Latest / The Accounting Podcast / Grant Thornton to Acquire CBIZ & Trump Puts Immunity Over Blanche

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Grant Thornton to Acquire CBIZ & Trump Puts Immunity Over Blanche · 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: [00:00:05] Nearly half of Gen Z workers say AI is making them less intelligent. David Leary: [00:00:09] Half. Half. Blake Oliver: [00:00:11] Yes. David Leary: [00:00:13] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:20] Hello and welcome back to the Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver. David Leary: [00:00:26] And I'm David Leary. Blake Oliver: [00:00:27] And today, David, we are leading off with the big news that Grant Thornton is going to acquire Cbiz, one of the largest combinations of accounting firms in history, and an acquisition of the only publicly traded accounting firm in the United States. We will dig into this. Also, President Trump is choosing to put immunity from tax audits over. David Leary: [00:00:55] Audits of. Blake Oliver: [00:00:56] Future audits over his nomination of Todd Blanche to run the IRS. So, David, before we get into that, let's thank our sponsors. David Leary: [00:01:07] Yeah, our sponsors today, we have cloud Accountant staffing on pay Thomson Reuters and Valtrex AI. Blake Oliver: [00:01:14] Are you tired of the endless search for qualified accounting talent? You're not alone. Growing accounting firms are struggling to find available and affordable team members when they need them most. Cloud Accountant Staffing has the solution with their revolutionary candidate portal. Unlike traditional staffing agencies that waste your time with sales calls, paperwork, and deposits, the Cloud Accountant Staffing Candidate portal gets you instant access to highly vetted, qualified accounting professionals. No waiting, no hassle. Just top talent right now. What makes this different? Speed and simplicity. While other firms make you wait weeks or months with Cloud Accountant staffing, you could interview someone as soon as tomorrow. Their boutique support ensures you're getting quality talent that's both available and affordable. Exactly what growing firms need. The candidate portal puts you in control. Browse live candidates, make selections on your timeline, and build your offshore team without the traditional headaches. To find, review and book interviews with potential team members, all in less than ten minutes. Head over to The Accounting Podcast dot ProAdvisor CAS that's The Accounting Podcast dot io forward slash CAS. And welcome to our live stream viewers. Great to see you. Boring accountant hazardous items Steve Hawthorne and can't pay attention. Great to be back with you on YouTube LinkedIn wherever you're watching us. Don't forget, subscribe to the accounting podcast on YouTube. Find us search for The Accounting Podcast, hit subscribe and that notification bell icon. You can tune in when we go live and you can earn free continuing professional education credit. Whether you listen live or on the podcast feed. Get the free earmark app@earmark.app in your web browser or get the free earmark CPE app on the App Store or Google Play Store. Sign up for free. Earn one free CPE per week and get unlimited CPE from our library of over 1800 on demand courses for the low price of $200 per year. All right, David, let's dig into this deal. Grant Thornton buying Ceebis. What stuck out to you. David Leary: [00:03:18] So we'll cover the numbers which I think are pretty common. Right. They're everywhere now. It's a $5 billion deal. It's going to be the largest accounting deal in over 25 years. It's going to basically make Grant Thornton jump to be the fifth biggest firm. So now we're now we might have a big five instead of a big four. Maybe it's time to rebrand these types of things. Um, this, if you remember, New Mountain Capital put a bunch of money in and bought a position in Grant Thornton in 2024. It was a. Blake Oliver: [00:03:45] Majority stake. David Leary: [00:03:46] Majority stake to make this deal happen. New Mountain Capital is putting additional. Blake Oliver: [00:03:50] Did you say Grant Thornton or CBS. David Leary: [00:03:53] Or Grant Thornton? Blake Oliver: [00:03:54] Okay. David Leary: [00:03:55] So. So in order to make this deal happen, New Mountain Capital is investing even more money into Grant Thornton to make this acquisition. Blake Oliver: [00:04:03] Okay. Got it. David Leary: [00:04:05] And and you're right that the key here is, is the, um, the, that one of these companies is public, which makes it interesting because we can see some of the numbers. And if you remember about a month ago, you made the argument that obviously the market is not valuing accounting firms publicly. So why would PE buy accounting firms? And maybe we'll see a decline in this. But this is exactly the opposite of that argument, which the PE company put more money in to buy a public accounting firm. Blake Oliver: [00:04:33] I guess I was wrong on this one, but I mean, we talked about this in the past over the year on on this show, and we saw CBI's stock price go from, you know, 55 all the way down to below 30 and just sit there in March, April came up a little bit in May, a little bit in June, and now it's way back. It's all it's back to $55 a share after the announcement of this acquisition. David Leary: [00:05:02] And that they're going to that's the purchase price. So it's it's about a 54% premium over its rolling its 30 day weighted average price. Um, but what I, what interesting because this is public, as soon as I saw it, I was like $55 a share. It's way cheaper than that right now. So I went and pulled up the chart like you just had up. Yeah. And what I observed in that, um, speaking of the stock price, that seven days before this deal was publicly announced, the stock started going up in price. And I'm starting to feel like, is this another situation of, you know, the impression of independence? You know, it gets muddy when P and everybody else is involved. Um, I suspect hundreds of people at both firms knew about this information. And who knows how many people at the PE firm knew that this deal was going through. I doubt it was something that was just one day of news like they've known for weeks, possibly months. Who knows? Right? But I can tell you this if you were lucky enough to buy on July 23rd, you made a very, very nice profit in 7 to 10 days. Very, very nice profit. But but it's the impression again, right? Like here we go. P is involved in some deal and it kind of looks funky if you look at the stock price. It's interesting. Blake Oliver: [00:06:12] I was wondering about this too and I looked into it. On July 7th, Bloomberg reported that an activist investor called Reference Equity sent the board a letter urging CBS to stop buying back stock and pivot back to M&A. David Leary: [00:06:29] I think we talked about that article. I remember that we talked about this. Yeah. Blake Oliver: [00:06:31] And the stock jumped 9% on that news around July 16th. And then by the close on July 28th, the day before the deal was announced, the acquisition, CBS was at $46.70. And then on July 29th, that $55 Grant Thornton deal was announced and it popped 17% towards $55. So what it looks like happened, and this is not to say that what you're saying didn't happen, right? That there were people on the inside who knew about this and the information got out because when deals like this happen of this size, there's like lots and lots of people who know. But the activist investor letter is a signal to markets that something could happen. They're pressuring the board. They're pressuring. David Leary: [00:07:21] You to take. Blake Oliver: [00:07:22] The deal. Basically without saying it right. And so basically up to the announcement of the deal, about 15% of that $55 deal price had already been priced in. So that is that is likely what happened. Right. It's the activist investor signals to the market something's going to happen. They buy, they buy and the price goes up. David Leary: [00:07:48] So so that that that seven days before people were just the market had its instinct was to buy more doesn't necessarily mean anything inside went on. Okay. Blake Oliver: [00:07:57] But I do wonder about this deal, right? Because we've been talking about CBS as a potential example of how maybe the markets are not that interested in accounting firms. Accounting firms are struggling in the era of AI or the traditional business model. Will accounting firms are actually doing great, but we wonder about the traditional business model of large firms. And we saw that, you know, the the stock price of CBS was down, you know, 60, 70%. It collapsed. It was it was down in the high 20s in mid-May. And it was because CBS had acquired Marcum. And that integration ended up being more expensive than they projected. There was client attrition. They had revenue misses. Q1 2026. They dropped 9.4% after a revenue miss there, and management was saying they're only going to grow 2 to 5% for 2026, which is basically just keeping up, barely keeping up with inflation. David Leary: [00:08:58] Yeah. Blake Oliver: [00:08:59] So it's interesting, right? After all that, Grant Thornton decides, you know what? It's a buy. And they did it. David Leary: [00:09:07] And I imagine and this is the Grant Thornton make this buy or did the company New Mountain Capital really make this buy indirectly through their Grant Thornton acquisition channel. Because because these are the new mountain capital is putting the money in to make this possible for Grant Thornton to do so. Blake Oliver: [00:09:25] Right. And so for new mountain capital to make its money back, what's going to have to happen is Grant Thornton is going to have to go public, because now it's the fifth largest accounting firm. Yeah. It can't be bought by the big four. They're they're too big. Right. Nobody. That wouldn't be. I don't think that would be allowed. I don't know, maybe it would. But, um, they're going to have to go public again. So that's this that's this private equity game. David Leary: [00:09:55] Yeah. Blake Oliver: [00:09:55] Package these firms up together, make them bigger, more attractive, and then go back with an IPO. And that's what Alan Colton is saying. You know, the private equity guru. He's predicting that like many of the top ten accounting firms, the most of them will be public within. You know, I forget his timeline ten years, something like that, which would be pretty amazing if that happened. David Leary: [00:10:20] It because then it's like now the market could become the buyers and now you have this infinite pool of possible potential buyers. And then you have the, you know, just this empty space, right? If it's big enough, it'll roll up into the institutional buyers will have to buy it, right? So state pension funds, etc. will have to purchase these big huge accounting firm stocks. Yeah, that's probably your only exit. And it reminds me of the whole like, hey, if we can get the government, like they keep escalating, who can buy the crypto? Who you can keep exiting it to? It's like, it feels like a similar march. Like eventually they're going to try to exit accounting firms to the general markets. Blake Oliver: [00:11:01] Yep. David Leary: [00:11:02] The general citizens in the same way they want to do it with get the government to buy the Bitcoin. So the general citizens are now buying the crypto. Blake Oliver: [00:11:09] Now there's one more thing I want to do before we move on, which is put this in perspective because it's a huge deal. And yes, Grant Thornton and KB is combined will now be the fifth largest accounting firm globally. But they're still tiny compared to the big four. Global revenue will be about $7.5 billion. How does that compare to the big four? Well, Deloitte has 70.5 billion. Pwc 56.9 E over 53 and KPMG close to 40 billion. That's fiscal year 2025 numbers. So compare that. Kpmg is is number four with like $40 billion of global revenue. The fifth largest will now be Grant Thornton with 7.5 billion. So the big four are still really, really, really big. David Leary: [00:11:59] Yeah. And all of a sudden this $5 billion doesn't seem as much big of a deal now. Blake Oliver: [00:12:03] Yeah. All right. Let's move on to our next story, which is about Trump putting his immunity deal over his nomination of Blanche. But I guess before that, David, we should thank our next sponsor, and that's on pay. And I'll let you take that one. David Leary: [00:12:20] Are you tired of payroll headaches getting in the way of your client experience that 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. Onp handles all the heavy lifting. You get a dedicated onboarding coordinator who sets up worker profiles and transfers year to date data from previous providers at all, at no extra cost. And that's an important one because we're, you know, we're doing those midyear switches. It's a very important. Oh yeah. And Onp keeps pricing simple too. Everything your clients expect from multi-state filings to off cycle payrolls. It's included no hidden fees, no surprises. To book a demo. Head over to The Accounting Podcast dot ProAdvisor that is Accounting Today dot promo forward slash OPAY. Blake Oliver: [00:13:21] President Donald Trump really, really wants to avoid the kinds of criminal prosecutions that he faced the last time he left office, and that has become an impediment to his pick for attorney general. And I think I misspoke earlier. I said Todd Blanche was being nominated for IRS. No, it's attorney general. This was in Accounting Today. I spotted this there. He said. On Thursday, President Trump said that he may withdraw Todd Blanche's nomination rather than accept written limits on that controversial IRS settlement covering investigations into his and his family and his organization's past business dealings. David Leary: [00:14:03] Because two senators are saying they're going to kill his nomination if he does not put it in writing that he needs this to go away. Blake Oliver: [00:14:09] John Cornyn and Thom Tillis, they want the immunity limited to IRS enforcement and exclude other agencies, such as the Justice Department and their opposition postponed the Judiciary Committee vote. And without both senators, Blanche probably can't advance out of the committee. Trump has suggested that he's going to wait until Cornyn and Tillis leave the Senate in January because Tillis is retiring and Cornyn lost, is made primary to Trump's pick, Ken Paxton. But that means that Blanche may not win a confirmation until the next Congress, especially if Democrats take control of the Senate. And looking at Trump's approval ratings, not that approval ratings necessarily mean that you're going to win or lose in the general elections, but it doesn't look great. So if Democrats take control of the Senate, he definitely won't get his nominee through. David Leary: [00:15:06] I was thinking about this. Maybe they could do this. I could almost agree to this. If the all the family's tax returns are made public every year. We want the IRS won't audit them, but you're just going to make them public and just let all of us see it. We want audit you as the citizens of this country and our government, but we just want to see them and then they can just audit it in the public opinion. Right. Blake Oliver: [00:15:30] It's, you know, hey, that's one way to do it. That's one idea. David I like I like your out of the box thinking here. David Leary: [00:15:37] Well, I think it's it's like at the end of the day, it's pretty clear everybody has these theories that they're making a lot of money by being in the presidency. The Trump family, they're making tons of money from this. And yes, there maybe there's a chance they get audited because something's funky. Who knows? Right? But just make it all public. And then there'd be no IRS audit. Just the public will be able to form, have better informed opinions of what's happening in the Trump White House and the presidency and his family. Blake Oliver: [00:16:05] So another interesting fact from this confirmation hearings around Todd Blanche. Blanche admitted that he did not know who wrote the sweeping immunity language he signed and initially saw no need to document changes in writing, although he later reversed that position. So there you have it. David Leary: [00:16:27] Are we going to find out? Ai wrote it eventually. Blake Oliver: [00:16:30] Ai is writing everything these days. David. Yeah. That's right. Um, okay. Let's thank our. Let's see. Is it time to thank another sponsor? Not yet. So let's go ahead and talk about this hack, this alleged hack of E because right. E has not acknowledged that this happened. But there's a group saying that they hacked E. David Leary: [00:16:53] Yeah. So a notorious hacking group hacking group called Shiny Hunters has publicly claimed responsibility for breaching E systems and is threatening to link stolen leak stolen client data unless the firm pays by July 31st. Now, we're recording this August 3rd, and from what I can tell, no activity has happened. So that tells us there's no evidence that besides their ultimatum, that they've released this data publicly, there's no evidence that E has paid or responded to their request. So we really don't know what's happening. Maybe maybe this got handled. Maybe E hired an assassin, I don't know. Right? For whatever reason, nothing has actually occurred with this, considering we've now passed the deadline. But if it's true, I mean, this is massive because they access they say they accessed is Jira, which is your support tickets and code GitHub so code. So if this would be UI is probably internal code. They're working on internal things. And if they're doing work for clients I imagine that's accessible now too. So that means these hackers, if they can get into GitHub and see code, that means they can hack into other people's systems too. Well, they're. Blake Oliver: [00:17:59] Also saying they got into Azure, which is. David Leary: [00:18:02] The hosting system. Yeah. Yeah. And passwords. And then to the sensitive data, obviously. What do accountants have? Social security numbers, credit card details, tax filing data like this hack. If it's true and they actually have this data, they don't even have to release it publicly. They could just put on the black market, and it's going to be worth tons because it's going to open the door to hack a fortune 500 companies that they audit, etc. it's not good. Blake Oliver: [00:18:25] Now, EY has not confirmed that this happened. So this is just the word of the hacking group online. But they do have a history. Through 2025 and into 2026, Shiny Hunters ran a massive campaign against Salesforce customers, reportedly compromising over 1000 organizations and claiming 1.5 billion stolen records. David Leary: [00:18:48] And they also specifically the Qantas Airlines, Jaguar Land Rover, SoundCloud. So they've hit some big brands as well. Blake Oliver: [00:18:56] Going back to Trump, Donald Trump has appealed the ruling against his IRS audit immunity deal. They the president's lawyers filed a notice of appeal in federal court on July 23rd, challenging U.S. District Judge Kathleen Williams July ruling against the settlement. As we reported on the show previously, the underlying lawsuit was filed in January over the alleged unauthorized leak of his tax information to the press. And then he settled with the IRS, uh, to resolve the $10 billion lawsuit. And that would give him that immunity against himself, his family, and his business interests from audits or other federal probes involving past filings. And in her 56 page decision, Williams barred Trump and his administration from citing the settlement and future regulatory or judicial proceedings, finding it had no viable basis in law or fact. So the saga continues of the Trump immunity deal. David Leary: [00:19:59] Do you want to do an ad? And then I have two pieces of zero news. Blake Oliver: [00:20:03] Yes. Let's think our next sponsor and that is Thomson Reuters. If your tax workflow still feels like a grind every busy season, you're not alone. We hear from firm owners every week who are buried under disconnected systems. Manual data entry and staff stretched way beyond their limits. But it doesn't have to be that way. Thomson Reuters built the tax automation suite to solve exactly this headache. It connects safe. 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That's The Accounting Podcast dot promo forward slash tax automation and please do visit those links. It lets our sponsors know that you heard about them on the show. It helps them. It helps us. We appreciate you. You know what the hardest job to fill in accounting is, David. It is the comptroller job, the most accounting of accounting jobs, if you ask me. And I spotted this on Comptroller council.org. Comptrollers and assistant comptrollers remain the hardest finance roles to recruit. That's according to the Corporate Finance and Accounting Talent Study 2026. They. The controllers were named by 44% of respondents ahead of bookkeepers, accountants and financial reporting professionals. The article said that controllers have held the top spot for four consecutive years. Employers are struggling most with roles requiring institutional knowledge, technical accounting, leadership, business judgment, technology fluency and the ability to influence executive decisions. David Leary: [00:22:32] What do we think the cause of this? Is it because people with that skill set can actually get better jobs in accounting, or is it is it a lack of the market doesn't have the skill set? Does the market just not want to do those jobs? Blake Oliver: [00:22:43] Like it's the talent shortage and it's got to be right. Controllers are mid-career or even more experienced senior level folks who have been doing accounting for ten years, at least in a lot of cases. And it's really hard to find people with that level of of knowledge and expertise who also want to stay in accounting. Because if you have accounting knowledge and you're good at it, there's lots of other things you can be doing. So it's, it's great if you can get to that level, you know, that's where you want to be? Um, let's talk about salaries too. I have a story here about salaries, uh, compensation if I can find it. So pay. This was in Accounting Today pay margin from associate to senior level flatlines. So normally when you get promoted from associate to senior, you get a pretty good pay bump, but it's not happening anymore. Accounting Today is reporting that a new distinct salary data survey shows the pay margin between associates and seniors in North America is flattening. So, for example, in New York, associate pay averaged 105,000 and senior pay just 108,000. That's only 3% more in Ontario. The move from associate to senior went from 59 to 60. Let's round up 62 K just 4% more. The bigger compensation jump is happening at the manager level, where salaries tend to rise by 20 to $40,000. The highest manager averages in the data set were Connecticut at 147,000, Virginia at 140,000, and New York at 139,000. David Leary: [00:24:36] So do you happen to. David Leary: [00:24:37] Know, or did I have any history on? Like, what was the difference, historically speaking? Blake Oliver: [00:24:41] I don't have that in front of me, but I, I feel like when I was back in public, it was more like, you know, like not just a few thousand dollars, but closer to that, like. David Leary: [00:24:53] It feels. David Leary: [00:24:53] Yeah. Like usually when you get that a senior title at a company, you make that jump. It's significant. David Leary: [00:24:59] Right? Blake Oliver: [00:24:59] I think it's. David Leary: [00:25:00] Because the. Blake Oliver: [00:25:01] The associate salaries had to rise a lot like the very entry level people, the firms had to raise the the salaries to attract them into the firms in the first place. But then they didn't bump the senior level. David Leary: [00:25:14] The the people in the middle are getting lost in this. So partners are getting higher profits. The entry level staff is getting a little higher salaries, but the people in the middle are the ones taking the cut on this. Blake Oliver: [00:25:25] And so it's the manager level. That's where you want to be. And that ties back to what we just talked about with controllers being in high demand managers. Controllers are in really high demand. So if you can get to that level, you get the pay bump. And we also have two factors that are pushing down senior salaries and that is offshoring and artificial intelligence. So this is going to create an even bigger problem, I think, at the manager level in accounting, because who's going to wait around to get to manager to get the pay bump. Maybe people will just be leaving right then we won't have enough managers. The pay and manager level will continue to have to increase to keep people who know what they're doing. David Leary: [00:26:08] The thing is that next, that next tier down, all those people are going to be managing AI bots. So now their managers, but they're never getting the bump in pay. They're actually doing management work. Blake Oliver: [00:26:20] Um, some more job market news. This was in cfo.com. Dan Nikpour is reporting that corporate finance accounting is in high demand. Uh, a third of companies are looking to increase their finance and accounting hires. It's actually 38% of finance leaders plan to increase hiring this year. And that's up from 24% last year. So 24% to 38% of finance leaders are going to increase their hiring. Only 4% plan to decrease. Compensation is also rising in corporate average salary increases are 6.7% for executives, 6.2% for directors and 5.7% for clerical workers, compared with 2025. 61% of the respondents reported a corporate finance and accounting talent shortage. That's up from 46% last year. Those reporting significant shortages rose from 11% to 15%. So that's also causing a problem in public. Your your your future managers are leaving for corporate because they can get paid better there. David Leary: [00:27:31] And so nobody there's demand, right? Everybody wants to hire. We're hiring bodies. So in theory, the last 18 months, all this AI was going to reduce the amount of accountants you need in your, um, controller roles and not the controller department, internal accounting department at your firm with how many accountants you need to do cash stuff with your client's tax data. So this is the exact opposite. Like AI is not taking the jobs away, right? Like if they're trying to hire. So then I'm wondering like, what is AI doing for people right now still in accounting? Is it actually reducing work? Yes or no? Blake Oliver: [00:28:06] I don't think it's reducing. Well it depends. It depends who you ask. David Leary: [00:28:10] Yes. Blake Oliver: [00:28:10] That's true. So so I actually have answers for you, David, to those questions, or at least some, some data that might help you make a decision. Uh, here's another cfo.com story. The headline is A's top value for finance now lies in improving judgment, not efficiency. David McCann reporting for cfo.com. It covered a recent KPMG survey of over a thousand senior finance leaders across 20 countries at organizations with at least a quarter million in revenue. So these are not small businesses in a bunch of different countries. Over 1000 senior and finance leaders surveyed. And the central finding is that A's business, A's biggest finance gains are showing up less in classic efficiency metrics, meaning we're not going faster. It's more in decision making quality, decision speed and forecasting accuracy. Over the past 12 months, 70% of the respondents said that AI moderately or significantly improve decision making quality. 71% said it improved decision speed and 64% said it improved forecasting accuracy. David Leary: [00:29:22] That's huge because now at bigger companies, when people are like, why? Why do I have this accounting department? Now they're if they're getting better data from the accounting department and able to make better decisions, you're going to invest in that accounting department still. So this is actually really good news across the board. I would say. Blake Oliver: [00:29:39] It's the cloud effect clod in Excel. Uh, cloud for finance. It has changed, uh, every way that I do accounting and finance. I mean, it's changed my work completely, but I feel like when it comes to doing that really heavy analysis work and putting together those spreadsheets and. David Leary: [00:29:59] The advisory quote unquote. Blake Oliver: [00:30:00] Yeah. Now you can't let it go alone. But in terms of like automating all the work that has to get done to make a forecast, it's Incredible. It's just unbelievable. So this totally makes sense. So this is interesting from an accounting perspective, because a lot of the coverage has been about automating the tedious work, automating the manual work. And yes, you can do that. You can increase your efficiency. But the real benefit, the real gain that people are seeing is helping more experienced people manage your level. Executive level people make better decisions. Okay, here's a, here's a, here's a story about how AI is not helping the younger generation. David Leary: [00:30:51] Okay. Blake Oliver: [00:30:53] Nearly half of Gen Z workers say AI is making them less intelligent. I spotted this in CPA practice advisor half. David Leary: [00:31:02] Half. Blake Oliver: [00:31:03] Yes. So a company called Go To conducted a survey with workplace intelligence and the survey, or the report is called The Pulse of Work in 2026. Opportunity, risk and responsibility in an AI driven workplace. It's a survey of 2500 global employees and IT leaders, and 39% of workers are saying that overreliance on AI is eroding their abilities and making less than making them less intelligent. So it's eroding their abilities, making them less intelligent. 39% of workers among Gen Z, it's 46%. They say that relying too much on AI is making them dumber. 50% of employees, not just Gen Z, but in general. 50% of employees say that they depend too much on AI, and 30% say they can't function without it. This makes sense. David Leary: [00:32:03] Yeah. Because if you deliver. If you're a junior employee and you deliver work results that are above average, the pressure of you to do the same thing again and again and again, over and over again, every time you have a deliverable. And if you use AI to do the first deliverable, you're going to be have to use it for the rest of them to either deliver the depth of the knowledge or the speed that's being requested for that deliverable. So yeah, I could see where the dependency, the, the, you have to use it more and more or else you can't keep hitting the bar. Blake Oliver: [00:32:35] Well. And the problem, if you are young and learning and using AI is that if you just use AI to do something, it's like getting somebody else to do your homework. David Leary: [00:32:47] You're not, you're not getting the struggle. Blake Oliver: [00:32:49] You have to work your brain like a muscle in order to learn how to do these things. And if you never have to use your brain, you won't develop that skill. And so yeah, it will make you dumber because then you're using AI to do the thing. You're not doing the thing yourself, you're not learning. And then you have to somehow evaluate the output. But you've never done the thing. I mean, to me, this is exactly like junior auditors who have never done accounting, auditing these big companies and expecting them to actually be able to like, do anything valuable. Or if you've never done the work, how do you evaluate the work? David Leary: [00:33:32] Going back to your music career as a playing the cello, like if I had a robot that just went under my arms and moved my hands and fingers around, I'm not actually learning how to do this because I'm not doing the struggle and I'm not creating those brain neurons. And it's kind of the same thing. If you're not doing the work and you're not making mistakes and feeling the pain, you're never going to create those brain neurons. Blake Oliver: [00:33:53] Yeah. Writing great example. If, if, if, if you don't actually have to sit there and put the words on the paper one after another. On your own, your brain doesn't form the connections that allow you to then be a writer. You have to actually do it. You just. If you just say AI doing it for you, you're never going to learn. So man, I feel like education is just, it's so interesting because AI is so powerful for learning things, but it also can take away the struggle. And without the struggle. How do you learn? Speaker 4: [00:34:28] Yeah. Blake Oliver: [00:34:29] All right, David, where do you want to go from here? Speaker 4: [00:34:32] I've had. David Leary: [00:34:32] Zero stories. We'll jump on. Blake Oliver: [00:34:34] Okay, let's do it. David Leary: [00:34:35] So zero unlocked an achievement this week. Zero is the new QuickBooks. All right. And now here's how. So Xero announced they are raising the prices on US subscription plans starting October 1st, 2026. And it's necessary to fund ongoing product innovation enhancements. Right now it's effective October 1st. But what caught my eye is there's a LinkedIn thread about this. And had this dramatic, like fire. You know, it wasn't a dumpster fire, but it was like a bunch of things on fire. Like they're burning their subscribers, basically. And then it had 80 plus comments. And it reminds me of all the, the threads every time QuickBooks raises the price, people. I'll just read two of these comments that kind of made sense. I think now it's starting to make people consider changing. There are several good and upcoming options that people have started asking for integrations as they just are sick of the price changes with the somehow reduced service. It would have been the last thing I would have done based on what's happening on the ground. Another person says, prompt your favorite coding agent. Build a simple MVP accounting app that compiles New Zealand tax law enabling invoices, bills, expenses, accounting for limited company together with bank reconciliation, using open APIs, GST and income tax calculations and payments. It's too easy now, right? So there's just on and on. David Leary: [00:35:53] Um, this has all the hallmarks of a company trying to play like an American company without. Without the backing. Still not a major player. Difficult to be in finance in the States as a non-American company. Um. All they can do is point to lots of new features. Is there an alternative? It just seems to be over and over again. Like it feels like the arguments that people make about QuickBooks every time they raise the price of QuickBooks. But my gut is they have a moat and I don't think anybody's going to nobody's going to leave. It's all I think it's going to be all talk. And that's what I mean. Like, congratulations, you are now the new QuickBooks. Everybody's going to complain. I'm going to leave zero. I'm switching and nobody's going to do it right. They have the ability to raise the price. It's very, very tight. Um, and another thing that so we think about the moat, right? We've talked about like, how do QuickBooks and Xero have moats against Claude or somebody just building this stuff? So Xero kind of addressed that this week. So Xero announced that they are going to have a built in lovable connector. Are you familiar with what lovable is Blake? Blake Oliver: [00:36:54] Lovable lets you build web apps without code, right? David Leary: [00:36:58] It's a vibe coding tool that basically you could vibe code with, like Claude or one of the AI models, but then you got to like deploy the code, spin up a server. There's a lot of hard work there. So think about it being a self-contained environment for you to write the code, host it, connect it to everything. So zero is going to be a built in integration or, you know, data source for lovable. So again, this is zero. Doubling down on this concept of the citizen developer. Let accountants, let clients just build as many things as you can. But if you think about it, if you have thousands and thousands of custom applications integrating to your platform, the odds of somebody building your platform, it's almost like a distraction, right? Build this software instead that connects to us instead of trying to build us right. And at the end of the day, it's pretty straightforward. If you don't make your data accessible, then they'll try to replace your app in GL. And I kind of think, and I predict that you're going to see you remember QuickBooks and zero. Two years ago, shifted to charge a bunch of money on the APIs because they needed to slow down some of these API companies that were just sucking too much data. I wouldn't be surprised if the pendulum swings back a little bit and makes the API calls free for these products, like lovable to encourage that citizen developer to build. Because that's the moat, right? Tens of thousands of apps, custom apps connected to your GL. People can't aren't going to switch what they build that custom app. Blake Oliver: [00:38:24] What what would you build with lovable and zero? David Leary: [00:38:28] Good question. I'm going to jump into another article that has some specifics about this. Um, and then it also makes me think we were at QuickBooks connect or Intuit Connect last year. I was like, oh, Intuit should offer vibe coding, right? People should be able to vibe code their apps with Intuit Agent and we're far from that. And maybe that's happening, but really now because of this with zero, Intuit should buy Replit like so every accountant just gets this email. You just create custom solutions for clients. You're never going to leave. Once you build a custom solution, that client's not going to leave you and they're not going to leave the platform that that it's in. Blake Oliver: [00:39:02] Okay, hold on before before you go on, David, I want to thank our sponsor of this episode and that is Valtrex. How much of your week is spent pulling reports, cleaning files, and explaining numbers clients still don't really understand. That's exactly where Valtrex AI helps. Valtrex is a finance AI copilot and collaborative workspace for accountants, advisors, and clients. Each client gets one private workspace where QuickBooks zero and a bunch of other sources messy PDFs and spreadsheets can safely sit together. You ask a question, and Valtrex gives a clear answer with the actual reports and sources behind it. So you, your team, and the client can work from the same context without exporting data just to double check it. And it's read only, so it never changes the books. Valtrex does a first pass, flagging duplicate charges, unusual entries, and slow paying customers before you go looking. Firms also get onboarding AI education and direct access to the team behind it. If you want a safer way to bring AI into client advisory work and get a free month, use the code free month 26. That's free month 26 for a free month of Valtrex. Go check out Valtrex at The Accounting Podcast dot promo slash Valtrex. That's Accounting Today dot promo forward slash VELTRIX, and that code is free. Month 26 all caps. Again, free month 26 all caps. All right, David, before I so rudely interrupted you, what were you going to say? David Leary: [00:40:39] So you asked me what I would build. So instead of saying what I would build, I'm going to give an example of what somebody did build. So, you know, I talk about the Sastre blog a lot, right? Because they kind of talk about how they run their company and the things they do. Well, they had a blog post recently about how they've moved. They used to have 30 AI agents at their company, and they've gotten rid of ten and came down to 28 agents. And because of this, they've out there because 30 was too much to manage. Right. So now they've been able to forex their output because they have this focus 20 AI agents just cranking and they're super, it's easier to supervise them. Um, but what's interesting about this post, he gets into what they build, right? So they have agents, for example, they have a, they call it their AI COO and it handles marketing, finance, rev ops collections, end to end reading contracts, creating invoices and Bill.com, sending AP contracts, even calculating commissions automatically. Right. Um, and this is the one that last week we talked about the agent even recommended to get rid of Marketo. We talked about this last week. Well he goes on to talk about specifically about we didn't vibe coat our own infrastructure. This is all about, um. David Leary: [00:41:53] He argues that the story that AI is going to replace all your software is wrong. We didn't rebuild Bill.com. We did not rebuild Pandadoc. We didn't touch QuickBooks. I don't want to build e-signature and I don't want to maintain it. We hooked existing infrastructure to the agent. The gain from using these tools. We already pay for more aggressively because an agent can now use them. So it's not. I'm going to get rid of the software because of AI. I'm going to use those tools even more aggressively because the AI is super efficient with this, and it's kind of changing their mindset on the buy versus build framework. You know, uh, you're going to still build in-house when you need the data and the solution doesn't exist, but buying off the shelf. And as long as it's connected through AI in the MMCP, right? Yeah. The MCP, you can just build these bots, and you're not going to get rid of any of your software. Possibly. So the SaaS apocalypse could be. And this is not an account. This is somebody who's like, hey, we're running our business and this is the decision we made. The decision wasn't, I'm going to vibe code the gel, I'm gonna vibe code Bill.com. I'm going to make my bots use these tools even more aggressively. Speaker 4: [00:42:58] Yeah. Blake Oliver: [00:42:59] I agree with you. Why would you focus your energy on reducing your software costs when you can save so much money, reducing your labor costs, which in most businesses is the by far the bigger cost. It's the people that are running these systems. So don't try to eliminate these systems that you're already using or that you can buy that work reliably, that are supported, that are known, such as your GL or your marketing software. You use AI to automate the flow of data between them and save money on your labor. David Leary: [00:43:39] And I get it, because you look at your PNL, you're like, gosh, we're spending so much on software. Then you're like, we don't even use some of this stuff to its full potential. This is where you can use AI to maximize your software spend, because right now, you're not officially using what you're spending on software. Blake Oliver: [00:43:53] Or better yet, right? Not just cut labor costs, but actually increase the value of what you build for customers, which is where you really make the profits. It's top line revenue. If you can use AI to increase top line revenue, you don't need to worry about cutting your labor costs or your software costs, right? So that's where the focus is. Number one should be increase revenue with new services, better services. Number two is reduce your labor costs, like avoid hiring as you grow. And number three is then only then cut your software spend. Speaker 4: [00:44:30] And. Blake Oliver: [00:44:31] Tokens. Cost is actually the least. Speaker 4: [00:44:34] Concern. Blake Oliver: [00:44:34] Concern because you look at like the cost of the tokens. When it comes to all this stuff, it's like single digit percentages, very small. David Leary: [00:44:43] And this is where I still think there's an opportunity for accountants here. And Xero is obviously leaning into this. Right. If if this is just a business with no real I mean, they're they're running their business. It's not like the accountant or controller is doing it. They're building this themselves. There's no reason half of your clients don't need the same solutions in their own business. Like this is an opportunity for firms to help vibe code custom solutions for clients. And now if your clients are on zero, you can do this as easy as possible. Now everybody this weekend should go start learning lovable and replit and just make silly apps. Just start making silly apps and just see where it takes you. Because Xero is leaning into this. And this is where I honestly think the future, there's no doubt into it's going to have to play this game too. Blake Oliver: [00:45:29] I've got some follow up on tariffs. Amazon disclosed approximately $600 million in tariff refunds last quarter during its Thursday earnings call, Alongside a 20% year over year revenue increase that beat Wall Street's expectations. This is the largest well among the largest publicly disclosed tariff refunds since the US Supreme Court struck down President Donald Trump's Liberation Day tariffs in February. They ruled that he could not impose them under the rarely invoked law that he used. I think was it the iipa tariffs? I can't remember which law it is at this point. Speaker 4: [00:46:10] He's tried them all. He tried them all. Blake Oliver: [00:46:11] Didn't get congressional approval for that. According to the court documents, U.S. businesses paid around $166 billion in related duties. The Customs and Border Protection opened its reimbursement portal in April, and Amazon, as it said, got $600 million in tariff refunds last quarter. The CFO, Brian Olsavsky. Olsavsky. Yes, he said the refund is smaller than might be expected because only businesses that directly paid tariffs qualify, and most products on Amazon come from third party sellers who handle their own imports and duties. So these refunds were only for the products that Amazon imported itself, and Amazon had reduced its exposure to tariffs by buying goods in bulk before the tariffs took effect, and Amazon also absorbed the remaining tariff costs rather than passing them on to shoppers, according to the CFO. But they did impose import charges in a limited number of cases. Those affected customers will be proactively contacted and automatically refund, and Amazon said the remaining refunds will be used to continue, quote, continue to invest in low prices for customers, unquote, without specifying exactly how much will be returned directly or how those investments will be measured. David Leary: [00:47:34] So is Amazon going to issue checks or are they just going to credit your Amazon account? Because I think this is genius. Amazon gets to come out. Look at this great thing we're doing right. We we're giving you this money back. And if they just give you if everybody gets 60, 70, $120, whatever it is in their Amazon gift balance, gift card balance, they're just going to spend more on Amazon. Like this is like Amazon cannot lose from this. This is like really, it's like a marketing gift from the heavens. Speaker 4: [00:48:02] It's brilliant. Blake Oliver: [00:48:02] And you know what a $600 million in in tariffs is probably nothing to Amazon like change. David Leary: [00:48:10] Well, that 600 million almost none of it's going to leave Amazon. It's just going to stay in the circle. Speaker 4: [00:48:14] And actually they're going to credit your. Blake Oliver: [00:48:15] Account and you're going to spend it on Amazon products. Exactly. Brilliant. David Leary: [00:48:19] You can buy more Amazon products. Speaker 4: [00:48:20] Yeah. Blake Oliver: [00:48:21] I've got follow up on the New York City pizza terror attacks. New York City has pushed the deadline until September 18th. It was supposed to be August 21st. They pushed it four weeks to September 18th. This is that tax on second homes, luxury second homes that New York expects to generate $500 million a year from. The extension applies to homeowners who received a Department of Finance letter warning that their property may be subject to the new p de TurboTax. Owners can use the additional time to prove the property is a primary residence. Establish another reason it should not be taxed, or seek assistance and answers from the Department of Finance before applying this. Tax targets condominiums and co-ops valued at $1 million or more and 1 to 3 family homes valued above $5 million when they are not the primary residence. And as we've discussed on the show, the challenge, of course, is then establishing what exactly is a primary residence and proving it. David Leary: [00:49:28] So is this an attack on Trump? Because Trump obviously has a second residence in New York City now, but his primary residence is the white House. That would be hard to argue that it's not his primary residence. Speaker 4: [00:49:39] Right? Blake Oliver: [00:49:39] Well, yeah. I wonder if he's going to get caught up in this, too. Um, there's another wrinkle to this, which is that New York City published the names, addresses and property values, uh, in a supplemental property roll that identifies thousands of owners whose homes may face the proposed tax. Uh, it's. And it contains hundreds of Staten Island properties, including residents who say that they do not own second homes and should not qualify. And they are objecting that the city disclosed their names, addresses and estimated property values before completing their eligibility review, effectively shifting the burden onto homeowners to prove a property is their primary residence. Uh, for example. Uh. Yesenia and Brian Thompson, a retired nurse and retired NYPD officer, respectively, said they have no second residence. Brian said he arrested more than 600 people during a 20 year police career in fierce. Former offenders could use the list to locate his family. Two others who were on the list warn that pairing identities and addresses with estimated home values could help scammers identify and target vulnerable residents. Staten Island Borough President Vito Fossella, who is also listed, called for the role to be withdrawn so ineligible owners do not have to jump through hoops. He compared the rollout to Havana and Communism, saying homeowners had become targets and the American dream had become an American nightmare. David Leary: [00:51:18] And I think, um, you know, LeBron James is now going to go play for the Philadelphia 76 ers. And you know in that tri state area it's very probably convenient to still live in New York City. And I thought I saw but he got called out like, oh, you're gonna have to pay taxes here because this is not going to be your primary home. But I feel like, you know, you see things fly by sometimes, but LeBron James. Blake Oliver: [00:51:43] Well, you look that up David. I'm going to cover one more story that's been in my queue. Speaker 4: [00:51:46] All right. Blake Oliver: [00:51:48] And this is a big one. Well maybe the fine isn't. But it's about the big four. Pwc in the UK faces a $4.4 million fine after regulators there found serious failures of professional skepticism and audit evidence. In two audits. The UK Financial Reporting Council sanctioned PwC over its audits of British Aerospace and defense contractor Babcock International Group for fiscal years 2020 and 2019. The engagement partner, John Waters, admitted serious and numerous breaches involving cash pooling, financial arrangements for an overseas Cease contract, goodwill impairment and other matters. The regulator said that PwC failed to exercise adequate professional skepticism and obtain sufficient appropriate audit evidence. What did the auditors miss? Babcock? The client presented cash balances and overdrafts net rather than gross, but PwC did not identify the treatment or test whether the offsetting complied with the relevant accounting standard. The financial statements also contain no disclosures about the cash pooling arrangements. Many of those breaches occurred in Babcock's aviation division, and it may have gone unnoticed because it was described as the company's smallest division. The FRC said the breaches were not dishonest, deliberate or reckless and were not committed for financial benefit. The engagement partner, waters, had joined the 2019 audit at short notice after work had begun. He got no handover and then faced the added difficulty of Covid 19 during the 2020 audit. But even so, the FRC enforcement executive, Penrose Foss, said the firm and partner should have addressed those challenges and completed work meeting applicable standards, and PwC and waters cooperated with the investigators, which helped to reduce their penalty from 7.4 million initially to 4.4 million. Pwc apologized that parts of the audits were not of the expected standard, and said that audit quality and continuous improvement remain priorities, and PwC no longer audits Babcock. All right. David Leary: [00:54:07] So I could talk about the LeBron James thing. Speaker 4: [00:54:09] So what. David Leary: [00:54:10] Prompted this? Lebron James said he's going to live in New York City. And obviously that he buys houses all over the country. So he's probably he's part of this loophole. They want to catch people. So and it's not really there's not a full tie that this was definitely his motivation because of this tax. But he's going to commute by helicopter every day to Philadelphia from his residence in New York. Like, it's pretty clear there's enough money involved where he's willing to take a $4,000 daily airplane flight, then pay this second housing tax in New York City. Speaker 4: [00:54:42] I like how you. Blake Oliver: [00:54:42] Connect the dots there, David. Speaker 4: [00:54:44] Yeah. Well, no. David Leary: [00:54:45] Politician called them out and used that. What's the term you call? Blake Oliver: [00:54:48] What's the pied a terre? Speaker 4: [00:54:50] Yeah. David Leary: [00:54:50] Like he got called out by the governor in New York. Speaker 4: [00:54:53] Wow. David Leary: [00:54:54] For this. So like he's going to be in this fight. And then you said if Trump's going to get involved, this is going to be a nationwide kind of crazy fight. We're going to see it's going to be a lot of attention. Blake Oliver: [00:55:03] Thanks everyone who joined us live. That's all the time we have for this week. Great to see you. Uh, Mega Mom and Tino and Samira and everyone else who joined can't pay attention. Great to see you all. Uh, uh, we have someone from Cape Town here, Jean Aw, yeah. Jean, good evening from Cape Town. Love your show. Thanks for watching us from around the world. Great to have you with us. You can earn free continuing professional education credit for this episode and our back catalog of now 499 episodes. Although I don't know if all of them are on the app for CPE, but hey, that's a lot. Speaker 4: [00:55:44] I'm sure some. David Leary: [00:55:45] Get old, some get old. Speaker 4: [00:55:46] Oh yeah, we. Blake Oliver: [00:55:46] Retire some of them, right? So go to earmark.app in your web browser, or get the free earmark app on the App Store. Sign up for free, earn one free CPE per week and support us by subscribing for the low price of $200 a year for unlimited on demand Nasba CPE. For listening to podcasts, go reclaim 40 hours a week of time that you're not sitting at your desk where you can be learning on the go anytime, anywhere. David. Speaker 4: [00:56:12] Always a pleasure before. David Leary: [00:56:14] You sign off. Next week is our 500th episode. Speaker 4: [00:56:17] Wow. David Leary: [00:56:18] So we're going to live stream. So all you people that are attending this live stream bring a friend. I want it to be like a big party. We're gonna we're gonna have some special guests on the episode. We're going to reflect on 500 episodes. I actually found a, uh, an article I pushed for next week that I had something I predicted. Maybe it's going to happen finally. It's happening now, three, four years later after I predicted it. So it'll be a fun look back show a little bit like that episode of Seinfeld where they looked at all the old episodes. Blake Oliver: [00:56:43] And that's going to be Friday, uh, the seventh. And we'll get going, I guess, uh, shortly after what, 11 a.m. Pacific. Speaker 4: [00:56:52] So tune in, we're going to start, I'm. David Leary: [00:56:54] Going to push it out. I think you're going to send an email reminder out, um, calendar events. We're going to really start pushing this out. Speaker 4: [00:56:59] This, I. Blake Oliver: [00:56:59] Guess we should just say we're going to start at, uh, are we gonna start at noon? Is that the plan? Let's start at noon. Noon Pacific. Speaker 4: [00:57:06] It's it's on Friday the seventh. Blake Oliver: [00:57:08] It's the 500th episode of the Accounting podcast. Hope to see you all there. Thanks for tuning in this week. See you on Friday. Bye, everyone.