Nasba works is the session and you go and you start to understand like, there's kind of this secret board that where people are appointed, you're chosen to join this board. So like, I was like, how do I like, I should get on that board? Like I should help steer the direction of education because there's things that I don't think are very logical. I, everybody who's listening to this, I'm sure has done a webinar for CPE before, and they all have polling questions. And the polling questions just basically really have to say it could just be like, I'm here, yes or no. Are you here? Yes or no? It's an attendance check, no proof of knowledge. So you can basically check your email. And just when the bell goes off, you just hit yes, I'm there even though you're not learning anything. And the focus, in my opinion, I feel like the pendulum to. Yes, you want to have standards and requirements, but the pendulum swing too far to where learning is not happening. And this goes to the other part of their letter to you. When you refer to things as the check box, it just has to get done because that's the requirement. Like the pendulum has swung too far towards regulation and too far away from learning. Blake Oliver: [00:26:23] Right, in my opinion. And that's the thing that's crazy is that like, if you just watch webinars like these CPE webinars that are happening in a lot of, um, a lot of like these free platforms that are our competitors or even, you know, from big firms, often the questions don't test the knowledge. They're not like actually making sure that you learned anything. It's just like you said, it's an attendance check and people are sitting in these sessions and they're not paying attention and they're only clueing in when the attendance check comes on. And so like, I just feel, I feel like here we are have nasba coming after us, you know, for, for talking about this like, and I don't see what's unprofessional about that. If anything, it is very professional to expose and to discuss issues in the profession. Yeah. David Leary: [00:27:22] This shouldn't be a stop talking about it letter. It should be like, hey, this let's, let's, I want to learn more about why you have this point of view, but it should it should be a discussion in the industry and understand the ways to go. Because even in person CPE is broken. You scan your badge at the doorway going to a room. If you doze off during that session, you will still get CPE. You could fall asleep the whole session and still get CPE and I've done that. You've you've done talks. You're on the second, third row in. You could just see somebody sleeping in a chair at one of these conferences. They're getting CPE. So like the like there's. Sorry, I got an alarm going off. Sorry about that. Oh that's fine. Yeah, I just the focus is not about learning. It's it's on the, uh, but this is the nature of accountants, right? The rules. The regulations. Blake Oliver: [00:28:10] Yes. Right. And so I think, you know what I would like, I don't know what I would like to see is, you know, a little bit of loosening up of these CPE rules, like to make it less about checking the box and more about learning. And if we can change it so that there is more of a, what do you call it, like less of a attendance based approach and time based approach and more of a knowledge based approach? That would be great. And at earmark, where we can use AI to do that very efficiently, I feel like the reason that CPE was originally designed with a time based approach is because it was easy to measure, just like time sheets, just like billable hours and answering a certain number of like multiple choice questions is easy to measure. But now that we have all these tools, we can, we can do it a different way. And that's what we've done at earmark. We've figured out a way to create high quality self-study courses from transcripts of podcast episodes, and be able to create all this content that makes learning more valuable so that people aren't just sitting on webinars, that they're not, that are not relevant to them. They can choose a course that's relevant and they can take the quiz. And the quiz is actually challenging. You know, it's not they're not easy. David Leary: [00:29:25] It's a proof of knowledge. Blake Oliver: [00:29:26] Yeah. And, and so, um, yeah, that, that's, that's my take. I guess, you know, you know, what I'm going to do is I'm going to like take the transcript of this conversation and I'm going to feed this into cloud and I'm going to help it. I'm going to ask it to help me draft a response to Nasba. And I hope somebody at Nasba is like listening to this episode and shares it because, you know, I just want to reiterate, like my intent is not to say anything unfavorable or unprofessional, inappropriate. And I'm sorry if Nasba feels that that like a difference of opinion is inappropriate to me. You know, that that like, they Like, that's just wild to me, right? Like, um, if anything, I would, I would love to help. So, uh, that's my take. David Leary: [00:30:13] Um, I said like that is the time and place to do it. It's, it's people, the only people in that room are people that care about accounting, education and training their staff at their firms. Like if that was the room to see, people should be allowed to have opinions and raise them now. Now, are they mad because it was during your session and it wasn't officially like a a panel of opinions happening? Blake Oliver: [00:30:40] Um, but it's interesting because, you know, like this, this, this part about like making inappropriate comments or whatever in connection with your learning programs or related operations. Like, I don't know, I guess what I need is I would like, I would, I'm in my reply. I'm going to ask Nasba to please explain why exactly these comments are unfavorable, unprofessional, or inappropriate because I disagree. I think they are appropriate. I think they are professional. And if they are unfavorable, I mean, that's NASA's point of view. That's that's not mine. You know, like they like they could say that anything is unfavorable. They could use the language in the sponsor agreement to tell anyone not to say anything. And to me, that's like a free speech opinion. David Leary: [00:31:24] You just can't have the opinion. At the same time, you're representing yourself as an as the sponsor. Mm. But yeah, right now. Blake Oliver: [00:31:31] Like what I'm saying. David Leary: [00:31:32] Is like. Blake Oliver: [00:31:33] What is an unfavorable opinion? Like who gets to decide what's unfavorable? Can nsba just say that? And can they just decide that a statement is unfavorable? It's not defined in the in the sponsor thing. David Leary: [00:31:45] They have all these rules and regulations, but you can't find a list of cuss words you're allowed to say for a CPE session. Like there's no list, but they'll let you know if you used one you're not supposed to use. Yes. It's like you have so much documentation and standards written down, but the obvious ones, which is like, where's the eight cuss words we can't put in a course that doesn't exist anywhere. Blake Oliver: [00:32:08] We've got some chat going on in the live stream here. Um, male, 22, says AI is going to be better than humans in both technical and advisory work. Well, yeah, maybe someday, but not yet. Yeah. Go ahead and put that bet. We got boring accountant here again, as always, boring accountant. Great to see you for coffees for coffee emojis today. Uh, let's see, Tate says, I think you guys and earmark have made me love learning again, because it's easy. I know I have the opposite problem of too much CPE. I don't think, uh, test of knowledge thing is an easy fix. Yeah, that would be a challenging testing knowledge versus attendance, but at least we make the whole attendance part compliance part easy, right? Which then makes people want to get more CPE rather than less Oswego, shark says. I love doing sessions with my interns and staff where they can ask questions, and I model them on a dry erase board. I'd love for these to be CPE eligible, but they can't do the requirements. David Leary: [00:33:08] Actually, if we could, that's not true. Blake Oliver: [00:33:10] We can do that. So if you record your sessions with your team, we can take the recording, transcribe it, and use that to create a compliant CPE course with all the learning objectives based on what you talked about, the description, the title, everything. And we do that for firms now. So if you have a firm you can subscribe to earmark for teams, get an unlimited earmark subscription for your entire team, and you get a private channel on the app where we will take your recordings, turn them into CPE courses available to your team and your team only unless you want to share them with the world, in which case you can make them public. But it's a way to create CPE content for your internal trainings that's on demand on a mobile app. So if you're interested in that, we'd love to talk to you. Shoot an email to sales@cpe.com. Sales at earmark cpe.com. And we'll get you signed up. Giles Pierson. Hey, Giles, good to see you. Giles says scenario based learning is the future, especially as we need those starting their career to upskill more quickly. Remember our discussion on role plays, being in partner client meetings? Oh yeah. I do remember that, um, like role playing how to talk in a meeting like that could be very powerful, but how do you do that in a CPE course these days? I don't know, Giles. Maybe we should do a do a session webinar or something where we we role play that. Blake Oliver: [00:34:35] That would be fun. All right. Let's thank our next sponsor and that is on pay. Are you tired of payroll headaches getting in the way of the client experience. You want to deliver manual workflows, creating bottlenecks, compliance, nightmares and endless support calls that go nowhere. There's a better way for your team and your clients on pay is the payroll partner that accountants and bookkeepers actually love. Why? Because it's easy to use, packed with value, and backed by support that actually supports you. Their team gets rave reviews for being fast, expert and actually reachable when you need them. Amp handles the heavy lifting. You get a dedicated onboarding coordinator who sets up worker profiles and transfers year to date data from previous providers, all at no extra cost. Their seamless QuickBooks and Xero integrations eliminate manual journal entries, and they support any type of business you serve farms, restaurants, nonprofits, you name it. Omp can handle unique requirements without adding complexity, and AMP keeps pricing simple, too. Everything your clients expect from multi-state filing to off cycle pay runs is included. No hidden fees, no surprises. To book a demo, head over to The Accounting Podcast dot com slash The Accounting Podcast dot promo forward slash ONPA. Why should we go into app News? David O. No, we need to talk about KPMG laying off 10% of their US audit partners and PwC. So PwC too. David Leary: [00:35:59] Wow. No. David Leary: [00:36:00] Yeah. We have to talk about PwC but not because of layoffs. David Leary: [00:36:02] Oh okay. Blake Oliver: [00:36:04] So the news is that KPMG is cutting roughly 100 partners from its US audit and assurance practice. That's about 10% of its audit partners. After two few people took a voluntary early retirement program. The firm says that it is part of a multiyear rightsizing strategy and not a response to partner performance. They didn't disclose how they chose which partners would be let go. The departing partners will receive financial packages and placement support. David Leary: [00:36:37] Yeah, the framing is kind of is a realignment to current audit demand like that, possibly overhired post pandemic. And now they're trying to get things realigned. But like It. Does audit demand ever actually decrease? Blake Oliver: [00:36:53] Yeah, I don't understand. I don't understand that argument. Right. Because it's not like it's not like there's fewer audits happening. I think all the big four have the same or more than they used to have. Um, so what is this about? Uh, you know, and I wonder, like, is this going to now impact audit quality? Right? Because we had those, those years in which Pcob was coming after the big four because they had low audit quality, according to the PwC. David Leary: [00:37:23] Staff, according to the staff. Blake Oliver: [00:37:25] Right. Because audits were understaffed and now they're cutting audit partners. So are we just going back the way we used to go? I don't know. David Leary: [00:37:32] I guess we'll. Blake Oliver: [00:37:32] Find. David Leary: [00:37:32] Out. David Leary: [00:37:33] A month ago or so, uh, KPMG's UK arm announced they're going to they warned 600 audit staff of potential layoffs. So they're going to get rid of staff in the UK as well. Blake Oliver: [00:37:45] Well more on that. Right. Um, KPMG and EY in the UK have started quietly demoting equity partners, which is a big change because, you know, getting to partner at a big four used to mean a job for life. Well, at least until mandatory retirement. And now they are demoting these partners from equity to salaried partners. Now, I mean, you know, we can't we I don't know how bad it is because the average equity partner at KPMG last year in the UK was 880,000 pounds. Uh, so I don't know what the demotion means exactly if you're not getting the equity, but it's a big change. I mean, like, I wonder if this is going to deter more accountants from sticking around because you work that hard to become partner and you're an equity partner and now you're demoted back to salaried. I mean, isn't that the whole point of sticking around for all those years and working your butt off? Meanwhile, PwC is in the US, ending its fully remote work option for tax staff, and they're going to be requiring them to come into the office at least three days a week starting July 1st, 2026. So no more fully remote option if you are in tax and you are staff, got to be in the office three days a week. They are saying the firm is saying it's about strengthening culture and supporting its apprenticeship model. But Going concern speculates that pushing remote workers back into the office is a effective way to thin out headcount without having to announce layoffs. Yeah, you hire remote people. They are living far away. They have to either move or come into the office, you know? David Leary: [00:39:24] And that goes. David Leary: [00:39:25] With the cutting of the benefits we saw recently. David Leary: [00:39:28] That's right. David Leary: [00:39:28] Who was that? Was that. David Leary: [00:39:31] Kpmg? Blake Oliver: [00:39:32] I think that was also that also I don't remember. David Leary: [00:39:35] I'll have to look at my all of the. It'll be all of them eventually. Blake Oliver: [00:39:39] Well, because you know, the power is swinging back to the employers in this AI driven. David Leary: [00:39:45] Delight economy is. David Leary: [00:39:46] Cutting the employee. David Leary: [00:39:47] Benefits. Blake Oliver: [00:39:47] Deloitte. Okay. Got it. Um, so anyway, that was reported and going concern and the evidence was an internal PwC email that was sent to going concern. David Leary: [00:39:58] So PwC has agreed to pay a fine of $166 million due to the Evergrande audit probe. So Evergrande was those the construction of those like apartment complexes in China. Blake Oliver: [00:40:11] Massive, massive construction. David Leary: [00:40:12] Companies that. David Leary: [00:40:13] Are building cities. David Leary: [00:40:14] Right? Yeah. Blake Oliver: [00:40:14] Building whole cities collapsed. Just massive losses for investors. People lost their entire life savings, uh, units that were never built. Lots of them. David Leary: [00:40:25] And PwC audited Evergrande for ten plus years. Um, and then they resigned from the, uh, contract in January of 2023. Evergrande was accused of inflating revenue by $82 billion. David Leary: [00:40:40] Wow. David Leary: [00:40:41] Like, so it's pretty massive now. I don't know how much KPMG got made out of this ten year agreement, but I'm willing to bet it's probably way more than $166 million in the fine. They probably got a billion if it's that kind of. David Leary: [00:40:57] Yeah. Blake Oliver: [00:40:57] How much was the fine, did you say 166 million? Got it. Yeah. It kind of pales in comparison to. Well, yeah, I, I mean, I wonder if that's even close to what they. David Leary: [00:41:07] And it looks like it's on top of a previous fine. They may have got for 60 million now. Um PwC they do not admit any wrongdoing. Right. Um and this basically this deal that it's going to be fines, it'll be compensation for investors. And they're also going to be on a temporary ban of taking new clients in PwC China. Blake Oliver: [00:41:29] Well, something that might have helped would have been some artificial intelligence, because researchers from the University of Texas at San Antonio published a paper Um called Predicting Material Misstatements using machine learning that was published on the accounting review. There was a summary of this study on, uh, Physorg that I saw. And, uh, what, what that study found is that a machine learning model using more than 59,000 SEC filing observations from 2001 to 2014, they were able to forecast material misstatements, uh, meaning reporting errors, whether accidental or intentional, that are significant enough to affect investor judgment. And according to the article, the model outperformed benchmark methods in predicting misstatements one year and two years ahead. So this feeding SEC filings into a model that's trained right by, by looking at the previous SEC filings. And then if there were material misstatements in the future. It can predict material misstatements 1 or 2 years out before the auditors do well, because the auditors, you know, typically don't write. I mean, like, like with the Evergrande thing, right? We have these giant, uh, collapses that happen and maybe we could predict them with AI. David Leary: [00:42:58] There's a company that was doing that. They and I, it was one of the companies Hindenburg wound up shorting. But two years before that, some some startup had some AI, and they were ranking like the most at risk companies or most fraudulent books. I don't know why you want to say it. And they they nailed. And I don't know which I, I feel like there's so many of these big companies that do shady stuff that I can't remember the names of them anymore. I, if I remember it before we're done, I'll. David Leary: [00:43:30] Well, while. Blake Oliver: [00:43:31] You try to remember, David, let's thank our final sponsor of this episode. And that is fishbowl. 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Companies using fishbowl report incredible results like an 18% reduction in inventory costs, 50% less scheduling time and 99% on time delivery rates. To see why growing businesses are making the switch to fishbowl, head over to The Accounting Podcast dot com slash fishbowl. The Accounting Podcast dot co forward slash FISHBOWL. We have a shortage of accountants. David, did you hear? Although I don't know, I'm starting to question that with these firms cutting partners. Um, I mean, like, seems like those are the people you'd, you'd want to keep. But anyway, there's an index now, um, a publication called Sam's List created an index of the states facing the worst accountant shortages. So the worst state, the state with the fewest accountants per 1000 residents is Nevada. Nevada has just 1.75 accountants per 1000 residents. It's the lowest figure in the country. It also has 139 professionally prepared returns per accountant, which is the highest ratio in the study. And Nevada's accounting workforce also posted the sharpest decline from 2019 to 2024, falling nearly 30%. So if you're an accountant and you want to be in a state where you are in demand, Nevada is apparently the one to be at. The other states near the bottom are Mississippi, Arkansas, Kentucky, and South Carolina. David Leary: [00:46:18] Sounds like state's accountants don't want to live in like. Like I don't think accountants like probably don't want that Vegas gambling lifestyle energy. Not a lot of accountants come off that way. It doesn't seem like a good fit. Blake Oliver: [00:46:31] Now, Nevada may have the worst shortage on a per capita basis, but the state with the biggest absolute shortage of accountants is Texas. They're 13th on the per capita shortage index. But the largest, uh, by what's the word, volume. Uh, total. They Texas needs 24,746 additional accountants to meet current demand. So almost 25,000 accountants. David Leary: [00:47:02] So let's take a step back here. Texas has had crazy growth the last half a decade or so, maybe ten years or so, of people moving from expensive states with high income taxes like California to Texas. So accountants who really understand the tax game, you would think there'd be a equal migration of accountants to Texas because of tax benefits. So are the benefits just not that good. And accountants see through it. Blake Oliver: [00:47:30] Like maybe accountants just don't want to move. I mean, you know, like we like, we get in one spot and we like to get comfortable there. That could be it. Oh, the area with the most accountants is Washington, D.C. nearly 14 accountants per 1000 residents. That's like ten times. Almost ten times. Nevada 8 or 9 times. And apparently there are only 16 professionally prepared returns per accountant. I wonder why there's so many accountants in Washington, D.C. maybe because there's so much like free money flowing around from the government. I'm not sure. I'd love to know if our listeners have any idea. David Leary: [00:48:05] How about. David Leary: [00:48:06] Boston? Does it have a ratio or stats on Boston? Because I thought Big Four has a big presence in Boston. Blake Oliver: [00:48:12] Massachusetts and South Dakota, Colorado and Delaware all have plenty of accountants. New York has the largest absolute surplus, 27,000 more accountants than the national baseline would require. So if you're in New York, you could relocate to Texas. And it's sort of the opposite situation. Got any other stories to take us out? David. Oh, here's one if you don't. We got more movement on the CPA licensure modernization front. Kentucky has passed a bill that makes it easier to become a CPA without the traditional 150 hour requirement. Now you can do just a bachelor's degree, two years of relevant work experience verified by a CPA. They join Maryland, Wisconsin, and dozens of other states making similar changes. I think we talked about Maryland in the last episode. David Leary: [00:49:09] We're almost done talking about this. All the states are going to pass legislation, and we'll never have to talk about 150 hour rule ever again. It's almost to the finish line. Blake Oliver: [00:49:20] All right. David. That's all the time we got for this week. Thanks everyone who joined us live. Tune in on YouTube, search for The Accounting Podcast, hit subscribe and notify and you'll get to join us when we go live. It's always great chatting with you. Thank you. And don't forget to earn free CPE with the earmark app. Go to earmark.app. Subscribe for the low price of $170 a year for unlimited CPE. It's the best deal in the industry. Support our work. We appreciate all of our subscribers and thank you to our sponsors. David Leary: [00:49:52] And the best thing earmark app has Nasba approved CPE the amazing Nasba approved CPE. Blake Oliver: [00:49:59] We love Nasba. We're very grateful to Nasba for creating the registry that allows us to offer CPE all over the country. All right. Uh, see you around here. Uh, I think on Friday we're going to record this week, so, uh. All right, we'll be recording live at our usual time. Thanks, everyone.