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AICPA Doesn't Care If PCAOB Goes Away · The Accounting Podcast

• Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! David Leary: [00:00:04] This is what Pepsi did when Pepsi couldn't sell enough Pepsi. They bought fast food restaurants so they could sell more Pepsi. And this is what happened with P did to Red lobster. They bought a shrimp company. They wanted to sell more shrimp, so they bought Red lobster. And then they made Red lobster. Do all you can eat shrimp. It's it's the same thing happening here. Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:30] Hello, and welcome back to the Accounting Podcast, your weekly roundup of news in the accounting profession. I'm Blake Oliver. David Leary: [00:00:37] And I'm David Leary Blake. I almost start clapping when the music was going. I had to refrain from that. Blake Oliver: [00:00:43] You're into it this week. You're excited. David Leary: [00:00:44] We're excited for the music. The music. It's always like, show prep is a lot. It's a little stressful and some of that music starts playing. It's like a nice transition into starting the show. It feels good. Blake Oliver: [00:00:55] Well, it's good to be back. It's good to be home. I was in Las Vegas at AICPA engaged this week, and I've got updates for you, David, about the AICPA position on the PCAOB. Specifically, they don't have one. They're fine with the with the Public Company Accounting Oversight Board going away and its responsibilities going back to the SEC. No problem there. We'll talk about that. Cpaacademy, a division of the AICPA, put out a report on artificial intelligence in the profession that is extremely bullish. I don't quite understand where some of these numbers are coming from. Can't wait to talk about that with you. There's stuff about tariffs, the CPA pipeline private equity that was discussed at engage. David what is top of mind for you. What's been going on back at home? David Leary: [00:01:46] I feel like a lot of my stories are themed and grouped together. So yes, you have the CPA, one about the very bullish AI one, but there's a lot of very bullish AI articles that came out this week. And they're all from like tech companies. But then there's also an article that was in CPA trendlines about how AI is failing accountants. And personally, I am starting to lean on that side of the fence a little bit. I'm not I'm not seeing all this AI promises that are supposed to be there. Or at least I go to the menus in QuickBooks. I'm expecting to see an AI person that I could give work to do doesn't exist. Blake Oliver: [00:02:20] Yeah. Where are these agents everyone's talking about? I want to actually use one. I want to see it in action. Stop, stop. Stop telling me about it. Show it to me. David Leary: [00:02:27] It's a lot of. I feel like there's just a big disconnect between what people think I should be doing and what AI is really doing, and how long, how far away we are from those crossing. Blake Oliver: [00:02:38] Billy Long has been confirmed as the IRS commissioner. Miley Cyrus went on a podcast and talked about how she hid her drug purchases from her accountant. We're going to learn about how she did that. You've got a story about the AI spending slowdown. We might be headed for a bit of a slump after many years of acceleration. And there's a survey about the big beautiful bill. What do Americans think? Do they agree with Elon or do they think like Trump? This is the best thing ever. All of that and more on this episode of the podcast. Let's thank our sponsors, David. David Leary: [00:03:17] Sponsors. This week we have Onpay, Relay Keeper and Pay Hawk. Blake Oliver: [00:03:23] Thank you to our sponsors. And if you want to support our show and our sponsors, please, when you hear that message during the show, use that link to go visit them. That lets them know that you heard about them on the accounting podcast. All right. Let's talk about AICPA. Engage. If you'll indulge me for a moment. David Leary: [00:03:43] That was that was what Monday through Thursday was. Yes. Week okay. Blake Oliver: [00:03:49] Four day conference. Mark Kozel is the new CEO of the AICPA. And he gave a very optimistic keynote. He talked about how accountants have constantly thrived despite decades of predicted disruptions, which is absolutely true. We are a very resilient profession, very recession proof. And so if you're looking for the kind of job that's not going to get eliminated during a recession. David Leary: [00:04:19] Tested over and over again. That's right. The accounting profession. Blake Oliver: [00:04:23] You know, I'm kind of proof of that, right? I was a musician, landed in the Great Recession when I graduated. And what saved me, what gave me the lifestyle that I wanted, it was accounting. And I became a CPA. And I have never struggled ever since then. And, you know, and even if this whole podcast fell apart, right, I could go get a job and make great money. So I love that. Um, he also mentioned how, you know, technological innovation has not ever really disrupted accounting. We've always done better. So from desktop calculators to personal computers to Excel spreadsheets to blockchain technology, none of that has actually. David Leary: [00:05:01] Is going to ruin everything. Nothing has ruined it. Blake Oliver: [00:05:03] It's created more work than ever for us, and I think we're going to see that with AI. As we discussed in the last episode, AI creates even more work for accountants. So like I mentioned, Mark talked about in his keynote, how about where the first two, uh, the last to enter recessions, the first to emerge from economic slumps. Companies need us when the economy is rough this year, when tariffs are causing havoc, who's going to be needed more? It's the accountants, right? We got to do those projections. We got to figure out things. We got to manage cash flow. David Leary: [00:05:36] Yeah. When when business is easy and everybody's making money. You don't need you don't need an accountant. If I mess up 20% of my revenue, who cares? But when you don't have the revenue and you don't have control of your expenses, that's when you want an accountant during those recessions. Blake Oliver: [00:05:50] Now, the thing that surprised me a bit was when Mark got to the Public Company Accounting Oversight Board because the Pcob, which is the regulator of the audit profession, it's set to go away. If Trump's one big, beautiful bill passes the Senate, with that provision included, there will be no more public company accounting oversight board. And this is the biggest change to the profession in 20 years since Enron, Enron, and we haven't had an Enron. We haven't had a Worldcom, we haven't had a giant public company fraud since then. And that's probably the best argument for keeping the PCAOB is that on their watch, there hasn't been one. And what if we don't have one and the SEC has its responsibilities, like what is going to happen to audit? David Leary: [00:06:38] And there has been pretty big frauds, but they've been outside the US. Blake Oliver: [00:06:42] And they've been in private companies. David Leary: [00:06:44] Not. Blake Oliver: [00:06:45] Not regulated by the Pcob. Right. Not inspected by the PCAOB. So, I mean, that alone is a pretty good argument. I mean, it's not the best. And, you know, I've been skeptical about the pcaob's value because I think they've done not the best job explaining their value and not the best job measuring audit quality in a way that makes sense to normal people, or even people who are just accountants, who are not deep in the world of audit. Like, it's very confusing. And if you want to learn more about that and the value the Pcob provides, go listen to the Earmark podcast podcast.com and look for my interview with three leading academics about the Pcob and about their research as to the value the Pcob creates. I've actually been converted. I am now of the position that yes, the PCAOB needs to be reformed, but getting rid of it entirely could be a really bad thing. And that's what kind of shocked me about what I heard at engage is that Mark Coso said the AICPA does not have a position on whether the Pcob should continue as is or be merged into the SEC, he said. Blake Oliver: [00:07:51] We're going to work with whatever regulatory body oversees the profession to ensure public trust in financial reporting. But the problem with the situation is if the Pcob goes away, the SEC is not getting any extra funding and the $400 million that the Pcob receives every year from a tax on public companies, that's not going to be replaced. So the SEC doesn't have the resources. And another big issue, which I learned when I did that interview on the earmark podcast, is that there are limits on what you can pay government employees, and that makes it really hard to recruit the people that you need to do these inspections, because if you're going to audit the auditors, you need people who actually know and understand how to do audits. And those people are paid hundreds of thousands of dollars a year. And so you can't, like, monitor an audit partner without somebody of equivalent level doing that. And those people, you know, a typical audit partner makes like $800,000 a year in the US. So, like, it's just not possible to get the people you need at the SEC. David Leary: [00:08:58] But I mean, I can understand why the AICPA may have a non-committal opinion about this. So what is the what is the Aicpa's mission? Blake Oliver: [00:09:07] Well, I can't remember it off the top of my head, but it has something to do with, uh, advocating for certified public accountants and protecting us and our needs and the public. David Leary: [00:09:18] And that's a stated that's the stated mission, right? Mission. What does it really do? They solve for partners at big firms. Like that's that's the real mission. They'll never say it or state it or put it in writing. But but if you have a government organization that essentially their job is to extract money from partners at big firms. Of course, the ISV is going to be, ah, it's okay if they're gone. You would think the AICPA would be like trying to keep it around. Like from an ethics standpoint, if, if the if the purpose of a CPA is to protect the the public? Blake Oliver: [00:09:49] Yeah. David Leary: [00:09:49] You think you would protect this organization? Blake Oliver: [00:09:53] I mean, there's got to be some oversight. When there wasn't, we had big problems in the profession, so. Yeah. I mean, like, short term, this might be great if you're an audit partner, because now you don't have to worry about PCAOB inspections anymore. But long term for the profession, if we don't have a reasonably strong regulator. And I'm not even saying the pcob was that strong. But like if regulators if the regulation, if the oversight is even less than it is now, you're going to have deteriorating, deteriorating audit quality because the incentive is going to be to cut corners in order to increase profits. You know, the business model of firms is designed that way. David Leary: [00:10:28] And then if you have another Enron type mess, the crackdown would be, you know, there might be a V2 of Pcob that comes out that's even worse or stronger or whatever. You know, there's an overcorrection, right? Blake Oliver: [00:10:41] Yeah, yeah. Let's say we have a giant public company fraud. Then then who knows what might happen to the accounting profession, to the audits. Um, what else did they talk about? Tariff uncertainty creates opportunities for advisory. Uh, Kozol compared what's going on with tariffs now to the Paycheck Protection Program and how that was like really important for accountants, a way for them to provide advisory services. I don't like that all that much because these tariffs are just terrible for the economy. And I don't like the idea of us profiting from economic turmoil. That's putting businesses like small businesses out of business. That's leading to layoffs. You know, I just don't like that attitude. Um, that's kind of upsetting to me. Like, we should be working to educate people about tariffs and how tariffs are taxes and how they're generally not good for businesses. But like this to me is not about protecting the public. It's about making money for the profession. Right. Like you were saying. Um, AICPA Chair Lexi Kessler reported positive enrollment trends, and we have reported this on the show as well. Accounting enrollment is up for three consecutive quarters, something like 1,112% more students entering accounting. And what are the factors driving the improvement? Kessler said there's job stability, better compensation, profession visibility in classrooms. But she didn't mention the 150 hour rule, which to me, if you look at the enrollment increase, it seems to have all started to happen right when all these 30 states made moves to eliminate the extra year of education and to make accounting undergraduate education competitive again. David Leary: [00:12:29] It sounds like this should be a nice graph. You work on this this weekend and we have it for next week. Blake Oliver: [00:12:34] We got to find it. Yeah. So anyway, that's some good news. Um, now she did say one thing. She she has said this before, and I just got to highlight it here on the show. Lexy Lexi Kessler. She urged accounting professionals to, quote, change the story they're telling by focusing on impact rather than workload when discussing the profession. And I'm sorry, but the number one problem with the profession right now is the workload. As we discussed last week, we have evidence of that. So I'm sorry, Lexi, but you are not going to change the image of the profession by just not addressing that issue, by not talking about it. David Leary: [00:13:16] You can't just yeah, you can't just talk about it. And that changes the image. Yeah. Blake Oliver: [00:13:19] No. Or just not talk about it. Right. Like the problem with with this method is that this is based on the, the old way of doing things when social media didn't exist. But everyone can see the workload problems. And when you have firms like Deloitte advertising the lack of work life balance at their firm as a positive for clients, as we discussed on last week's episode, then you know, what are you going to do about it? Right. We got to address the workload if we want to keep increasing the number of accountants going in. We got to address the workload issue. And the good news is that technology could help us do that. And we had some news from AICPA engage about where where we are with AI in accounting. Cpaacademy, which is the for profit subsidiary of the nonprofit AICPA, released a 2025 AI and accounting report. And I want to dig into that, David. But first, let's thank our sponsor, who is our first sponsor, Onpay. David Leary: [00:14:21] I'll jump in here. Forbes and CNBC rank Onpay number one for small business payroll. 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That is The Accounting Podcast. Blake Oliver: [00:15:24] Thank you. David Leary: [00:15:25] Onpay and Onpay. Hey, I got some new Onpay swag. They have a new, uh, pullover quarter zip sweater. I think it's a company called marine. Marine layer. Blake Oliver: [00:15:36] Marine layer. Those are nice. David Leary: [00:15:37] It's really, really nice. Yes. Blake Oliver: [00:15:39] So I need one of those too. David Leary: [00:15:40] So. So go sign up for On Pain. When you're talking to your sales rep, tell them to send you a quarter zip up. They're really, really nice. Blake Oliver: [00:15:47] And we use OMP here at Earmark Media and the Accounting Podcast. And we love it. So uh, please do. It's great to see Valerie from OMP at engage. All right. Let's talk about CPAacademy 2025. I in accounting report because some of it is just hard to believe. And if you're listening and you know of any companies that are doing this, I want to talk to them. Cpaacademy says that bookkeeping workflows can now be completely automated from start to finish using AI agents. These systems can categorize transactions automatically, flag anomalies without human input, generate monthly reports independently, and draft client communications. David Leary: [00:16:30] And they say that bookkeeping is basically fully automatable and tax is rapidly following coming up from behind. Yeah, the stats in this are crazy. 80% firms are reporting that 80% in their individual tax Prep is automated now. Blake Oliver: [00:16:45] I would like to know who is doing 80% automation in tax prep right now. There's no mention of any of the tools in this report. So I just I don't know where this is coming from or am I am I blind? Have I missed something? Where where are the bookkeeping agents that can do end to end workflows, from categorizing transactions to issuing reports and drafting client emails? David Leary: [00:17:08] And maybe they can, but maybe they make mistakes. And I'll give you an example. I scanned a bill from Zoom in QuickBooks. So I used the QuickBooks I, I scanning agent, whatever, whatever they call this thing, and it put my company as the vendor and literally it has the Zoom logo. It's very obvious if you showed this to a six year old, they'd be like, that's from that company. It's like their logo. It's the biggest thing on there. It says Zoom and they didn't categorize it. But I could see I could see an agent that gets scanned in, some apps. Company $100. Pay the bill. Blake Oliver: [00:17:43] Yeah, well, so. David Leary: [00:17:44] There's obvious. Blake Oliver: [00:17:45] There's AI agents that can do each of these tasks. I've. I've built an agent that can generate monthly reports and draft an email to a client based on them, but I haven't seen an agent that can do this all without me intervening in it. So maybe that's the disconnect here, is that they're saying that it can be automated from start to finish, but there's a human helping the AI along every step of the way. As far as I can tell, I haven't seen a system that does this autonomously yet, so maybe that's what I'm misunderstanding here. David Leary: [00:18:17] And then the concept of agents is very confusing to me. So you have QuickBooks online and you have a experts menu and you click it. And that's where let's say I was connected to a ProAdvisor, an accountant. That's where my accountant or ProAdvisor would be, and that's where I would kind of think I was like, maybe I could go there and there's these AI agents in there, and I could pick one of them and give them work to do. But this, I think the word AI agent is just being flown around a lot. And like, apparently there's this new AI that I just got for the bank feeds now inside of QuickBooks online. They changed the bank feeds. It's now AI powered, but like, I don't think those are agents I want to give work to do to somebody, and I want them to do the work. And when they're done, come back to me and maybe I have to review it. And I don't think we're even close to that at all. Blake Oliver: [00:19:02] An agent can act autonomously. That's the definition of agent. It it works on behalf of a person or an organization. And if I'm just sending a prompt to a chatbot and it gives me a response, that's not an agent, that's not autonomous, an agent needs to be able to act on its own in response to some sort of input and create outputs. So I guess if you had an agent that is designed to, like, receive receipts and invoices and then enter those into the accounting system, you could call that an agent. But that's a very limited case. But there's no agent that I've seen that can operate across the entire workflow. They just do little pieces of it. David Leary: [00:19:45] And that's the problem, right? You you have this little agent that just scanned a bill, and then the next agent would pick it up. And there's no there's no actual intelligence. That's the problem, right? It doesn't say like, hey, we've never paid some company before. Are we sure that's the right vendor on this bill? And then go look at the dollar amount? Oh, there's this bill from Zoom. That's the exact same amount every month. Maybe we should look at this. But you see it instantly. As soon as I saw it, it was like, that's wrong. Within eighth of a, you know, a flash of an eye you could see. Yeah. Blake Oliver: [00:20:18] Um, so that's my coverage of AICPA. Engage. I do want to jump from there to some ideas for real ideas for how we could actually replace the PCAOB, or how we could increase audit quality. And this comes from an article in CPA Journal.com. The author is Michael Creighton. He's a PhD and a CPA. I think he's at the University of Houston. Yes, University of Houston's Bauer College of Business. And he argues that the Pcob has failed to improve audit quality despite two decades of oversight and major financial frauds such as TD Bank, Theranos, Wells Fargo, GE, Silicon Valley Bank, they all received clean audit opinions. And he argues that it's the market consolidation of the big eight to Big four that has eliminated competitive pressure to differentiate on quality. And this is a natural thing that happens when you only have a few firms that can do the big audits. They don't compete on quality Because there's there's not that many of them. Right? They don't have to. So his proposal is to allow multiple players to compete with the Pcob in audit oversight, to have multiple audit overseers or audit regulators. It could include rating agencies, stock exchanges, state oversight departments and investor groups. And the competition would then encourage innovation and quality improvement. So these regulatory bodies could develop their own auditing standards and and their own ways of of inspecting audits, just like there's multiple rating agencies for for bonds. Or I'm trying to think of another example. David Leary: [00:22:19] Or there's three different credit reporting companies. Blake Oliver: [00:22:21] Exactly. David Leary: [00:22:22] You reconcile across all three. Blake Oliver: [00:22:24] He also recommends allowing non CPA firms to conduct audits for low risk public companies. Open it up beyond the CPA firms And enable entities beyond the ASB and Pcob to produce assurance standards and allow companies to work with investors to explore new audit report formats. And he highlights the problem with relevance in financial statements and audit reports that we've talked about at length over the last few years on this show. He mentions that today's audit reports ignore intangible assets that represent up to 87% of modern corporate value. He argues that the 300 page audited financial report has become functionally irrelevant. According to research. And he says evidence of that is that each 10-K is downloaded only about 30 times, despite 990 million Americans owning stock. If people really cared. David Leary: [00:23:22] Literally, it's an output of accounting firms is completely not used. That is like such a teeny number. Blake Oliver: [00:23:32] Right? Right. David Leary: [00:23:34] It's like bot traffic, basically. Right. It's Google indexing it once a month. Blake Oliver: [00:23:37] It's the it's you know, my my take on that is that what's happening is that, uh, the reports are being downloaded by aggregator sites that are basically pulling out the earnings per share number. And that's all that people care about. Like, nobody's going into the financial statements and reading all 300 pages. Nobody was going into Silicon Valley Bank's financial statements and reading all 200 pages, or we've. David Leary: [00:24:03] Had a podcast now for going on seven years and we've we've looked at financial statements or 10-K twice ever on the entire podcast, maybe. Blake Oliver: [00:24:13] Yeah. I mean, you know, now you can use AI to dig through them. The context window has gotten big enough where you could actually do that. But like, I want to take this back to what Mark Koziel and the AICPA are saying about the Pcob. They're basically saying we don't really care what happens. You know, we'll work with whoever regulates. What I'm saying is this is a humongous opportunity to reimagine what audit quality looks like, what the audit report looks like to make financial statements more relevant and therefore make audits more relevant. It's a huge opportunity that nobody seems to be interested in taking. Why? Why is that? David Leary: [00:24:55] David, get into it in the same way they, they they do soc2 compliance and they issue their little badge. Like, why doesn't AICPA get into this game and make some money? For themselves? Blake Oliver: [00:25:07] That's that's one idea. Um, you had a story about how, like while we're talking about audit, that two thirds of companies would change auditors if they could. Do you have that handy? David Leary: [00:25:19] So this is from audit software called inflow. They had a survey and they have 70% of US businesses are open to switching audit firms within the next three years. And the the reasons for this are a high audit fees, outdated prices and or outdated practices and poor communication. Now my I feel like this is one of those like the grass is never greener. Things like do they do all these people that are going to switch auditors think the next audit is going to be way better, or is it going to be the same experience like this is and the fact if 70% plan to change, that means 70% of the auditors that are out there are all the same. So what are the odds of you switching and not getting the same auditor that somebody else wanted off of over and over again? It it just feels like that's the bigger issue is there is not. And this goes back to your word competition. Right? Blake Oliver: [00:26:10] There's not enough competition. David Leary: [00:26:11] There's no competition. Blake Oliver: [00:26:14] All right. We got to talk about Billy Long, the big beautiful Bill Miley Cyrus. But first let's. Oh, we. David Leary: [00:26:20] Missed. Blake Oliver: [00:26:21] Our. David Leary: [00:26:21] Next chance for a headline. What was that big, beautiful Billy Long we could have. We messed up our chance for the headline. We should redo the whole show. Start over. Darn it! I just thought about that. Now I'll jump into the second ad here. Blake Oliver: [00:26:32] I got this one. David Leary: [00:26:33] Okay. Blake Oliver: [00:26:34] Let's thank relay between David and myself. We now have three, four or maybe five business entities, 20 or so checking accounts, dozens and dozens of virtual cards. It would be impossible to manage all of this if we weren't using relay as our small business bank. Relay is truly a part of the tech stack we use to run our businesses. Relay allows David and me to each have our own logins. We can grant access to our team, even our accountant, without sharing passwords or two factor authentication codes. Relay allows us to grow and scale our banking needs without ever going into a physical branch. I recently added an account to receive inbound merchant services. With just a few clicks. I had to create a payroll checking account and just a few clicks and I, I was done. I had access to my ACH info to give to my payroll provider instantly. With relays virtual cards, we can issue debit cards and credit cards to our team around the world for needed business expenses, I can instantly spin up a new visa card and set both daily and monthly spending limits. And when a team member doesn't need their card, I can freeze it until they need to use it again. Relay also has automation features to sweep money automatically from one account to another based on dates, amount or target balances, or percentages. For example, inbound payments can be split daily to your payroll sales, tax payable, operating and savings accounts based on predefined rules. To learn more about using relay for your firm and clients, head over to The Accounting Podcast. The Accounting Podcast. David Leary: [00:28:06] And I'll testify, the automation features that are relay to sweep money between accounts is is great. You just every Wednesday. If an accounts over a certain balance it sweeps it to the savings account. It's the way it's really the way to to do that Treasury management you need to do automatically. It's great. Blake Oliver: [00:28:23] We've got a question here in the live stream from Jackson who says, are you guys going to be at the Eye in Accounting Summit in Denver? And I think we are, David, because isn't that the one we're doing live CPE for? It is. I see earmark on the on the page. David Leary: [00:28:39] Yes. That's ours. Blake Oliver: [00:28:40] Yeah. So earmark is going to be doing live CPE for the AI and Accounting Summit, which is organized by Ater and carbon and zero Ignition and Automation Town. And Jason Statts who is going to be uh, is the content creator, uh, the head of content for that. David Leary: [00:28:57] So and this is a roadshow, right? They're going to a couple cities, not just Denver. Blake Oliver: [00:29:02] I think it's four cities. I better check my schedule. But yeah, very excited. The earmark will be a part of it. Uh, I think at least, like either me or David will be at each one. We got to figure out our schedules there. Um, all right, let's talk about Miley Cyrus, shall we? This was a funny headline. How Miley Cyrus hid drug purchases from her accountant, Grammy winning singer Miley Cyrus revealed on The Ringer's Every Single Album podcast that she disguised drug purchases as vintage clothes on financial records. The deception occurred during the creation of her 2015 album Miley Cyrus and Her Dead Petz, when drugs were integral to her creative process. The financial camouflage involved checks worth thousands of dollars, labeled as vintage clothing clothing purchases. Cyrus said that her accountant would ask about these expensive vintage items, including a supposed $15,000 original John Lennon T-shirt, and Miley would deflect these questions by claiming the items were stored upstairs and too delicate to display. She admitted to purchasing a lot of vintage clothes during that period. She has since become sober since since that period, and she she recommended that others do not follow the same path. So there you go. Vintage clothes. If you see checks for vintage clothes and you're an accountant now you know responsibility. David Leary: [00:30:34] The accountant. Right. Are you like, if they submit a receipt? If somebody gives you a receipt for a meal that they had, you don't ask them to show you a video of them eating the food. Right? Like, like where does this stop? Like, at what point is this actually the accountant's responsibility? Like. Like if she wrote a check and wrote in the memo that it was for t shirts, does the accountant have to verify that it was for t shirts? Like where I. When I saw this, I was like, what is the accounting story here? Yeah, she lied to the accountant. Blake Oliver: [00:31:05] But I wish I had the ethical guidelines at the top of my head. But no, in this case, um, you know, it's not the accountant's job to go and investigate. Right. We we work with what our clients provide us. We aren't IRS auditors, but unfortunately, some accountants seem to think they are. And that it's their job to enforce all the rules and to to to be the bad guy, I guess. And, uh, people don't really want to work with those kind of accountants. Well, I mean. David Leary: [00:31:36] In. Blake Oliver: [00:31:37] My. David Leary: [00:31:37] In. Blake Oliver: [00:31:37] My. David Leary: [00:31:37] Experience, a place of protection, like, hey, let's just make sure this actually happens so we don't have to deal with the IRS later on for anything like that. Now, is she risking herself by saying this out loud, like, is this going to put her like. Blake Oliver: [00:31:49] Could she get should could she get an audit? Well, maybe she's not worried about it because the IRS is, uh, is going to be completely understaffed for a while. I don't know. David Leary: [00:31:58] If this came out of her personal bank account and not her. Not. It wasn't out of the business. Blake Oliver: [00:32:03] And what do you want to bet it came out of the business account? What do you want to bet? David Leary: [00:32:08] Probably. Probably. Right. That's correct. The odds are all right. Blake Oliver: [00:32:12] Uh, should we talk about Billy Long getting confirmed? Billy Long was confirmed by the Senate as the new IRS commissioner Her by a 53 to 54 vote on Thursday. Long previously sponsored legislation to abolish the IRS entirely while serving in Congress from 2011 to 2023, and now he's going to be leading the agency he once sought to eliminate. Kind of reminds me of, uh, what's his name? Kennedy. Right. The guy running. David Leary: [00:32:44] Food and drug in there? Blake Oliver: [00:32:45] Yeah. Yeah, yeah. Um, so I think his most he's been involved in some controversies that we've discussed on the show before. I think the, you know, the promotion of the ERC credits. People know about that, telling people not to listen to their CPA. I think most people have heard about that. He was also involved in these questionable tribal tax credits, and I hadn't really looked into that. But apparently they're completely fake. It's like a it's a big scam. Um, and one of our LinkedIn one of my LinkedIn connections, It's actually pointed me to a post that he did. Uh, this is, uh, Gian Porzio. And he he has a story here on LinkedIn about how he was approached 18 months ago to sell tribal tax credits to wealthy individuals and companies. And he talks about how it sounded too good to be true. And so he dug into this. The story is that the white River had a deal with the Cherokee Nation, who were allocated $5 billion of credits as reparations back in the 1940s. And it raised all sorts of red flags for him, he said. Each time I asked them for legal authority, I was given a carefully crafted excuse as to why there wasn't anything on public record I could look at. They told me they hired two major national law firms that wrote tax opinions, providing these credits were legitimate. Blake Oliver: [00:34:10] When I asked to see these tax opinions, they asked me to sign an NDA that required me to pay $10 million if I disclosed anything in the tax opinion memos. When I question the NDA penalty, they said that the tax opinion memos would essentially give any other Native American tribe the ability to access billions of similar tax credits and white River needed to protect this trade secret. He discussed it with his partners at CCB. They did their own investigation to see if it was legit. He used his connections to go directly to the CFO of the Cherokee Nation, who said he had no knowledge of the $5 billion of tax credits that white River claimed they were transferred to them. So then he went back to the white River representative and told him that the CFO had no knowledge of this. He was surprised and annoyed that I went this far in my due diligence. Here's where it gets good. He explained to me that there is an elected chief of Cherokee Nation, and then there is the chief by blood lineage. He explained their deal was with the chief by lineage, and that the elected officials are not involved in their deal. I mean, this gets wilder and wilder, right? David Leary: [00:35:12] What I'm trying to bridge in my brain here is it feels like people that are maybe not part of the tribe are trying to use tribal tax credits. That's the huge disconnect. Like, how does the scheme work? Like like, what are these credits? Blake Oliver: [00:35:27] I mean, they've created an imaginary tax credit. They're saying that like, this tribe got this tax credit back in the 1940s as a negotiation for reparations, and that now somehow you can buy in. David Leary: [00:35:40] Because they did it. You're allowed to also claim it. Blake Oliver: [00:35:43] Like if you buy into it, you. Yeah. Or something. It's it's you know, and you investigate it and then it's completely fake. So I mean, so that's what Billy Long was involved in. New IRS commissioner. Uh. What else? David Leary: [00:36:03] I'm actually surprised how it feels like it went quick. I was expecting because he's he's such got such a big personality. I was expecting to see, like, highlights for weeks of every day of his Is hearing and nothing really leaked out like it must have been a pretty quiet, uneventful vote. I was, I was. Blake Oliver: [00:36:24] Hoping already grilled him, right? David Leary: [00:36:27] Or again, maybe they don't care. Blake Oliver: [00:36:29] So I'm posting the link to, uh, the tax credit story in the chat. Where do we go next, David? Big beautiful bill. David Leary: [00:36:39] Yeah, since we just talked about one bill. Blake Oliver: [00:36:42] All right. So the big, beautiful bill is still in the Senate. I got to find this story here. Here we go. Was Elon Musk right to oppose the big, beautiful bill? A new poll of Americans finds that public opinion strongly supports Musk. This is an economist YouGov poll. And it reveals that 56% of Americans agree with Elon Musk's criticism of Trump's bill, while only 17% disagree. That's that's a pretty big split there. Over half 56% agree with Musk's criticism of the One big beautiful bill. Only 17% disagree. Musk argued that the legislation, quote, will massively increase the already gigantic budget deficit to 2.5 trillion and burden citizens with crushingly unsustainable debt, unquote. Not surprisingly, 72% of Democrats agreed. 55% of independents concurred, and 44% of Republicans agreed, which is a plurality, though not a majority. Is is my video freaking out, David? David Leary: [00:37:53] Yeah, you might have a loose cable or something, I don't know. Blake Oliver: [00:37:56] Weird if it. But you can hear me. Okay. Right. Speaker3: [00:37:59] I can hear. David Leary: [00:37:59] You just fine. But it does go black and then like a green screen then comes back, then. Speaker3: [00:38:03] Weird. Now I might. Blake Oliver: [00:38:04] Have. Speaker3: [00:38:04] To reset. David Leary: [00:38:05] Stop. It just stopped. Speaker3: [00:38:06] I think we're good now. David Leary: [00:38:07] Don't move. Speaker3: [00:38:07] Don't move, don't move. Blake Oliver: [00:38:08] I can't touch anything. Um, so what's actually in the bill. We already talked about that. Um, yeah. So that's it. Basically, the bill is not popular. And the CBO came out with an analysis of the bill, which we actually already did this on the show. Um, like I think the Tax Foundation did this analysis, but now the CBO has done one that basically shows that the bill would be a wealth transfer from low income to high income households over, uh, like the next eight years. Basically, the bottom 10% of earners would lose income. They would lose about 1600 annually, which is almost a 4% reduction in income or benefits. The top 10% of earners would gain 12,000 annually. That's a 2.3% increase in resources, and middle income households would see modest gains of 500 to $1000 annually, which is less than 1%. So the bottom 10% of households, like lose 4% of their income, essentially in the form of like, uh, Lost benefits due to these cuts. Speaker3: [00:39:15] Top 10% benefit. David Leary: [00:39:17] For a lower income person is way more important than 4% in any of the other demographics. Blake Oliver: [00:39:23] Right? Because of the. Speaker3: [00:39:24] Amount of discretionary. Yeah, yeah. David Leary: [00:39:26] Every penny counts. Speaker3: [00:39:27] Yeah. Blake Oliver: [00:39:28] Um, and the problem I have with it too is that, like, it doesn't actually stimulate the economy the way the previous, uh, Trump bill did with all these, like, benefits for businesses. Right. It's really like individuals and cuts to, like, government programs, which they're not going to stimulate the economy the same way. All right, David, I'm going to let you I'm going to let you thank our third sponsor. And I'm going to refresh. David Leary: [00:39:56] By combining client communications, file review reporting and task management. Keeper has everything you need to run your bookkeeping or cast. Practice keeper is an all in one app that allows you to you, your team and your clients to easily collaborate and to make your monthly clothes as efficient as possible, starting with a beautiful custom branded client portal optimized for bookkeeping work. Your clients can answer questions you have about uncategorized transactions, allowing you to categorize and automatically post them to QuickBooks online correctly, all without ever leaving keeper. Keepers month end file review feature will surface transactions that may not be posted correctly, and with keeper's customized reports, you'll be able to increase the value your firm provides clients by giving them the reports they'll actually read. Keepers built in task manager ensures nothing falls through the cracks, and it includes time tracking, so you can see where you and your team spend their time. Keeper also just announced they've added two new features Keeper Email and Tax Sweet Keepers. Email features allow your firm's email communications to appear in one shared inbox that can easily be assigned and turn into tasks for your team, ensuring no client work falls through the cracks. Keeper's new tax suite allows you to expand your use of keeper beyond your CAS clients. You can now use keeper with all your text clients. To keeper is a very affordable and clear pricing model that starts at only $8 per client per month. To learn more. Why thousands of bookkeepers and accountants trust keeper to manage their month end close. And to get 20% off your first three months, head over to The Accounting Podcast. That is The Accounting Podcast. Thank you keeper. Blake Oliver: [00:41:35] Thank you keeper. Trump's tariffs are still alive. A US appeals court has said that they ruled Thursday that Trump's global tariffs can remain in effect while the administration appeals a lower court decision that had blocked them. This extends an earlier temporary reprieve and represents a significant win for one of Trump's signature economic policies. They have expedited the appellate court arguments. Those are going to be July 31st. But Trump's 90 day pause on reciprocal tariffs are set to expire on July 9th. David Leary: [00:42:16] So I forgot we even had tariff articles actually between the the feud between him and Elon. And then now you have the Ice raids that are happening. There's always like this new story that trumps these these other stories. And nobody talks about the tariffs anymore. But like you're the first person that's mentioned tariffs in two weeks. Blake Oliver: [00:42:34] But they're also the, the the biggest like economic doom and gloom possible story. They could they could send us into a recession. Speaker3: [00:42:44] I agree but. David Leary: [00:42:45] They've they've gone away because of all the media. So the media is bored with they're not talking about tariffs anymore. But it's super important to still talk about. Speaker3: [00:42:52] I. Blake Oliver: [00:42:52] Guess it'll come back in a couple of weeks when we get to the next deadline, and we'll see if there's another extension. Speaker3: [00:42:58] Um, but. Blake Oliver: [00:42:59] You know, maybe this is why optimism has declined among accountants. According to a story in accounting Today, Avalara did a 2025 Accountants Confidence Report, a survey of accountants that reveals a stunning reversal in accountant optimism between January and April. Net sentiment among accounting professionals swung from plus 19% to -39%, a 58 point drop in just four months. What are the major issues impacting small and mid-size business clients, according to accountants? Number one is inflation costs and pricing. Number two is tariffs and trade uncertainty. And those are basically linked. Number three is new tax legislation concerns. Four is labor supply and wage issues. And five is technology and AI adoption. I saw another story about auditor pessimism. So specifically looking at auditors and how they feel. The center for Audit Quality released their Audit partner Pulse survey, and it reveals another dramatic shift in sentiment. Pessimism among audit partners has skyrocketed from just 10% last fall to 44% today. So that is more than four times more pessimism in just a matter of months. And the trade issues lead the pack as the biggest economic threat. Trade issues. Recession fears, geopolitical instability. Those are the top three. So auditors they have the like inside view of what's going on with these companies right. So you know what is what's going to happen. Um, if these tariffs come into effect could be really bad. Will will Trump Taco again. Trump always chickens out. That's been the motto. Will he do it again and again or will he finally stick to his guns and do the tariffs. I would not I would not be optimistic. Business travel has been taking a big hit. European business travel bookings to the US dropped 25% in April versus last year. Overall, international business travel fell 19%. But what's interesting is that it's not that business travel is dropping globally, it's that European companies are going elsewhere. So bookings are up 23% in Norway, Turkey and Australia up 19%, Japan up 10%, India up 7%. David Leary: [00:45:41] As in, they're just doing commerce and business with other nations and. Speaker3: [00:45:45] They're avoiding the US. They're avoiding the US. Blake Oliver: [00:45:47] Right. Um, and that's the risk of the policy of these tariffs. Is that like, you know, other countries can just do business with each other instead of the United States? Uh, we don't have a monopoly on global trade. So. I have one bit of good news though. Almost three quarters of accounting firms reported increased profits in the past year. That's according to Xero's 2025 state of the industry report. Over half of firms added new clients due to improved operational efficiency and expanded services. 85% of practices now offer client advisory services, 85%. So outsourced accounting, bookkeeping. That is a massive jump from just 41% in 2023. So basically, according to Xero survey, it doubled in two years. That's that's the tipping point, right? Everyone's doing it now. Amazing. Speaker3: [00:46:49] That yeah. David Leary: [00:46:50] To double in two years is for anything to double in two years is amazing. Speaker3: [00:46:54] Also, 80%. Blake Oliver: [00:46:55] Of accounting firms expect I will positively impact their practice. We're very bullish on AI. 85% of firms have adopted cloud accounting. We did it, David. Speaker3: [00:47:07] It's there. Blake Oliver: [00:47:08] It's there. It's cloud is default now. All right. That's everything for me when it comes to tariffs and surveys. I guess I got one more stat here. Um. Even though firms are bullish they're growing. They've got increased revenue. A survey by the Indiana CPA society finds that over half of accountants predict their firms will reduce headcount by 20% over the next five. Speaker3: [00:47:37] I had that. David Leary: [00:47:38] Article. I was waiting to bring this article next. Yeah great article. Blake Oliver: [00:47:41] But then 75%. So three quarters also believe at the same time that their firms will need the same or more staff to meet future client demand. I don't know if they will though. You know, maybe the AI stuff will will take care of that. David Leary: [00:47:58] And 60% believe that automation is going to eliminate many of these entry level positions. And what I find interesting about this is you have these are accountants at firms. These are not this is not a survey of firms. It's it's people doing the work. It's the workers that are doing this. And I understand why they could be thinking that because I don't know if you saw last week, BDO said they're going to spend $1 billion on AI strategy. And this week RSM said they're going to spend $1 billion on AI. Speaker3: [00:48:29] I always wonder about that. Is that cash? Blake Oliver: [00:48:31] Is that like, are they spending a billion in cash or is this some like made up number based on timesheets? I feel like $1 billion is a lot to spend on AI. Speaker3: [00:48:40] Well. David Leary: [00:48:41] What I'm wondering about this is, is payroll at these firms so big that spending $1 billion over here is going to eliminate tens of billions of dollars of payroll. Like, how big is payroll at a company like BDO? A year? Blake Oliver: [00:48:57] I have. Speaker3: [00:48:57] No idea. I have no. David Leary: [00:48:58] Idea. Yeah. Um, because the real money. I think that's outgoing is probably not the entry level people, it's the partners. That's where the real revenue is headed to. So it just but I understand, like if you're working at a firm and you see this messaging of your firm saying we're going to spend this much on AI agents, I see how you can connect the dots and be like, I'm going to lose my job, or my coworkers are going to lose my job. At least 20% of them will lose their job. So I totally understand why 50% of accountants believe you're going to see these massive cuts in the next five years. Speaker3: [00:49:30] David. Blake Oliver: [00:49:32] Did we thank our final sponsor yet? David Leary: [00:49:36] Not yet. Blake Oliver: [00:49:37] I'll read this one. Are you still drowning in month end expense chaos? Imagine getting multiple days back each month that you're currently losing to manual accounting processes. This is why I'm excited to tell you about Pathok, a leading spend management solution that can automate your financial processes while giving you total control and instant visibility over all your company spending. Pathok unifies your corporate cards. Expense management, accounts payable and procurement into a single platform. The best part? It works with your existing credit cards and tracks transactions as they happen, giving you real time insights into your spend. No more chasing receipts. Pay hacks. Automation handles that. No more end of month surprises. See exactly where your money's going. The moment it's spent, and with real time integrations into systems like NetSuite, QuickBooks, and Sage Intacct, reconciling expenses is faster than ever. Finance teams using Pathok are saving days of work each month while gaining better cost control, real time visibility, and the ability to focus on strategic priorities instead of expense reports. Ready to transform how your company manages spending and see how payback can work for your business? Head over to The Accounting Podcast. That's The Accounting Podcast. David Leary: [00:50:54] So I mean, the chat said payroll is about $800 million. Dollars. Speaker3: [00:50:59] Okay, so. David Leary: [00:51:00] If you invest a billion and after three years, that's going to have a payoff. Speaker3: [00:51:04] Meaning you can lay off 20%. Blake Oliver: [00:51:06] Of your. Speaker3: [00:51:06] Employees. David Leary: [00:51:07] Yeah. I mean, like and then obviously we talked about this before. The real reason they're spinning is that is they want to go into industry and be the AI experts and make revenue. But I could see I totally could see why people are afraid that these, their coworkers are gonna get laid off 20% of them because of this AI spending that the big firms are doing. Speaker3: [00:51:28] Well, I mean. Blake Oliver: [00:51:28] It's going to be it's going to be staff at the low level, right? Speaker3: [00:51:31] As we've talked about, it's going to be with. David Leary: [00:51:33] These all these AI agents that are everywhere doing all this work, apparently. Speaker3: [00:51:37] All. Blake Oliver: [00:51:37] The manual work. Speaker3: [00:51:38] Yeah. Yeah. David Leary: [00:51:39] That doesn't exist. I want to touch on something that's kind of related to AI and bigger in firms. So create professional alliance in parentheses CPA, which I find really interesting. Right. So it's a it's a P rollup. Right. That's using the abbreviation CPA, CPA as their company name which. Speaker3: [00:51:56] Oh that's that's does this even happen? Wait, wait. David Leary: [00:51:59] But that's not the story. Speaker3: [00:52:00] But okay. David Leary: [00:52:01] I just find that very interesting. That create professional alliance parentheses CPA, even though they're not a CPA, but they're using. Speaker3: [00:52:09] Cpa company name, I feel. Blake Oliver: [00:52:10] Like they're going to get in trouble. Speaker3: [00:52:12] For that. Yeah. David Leary: [00:52:13] So they plan to invest $500 million into accounting firms over the next two years. And what's this is driven by who backed them. It's thrive capital. So Thrive Capital. Let's rewind a little bit more. Thrive capital put $1 billion into open AI in August 2024. So so you have this this I guess they're private equity, but they're probably more risky. So arguably, uh, it's just an investor, right? It's the money. It's the capital. Right. And they're basically implementing a strategy where they are going to embed open AI powered tools into accounting firms. So you spent all this money on open AI. I. Well, now I need customers. Now they're going to buy accounting firms and make them buy that technology. Now they're not the first ones to do this. This this article led me to discover that there's another company from General Catalyst. General catalyst invented or invented? Invested in an AI startup called accrual, which is led by a former Brex CTO, and accrual. Their goal is to create AI from scratch. But now you need people to use the AI. So they're buying accounting firms. General catalyst is also doing this. So the the PE, the money, the VCs, they're spending billions of dollars on AI and they need to have a customer. And this goes this is what Pepsi did when Pepsi couldn't sell enough Pepsi. They bought fast food restaurants so they could sell more Pepsi. And this is what happened with PE did to Red lobster. They bought a shrimp company. They wanted to sell more shrimp, so they bought Red lobster and then they made Red lobster. Do all you can eat shrimp. It's it's the same thing happening here. Speaker3: [00:53:55] Or. Blake Oliver: [00:53:55] Going back even further in to the Gilded Age, its, uh, railroads buying factories in order to, uh, have customers to ship their goods or or vice versa. It's vertical integration. Speaker3: [00:54:10] It's vertical integration. Blake Oliver: [00:54:12] Fascinating. Um, well, David, I think that's all the time we have for today. Thank you to everyone who joined us live. Don't forget, if you're listening on the podcast feed, you can subscribe to us on YouTube. See what we look like. Sometimes people are surprised. Hit that notification bell icon and get notified when we go live and you can join us and chat with us. We love chatting with our viewers. Thank you to Stephanie and Aztecs and Night Light and Tate and Jackson and Sarah and Matt and Boring accountant and everyone who joined. Sorry if I didn't call out your name. And apologies if we didn't get to your comments this week. We had so much going on and you can also earn CPE credit for listening to this. You made it 55 minutes into an episode of the Accounting podcast. If you have a CPU requirement, you ought to get a certificate for that. Go to earmarks. You can earn CPE for this episode and all of our back catalog for quite a ways. It's a great way to get your CPE done, earn one a week for free, or join for just $150 a year to get unlimited. And we also offer IRS CE for certain courses. So look for that IRS CE banner if you're an enrolled agent and you need CPE. I have heard that our credits work globally as well. Almost every organization accepts Nasba approved CPE credits for Chartered Accountants and CPAs around the world. Check with your local organization. But I've heard from listeners in the UK, Australia, and Canada that they have been able to use earmark CPE credits. David Leary: [00:55:54] So and we just launched a new show called Tax in Action. And that's doing really well. And you can get your ask for that. I put the link in the the chat just now. Blake Oliver: [00:56:03] It's easy go to tax show to subscribe. You can listen on your favorite podcast player and then get the earmark app in order to get your CAE and CPE credit. Thanks everyone for listening and tuning in. If you want to let us know what you think, send us an email The Accounting Podcast at Earmark me. That's The Accounting Podcast at Earmark Me. We get a lot of messages these days, so we don't always read them on the air. In fact, rarely do we have time, but we read all of them. I personally read and reply to all of them. Sometimes it just takes me a little while to get to it, so I'd love to hear from you. Love to know what you think. Is there a story that we missed? Is there something we got wrong? Um. I want to hear it. See you around here next week. Bye, everyone.