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The $2T Stablecoin Opportunity for CPAs & Agentic AI in the Browser · The Accounting Podcast

• Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding! Blake Oliver: [00:00:04] It's going to create the opportunity for hundreds of monthly recurring revenue attestation engagements, if not thousands. But then the question is, are there enough auditors to do this right? This only works as long as there's trust in the system that all these stablecoins that are out there are actually backed by US dollars. And what if they aren't. David Leary: [00:00:31] Coming to you weekly from the OnPay Recording Studio. Blake Oliver: [00:00:39] Hello and welcome back to the Accounting Podcast, your roundup of news in the accounting profession. I'm Blake Oliver. David Leary: [00:00:46] And I'm David Leary and Blake. I really tried to take the biggest story that's happened the last 4 or 5 days and tie it to our show, and I could not tie the accounting angle in. Did you see the astronomer CEO with the HR lady at the Coldplay concert who didn't. I know exactly, but there's no accounting story. I really tried, so outside of just mentioning it there, we can't bring it into our show. I wanted that viral. I wanted the the viral clip from it, but we can't do it. Blake Oliver: [00:01:14] It's okay, David, because there's so much to talk about this week. We've got Agentic browser AI. It's in the real world now. We've been talking about this for a while, giving access to AI agents to the browser. I got access to Perplexity Comet comet, which is their new browser that has perplexity built in, and I can ask it to do stuff in my accounting system. So we'll give it a shot. David Leary: [00:01:38] Go to zero or QuickBooks. The browser now can see things in the UI or the AI because the browser obviously can see the UI. But now the AI that's in the browser can use the UI that the browser sees to do stuff. Blake Oliver: [00:01:51] That's right. And you can have multiple tabs open, you can be logged into a bank account, uh, and you can ask it to like look up information in a spreadsheet, put that into other tabs. It can basically click around like you. Uh, it's not all it's cracked up to be. It has a long way to go, but there's. There's potential. And I want to try doing a live demo later in the show. Uh, we'll check it out. We've also got some demo videos from ChatGPT, which also has built this kind of, uh, functionality into into their app. David Leary: [00:02:19] We've also got browser right. Blake Oliver: [00:02:21] Well, so perplexity built their own browser. Perplexity. Chatgpt built. It's not a browser, but it can like do browser things inside ChatGPT. And I don't have access to that. Uh, so we'll try the perplexity one. Uh, we've also got to cover the genius act, which is the new stablecoin legislation that passed the House and the Senate and the president signed. This is enormous. It's humongous fintech news. And it kind of got buried by the big, beautiful bill. But it's a giant opportunity for auditors and CPAs. It's it's it's going to create tons and tons of work for auditors. So we got to talk about this. I mean, we're talking about a giant $2 trillion market potentially in just a few years. And these companies are going to have to get monthly attestations that issue these stablecoins. So that's a big one. We've got updates on the 150 hour rule. We've got updates on the PCAOB. Erica Williams forced out. Uh, we've got AICPA updates to auditor responsibilities for fraud. And we'll see what else we can get to this week. So, David, let's start with that big headline about Erica Williams. First, though, let's thank our sponsors. David Leary: [00:03:41] Yeah. So our sponsors this week is missive who's a new sponsor. Relay and cloud account and staffing. Blake Oliver: [00:03:47] And thank you to our livestream viewers who are joining us on this Sunday. I'm a mammoth lakes for the week. Uh, here with my brother going to do some hiking, that sort of thing. So hopefully my connection is stable and we have a good show so far. Good. I'm glad. Welcome, Cody for coffee emojis from Cody. Uh, if you are tuning in live and you want to chat with us, please do that. Youtube LinkedIn we see your comments there on the screen. Let us know what you think about the stories that we are talking about, or if there's anything that we missed. And if you're listening on the podcast and you've never tuned in on YouTube, go to YouTube, search for The Accounting Podcast and hit that subscribe button and that notification bell, and you'll get notified when we go live. And I always forget to mention this at the beginning of the show, but it's super important if you are a CPA and you are listening to this, or let's say you're a CMA and you're listening to this and you have a CPA requirement, which you do. If you are a CPA or a CMA, you can get free continuing professional education credit Nasba approved CPE for listening to this program. Go to the earmark app, go to Earmark app in your web browser, or download the free app on the Apple App Store or on the Google Play Store, and find our channel on the app. Take a quick quiz and get your CPE certificate. All right, let's start with audit news because it all kind of flows from there, from news about the PCAOB into this genius act and the auditor opportunity here. So the big news is that Erica Williams has been forced out of the Pcob SEC chair. David Leary: [00:05:25] Because it looked like she resigned. But it's like that forced resignation. Is that the. Yeah. Think about this. Blake Oliver: [00:05:32] I mean, she she resigned. But the word is that SEC chair Paul Atkins forced her out. Sources say sources tell Thomson Reuters that Williams had zero intention of leaving until Atkins asked her to step down, and she is out on July 22nd. This could mean a big shift in audit regulation. Williams pursued an aggressive agenda. She was appointed by Biden and under her, the Pcob set record penalties and made new rules. Whereas Atkins is known for his deregulatory stance and he wants someone who shares his philosophy running the audit watchdog. So what changes can we expect? Slower rule making enforcement more for egregious violations and then potential rollbacks of standards that auditors say are burdensome without clear benefits? And to be fair, you know, on the show, we've talked a lot about these PCAOB fines and actions. And even though they were record, it felt like a lot of these actions were for like small things in many ways, like an audit firm, for instance, forgetting to rotate an audit partner after the mandatory period, or they had like a conflict of interest with something, but, you know, actual audit failures, fines for that. We didn't see a lot of that going on. David Leary: [00:06:57] In general, the fines arguably in the rotini in the right. Blake Oliver: [00:07:02] As a percentage of revenue from revenues. Yeah. They're tiny. Right. So it's a new era. It's going to be a new era for the pcob, perhaps a little less, uh, adversarial, maybe a little more breathing room for the auditors who are going to need it, because there's a big need for audits with this new stablecoin act. Also in audit news. David Leary: [00:07:24] Now, just before we leave, Erica Williams, is there any rumors of who they're going to appoint? Are they going to not appoint anybody and just have this roll up to Paul Atkins? No. Blake Oliver: [00:07:34] So I should I should remind our listeners that the Pcob was set to be disbanded under the Big Beautiful Bill act, and it got stripped out. That part of the act got stripped out by the Senate parliamentarian who said that it it wasn't allowable in the Senate version because it's a under budget reconciliation rules. Every item in the bill has to relate to a budget for the federal government, but the Pcob is not funded by tax revenues. There are standalone nonprofit that's funded by a fee from public companies. So that's how, um, it got stripped out. So Pcob continues. But it's going to be led most likely by somebody who's much more, uh, friendly to auditors. Less adversarial there. That's my guess. All right, so in other audit news, we saw the Office of Management and Budget said that audits at the federal government are completely broken. Only 18 agencies got clean audit opinions in 2024. That's the worst showing in nearly 20 years. Director Russ Vought says audits have become, quote, rote exercises, unquote, that fail to prevent fraud and waste despite heavy taxpayer costs. Under his direction, the OMB is launching a strategic reset starting this year. Agencies are going to switch to single year audits focused on current activity instead of multiyear reviews. The goal is making audits actually useful for catching problems in real time, rather than just checking boxes. Blake Oliver: [00:09:13] Now, this isn't the first attempt at reform. Previous OMB controllers have tried similar changes, but they hit resistance. So we'll see if they can actually make this happen. I think the thing to to note is that like that, these federal agencies just cannot get clean audits. They're required by law to do it. And only 18 agencies got them. Um, and that's out of like what's the total number? There's a lot. So let's now talk about the Aicpa's updates to auditor responsibilities when it comes to fraud. The AICPA Auditing Standards Board is proposing some significant changes to how auditors handle fraud detection and response. This follows the stalled PCAOB project that got a lot of industry pushback. So what are the changes when it comes to fraud? When auditors discover it? And this is important because I think a big disconnect between the public and the CPA world, the auditor world, is that whenever there's a giant fraud, people ask who are not accountants, where were the auditors? We've talked about this on the show all the time. Every time there's a big fraud, we wonder how. How come the auditors didn't find this? How come this didn't become public? David Leary: [00:10:33] Because the public's impression of what their job should be doing, they should be finding these things. Yes. Blake Oliver: [00:10:38] Right. But that is not the job of auditors according to auditing standards, which is to determine whether or not financial statements fairly present information. Right. It's not. It's not about like, detecting fraud. Well, the question is what happens when they do? Right. Because I think there's this, you know, possibility that when fraud is detected, maybe the auditors just ignore it or don't do anything about it. And only 4% of financial frauds are actually detected by the external auditors. So the big change is now that auditors are going to have mandatory procedures that they have to follow when fraud is suspected, instead of having discretion on how to respond. And it also expands what counts as fraud risk. So auditors are going to have to stay alert for corruption, bribery, money laundering throughout the entire process. And here's the important thing even small amounts of frauds can be considered material if it's committed by management, regardless of the dollar amount involved. So previously, if a fraud was immaterial, it could be unreported. We didn't have to as auditors. We didn't have to consider it right. It's immaterial. But now this clarifies that any amount of fraud can be considered material. So comments are due by October 2025 and the new standard, if it is adopted, would go into effect in 2028. David Leary: [00:11:58] So so this standard when you say it's adopted, what does that mean. Like does it have to be codified law. Does it have to be like who enforces this. It's just a letter from the AICPA like how does this how does it take this next step? I agree with the recommendations. Right. But how does it take the next step? Blake Oliver: [00:12:14] Well, so the the AICPA adopts this new standard. And then the auditors who follow AICPA Auditing Standards are required to follow them in all of their engagements. So this is one of those situations where the SEC has delegated rulemaking authority. They've delegated this to the AICPA. So that's why they're responsible for it. David Leary: [00:12:35] Okay. So so so PCAOB is going to have less work and AICPA is going to get new business, I guess. Blake Oliver: [00:12:45] Yeah. Um, so that's my audit update. David, shall we thank our first sponsor? David Leary: [00:12:51] Yeah. Um, this. Blake Oliver: [00:12:53] Is a new sponsor for us. David Leary: [00:12:54] Missive. Yeah. Blake Oliver: [00:12:56] So? So missive. You may not have heard of missive. Uh. And if you haven't, I encourage you. If you're looking for a new way to manage email at your firm. Check it out. We at earmark, which produces the accounting podcast, we rely on missive every single day to manage our team communications. And there's a reason hundreds of accounting firms have made the same choice. If you're running an accounting practice, you know the pain. As you grow, you become the bottleneck. Every client email lands in your inbox. You forward it to team members with a quick handle this and then it disappears. There's no visibility, no accountability, no idea if it's actually getting done. Missive solves this brilliantly. Instead of emails vanishing into individual inboxes, client communications go to dedicated team inboxes where everyone who needs access can see them. You can assign conversations to specific people, create trackable tasks, and have internal discussions right within the client conversation, all without the client seeing your internal notes. What makes missive special is that it feels familiar, like the email client you're already using, but it's incredibly powerful under the hood. Whether you organize by client, by service line, or run pod based teams, missive adapts to your workflow. Plus, their AI can automatically escalate urgent emails to managers, so you're not constantly checking every inbox, ready to stop being the communication bottleneck, and want to try missive for free. Head over to The Accounting Podcast. That's The Accounting Podcast. David Leary: [00:14:25] It's funny in the ad and this never hit me, but the about the interface, it does look like the historical Microsoft Outlook style interface for email, and that's a huge deal. It never even hit me that it looks so much like that, and it doesn't feel like a different tool or different technology? Blake Oliver: [00:14:42] Yeah, I think what I like about it most is just the ability to comment and talk about emails in the same thread that I'm having the the email thread in. So it's like think of like combining slack and your email client together, because that was always the problem for me with slack. And I was never happy with using slack or something like Teams or Google Chat because we'd have this email thread going on, and then we would have this conversation in chat and they were in separate apps. David Leary: [00:15:12] And then you'd branch the email thread where you're like removed all the blah, blah, blah, remove client from email. Then you have a new thread and then. Yeah. Messy, messy. Blake Oliver: [00:15:22] Um, all right. So that's my audit update. David, I'm going to let you decide where we go next. Do we want to do a genetic browser I or are we going to talk about the genius act or do you want to go somewhere else. David Leary: [00:15:33] I want to this is kind of audit related before we leave that that I want to understand your theory about the genius act. So you brought up a story a while back about a $300 million fraud that was done by Christine Hunsicker. She's a former CEO of fashion tech companies Castle and Castle, with two A's in the word castle and P180. And so she was charged with defrauding investors over $300 million. But now it's official. She went to court and she's been released on bond or bail. $1 million bail. So six federal charges on Friday. And what's interesting, this is now we got to see information from like the Southern District of New York, actual details of what she did. So when I'm going to read the actual paragraph, the quote, when confronted by an audit firm in October 2023 about transmitting a fake audit to an investor, Hunsicker lied falsely claiming that she had created a fake audit in connection to a lecture she gave at Princeton University. Then sending the audit to the investor had been a one time error. In reality, Hunsicker had provided two fake audits to the investor while soliciting investment. She later repaid that investor to prevent public disclosure of or fraud. Undeterred, she continued the scheme, providing an investor with a fake bank account. Screenshot showing more than $200 available in cash. Cash when Castle had less than 200,000. One month later, in October 24th, Hunsicker provided a different investor with a fake draft audit. So we've seen this where people create fake bank statements or a screenshot of a fake bank account, but like fake audits are reentering a whole new world because that would take a lot of work before. But now with AI, you probably could create a fake audit. Now, what's nice about this? The audit firm raised this, and I think the audit firm might have been Sirrine and associates. So so this was at least an audit firm smelled something funny, which is like where did that audit come from? Right. But the fact that people can create a fake audit. Now are we just entering new territory? Blake Oliver: [00:17:33] Definitely. And I mean, I haven't tried doing it, but I bet we could if we. If we used AI and gave it, like a previous audit report or. I mean, I'm sure it's got plenty of, uh. I'm sure these AIS have been trained on plenty of audit reports. So they're all out there publicly. Could you ask it to, like, generate one for your own company? David Leary: [00:17:53] Yeah, you. Blake Oliver: [00:17:54] Could. David Leary: [00:17:54] Connect it to your your your balance sheet, your profit and loss and say go create an audit report. Blake Oliver: [00:17:59] Yeah, yeah, yeah. I mean, um, yeah, the potential for fraud. I mean, it's not just creating fake receipts as we've talked about on the show. It's not about creating fake invoices. You could create entirely fake reports. Uh, and if investors don't do their due diligence, which is hard to do, then it takes a lot of time. Then you're going to get a fraud. Yeah. You're gonna you're gonna lose your. David Leary: [00:18:22] Money that people aren't actually using the audit reports at all. People other than having it. The check box, right? Are people not reading the audit reports? Not reading it? Blake Oliver: [00:18:31] Yeah, they're not reading it. Yeah. David Leary: [00:18:32] So see what was in there? Blake Oliver: [00:18:34] Well, so. Then this is the opportunity when it comes to the due diligence side of things, to integrate AI into whatever platform you're using for that. And I'm sure some companies working on this, there are these apps that will, you know, organize the due diligence for like M&A deals, for acquisition deals. Um, I forget what they're called. I forget some of the names, but, you know, they're like, uh, data rooms, right? Where everyone uploads, you upload all your documents, and then, um, it could go through and actually try to do the due diligence in terms of ensuring is this audit firm real? And if they are reaching out and asking, did you actually do this audit getting some sort of confirmation. So I mean there's there's ways to fight this with AI, but I think that's going to lag behind the fraudsters for a while. So it. David Leary: [00:19:20] Just seems. Blake Oliver: [00:19:20] Really crazy the the scale of that $300 million fraud there. Yeah. And she got away with it for years just by creating fake documents to give to investors. David Leary: [00:19:32] Yeah. And she was hailed as like, you know, this rising all star. What a great leader. Amazing tech company. And yeah, she's so I mean, she's facing charges of wire fraud, securities fraud, money laundering, identity theft, potential sentence up to 30 years. Um, she raised. Yeah, 275 million for the one company and 30 million for the other. And got the company valuation, I think, up to like $1.4 billion at one time. I'll just from fake numbers. But the but creating a fake audit is like a whole different level that we haven't really seen before. Blake Oliver: [00:20:07] All right. Let's talk about the genius act. This is the first comprehensive federal framework specifically designed for payment stablecoins signed into law by President Trump on July 18th, 2025. This landmark legislation creates a structured regulatory environment for digital assets designed to maintain stable value relative to the US dollar. What are stablecoins? They are digital assets used for payments or settlement that maintain stable value and can be redeemed for a fixed amount of monetary value. So this is not Bitcoin, this is not Ethereum. This is cryptocurrency that is linked to dollars. David Leary: [00:20:52] Every time I issue one. So if you come to me on that company you give me a dollar, I issue you a coin. I have to keep that dollar in reserve. So when you come back, you can get your dollar back. Blake Oliver: [00:21:02] Essentially that's the that's the idea. And that's why they maintain their value. And that's why, you know, unlike Bitcoin or Ethereum, they have a stable value because they're backed by a fiat currency. In theory we saw, you know, the Terra Luna collapse, which erased, you know, tens of millions of dollars. Actually, it was 40, not tens of millions. It was billions, $40 billion. Um, you know, that's that's an example of how stablecoins can go wrong. Um, but, you know, the idea behind this bill is to, uh, keep them stable. But there's there's a lot that rests on the shoulders of auditors and accountants in here. So I mentioned the opportunity for auditors. Why is this an opportunity? Well, currently, the market for stablecoins is about $234 billion a year, and that's without federal oversight. Um, you know, we have, uh, we have tether and we have a Usdc. Um, those are the two major stablecoins. We've got President Trump having issued his own stablecoin. Uh, but none of them have been regulated up to this point. And we've talked about on the show many, many times, like tether has never submitted to an audit. Yeah. They say. David Leary: [00:22:20] That's. Blake Oliver: [00:22:20] All of. David Leary: [00:22:20] Them that happened. They they got a attestation audit. Right. And then they would just I got this claim. It's an audit. They put the logo on the website and exploit the accounting firm. Blake Oliver: [00:22:31] They've never had a full they've never had a full audit of their financials. Right. They've they've done these like attestation reports that claim to back up the reserves. But, you know, the EU actually passed regulation around this before the United States did. And rather than comply with the EU's regulation, uh, tether just decided to leave the EU and not do business there. So we're going to actually see what happens with tether. They could actually be a big loser from this act, uh, if they can't comply. So let's talk about like, you know what this actually means in terms of implementation timelines, right. So the legislation becomes effective either 18 months after enactment, which, um, or 120 days after final regulations are issued, whichever occurs first. So, you know, uh, it could be sooner. Could be later. The regulators have to establish the necessary rules. Federal regulators have one year from enactment to issue comprehensive regulations covering capital requirements, liquidity standards, operational requirements, and AML compliance standards tailored to stablecoin issuers. The Treasury Secretary has to establish principles for determining whether state regulatory regimes are substantially similar to the federal framework, and there's a three year grace period which allows existing stablecoin transactions to continue without disruption. So that gives them time to comply with the new requirements. Um, what's interesting about this act is that it has a dual track regulatory system. So there's federal oversight, but also smaller stablecoin issuers can be regulated by the states, the federal stablecoin issuers, the federally qualified stablecoin issuers, um, they could be subsidiaries of insured depository institutions, non-bank entities, federal branches of foreign banks and uninsured national banks. Blake Oliver: [00:24:28] The office of the Comptroller of the currency is going to be the primary regulator for most federal issuers, while federal banking agencies will oversee subsidiaries of insured institutions. State qualified payment stablecoin issuers with consolidated outstanding insurance under 10 billion can opt for state level regulation, provided the state framework meets federal standards. So there's going to be a stablecoin certification review committee comprising the Treasury Secretary, the Federal Reserve Chair or vice chair for supervision, and FDIC chair. And they're going to evaluate whether state regimes are substantially similar to federal requirements. And you know what this sounds like to me, it sort of sounds like the situation we have with CPA licensure, where you've got all these different states regulating, and there's going to be some sort of like substantial equivalency at the national level. Um, I don't know how well that's going to work based on our experience as CPAs, but we'll see. We'll see. Uh, so basically, if you're under $10 billion, you can be regulated at the state level. But then if you go over that, you have to transition to federal oversight within a year. And here's the here's the really important part is the reserve requirements. Okay. So the genius act requires the stablecoin issuers to maintain reserves 1 to 1 with the stablecoins they issue. So the reserve assets that are backing the stablecoins have to be high quality liquid instruments, including US currency. Federal reserve Bank deposits demand deposits that insured institutions, Treasury securities with maturities under 93 days, repurchase agreements backed by treasuries, and government money market funds investing only in permitted assets. David Leary: [00:26:12] Super liquid. You can't take it and then buy other crypto. You got to keep it liquid as much as possible. Blake Oliver: [00:26:20] Yes, according to the rules. David Leary: [00:26:21] And and somewhat stable investments. Maybe that's the key there. Yeah. Blake Oliver: [00:26:25] And the reserve assets, they have to be segregated from issuer's operational funds and held with qualified custodians. And the stablecoin holders get priority claims on reserves if the issuer becomes insolvent. In other words, goes bankrupt. Now here's the thing. Stablecoins are not covered by federal deposit insurance. And issuers are going to have to disclose this limitation prominently. But I think this is one of the biggest criticisms of this bill is that we're creating a situation where hundreds or thousands of companies could start issuing their own stablecoins, and consumers can buy them and use them, but these stablecoins are not FDIC insured. So, you know, that's that's that to me is a is like a real problem or potential problem if the system doesn't work, if there is, say, a run on the bank because the best you get is priority in bankruptcy. But well. David Leary: [00:27:32] In theory, right? Aren't you getting these stablecoins to. It's a, uh, it's a vehicle to move funds around and bypass the traditional rails. So it's like you're really storing your money there. I would go, I get 10,000, I convert it, I mail that, or I pay somebody that right. It's a bill payment. The receiver gets it and then cashes it in. Right. That's kind of the right the purpose of these, they're not hopefully somebody's not going to buy it. Let's say Bill.com starts issuing a stablecoin which would make sense, right. To do international payments, things like that. Hopefully you're not going to buy lots of Bill.com stablecoins maybe, and hold them like it's a currency reserve for yourself. That doesn't make sense. It's this is a vehicle, right? Blake Oliver: [00:28:14] Well, well, you might though. And the reason you might is because Let's say Amazon decides to create a stablecoin. And so you could buy Amazon Bucks and you could use that to purchase on Amazon. Or you could use that to like send other people like it's US dollars. Like you're it's imagine if your Starbucks card, right, was a currency. And it's not just a value on a card. I could actually send you Starbucks money on my from my card, and then you could send that to somebody else to pay for something. David Leary: [00:28:52] People are doing that with airline miles for years. They sell their airline miles. Somebody else and somebody else uses the airline miles to buy a plane ticket. Like this has been happening for years, but it's always just a vehicle, right? It's not a store of wealth. Blake Oliver: [00:29:05] Well, but let's say let's say Walmart creates their own cryptocurrency. And if you buy at Walmart using their cryptocurrency, their stablecoin, you get perks like discounts. And what if Walmart tells you their employees, hey, if you opt to get paid in Walmart dollars or wall bucks or whatever, they call them bucks, right? We're going to we're going to give you an incentive to get paid in our our stablecoin. Now, why would a company do that? Well, because they can take the US dollars that they are not spending, right. They can take that the US dollars that they they have to hold in reserve. And they can invest those in treasuries and other highly liquid treasury like securities and they can earn interest. So I mean, this is, you know, you can earn 4 or 5% interest right now. It's a it's a money making opportunity for the stablecoin issuers. So I think it's inevitable that what will happen is that consumers will end up using stablecoins as a store of value instead of US dollars. Like it'll be like another bank account to them. I mean, that's what they're going to see it as. But these are not FDIC insured. So what protects the consumers is the monthly attestation reports that are required. So every stablecoin issuer and this is where the opportunity for accountants comes in. Right. Every stablecoin issuer has to conduct a monthly examination of their reserve assets by registered public accounting firms. These examinations they have to be performed by PCAOB registered firms. And the CEO and CFO of each issuer have to ensure the accuracy of monthly reports they have to certify it, creating personal accountability for reserve adequacy. So all of this depends on auditors doing their job. It's going to create the opportunity for hundreds of monthly recurring revenue attestation engagements, if not thousands. But then the question is Are there enough auditors to do this right? This only works as long as there's trust in the system that all these stablecoins that are out there are actually backed by US dollars. And what if they aren't? David Leary: [00:31:32] And I think 30 days is too much window. People are going to game the system they're going to for 20 days, put in a high risk investment and then try to move the money back in the day before the audit. And then we're just going to see a lot of gaming, because it really needs to be every single second of every single day. There needs to be parity. Whatever. How many stablecoins you've issued should match those liquid assets that you have in the bank. And every 30 day window is just you could see this is going to be bad news. 30 days is too much of a window. But it's good for firms because firms like you said, there's a lot of work, but they're going to have to set it up in an automated fashion to constantly monitor it and then sign off on it, because it's going to get gamed if it's 30 day window. Blake Oliver: [00:32:15] And these stablecoin issuers, if their stablecoins have less than 50 billion in outstanding tokens, they only have to get those monthly attestation reports. They don't have to get annual financial statement audits. So that's the threshold 50 billion in outstanding stablecoins. And you have to get audits. And currently I think that's only tether and Usdc. That's it. So they're going to have to get annual financial statements. So that's the big thing for tether is they have to actually now within three years get an annual financial statement. And we're going to find out if those tether if those tether tokens are actually backed 1 to 1. David Leary: [00:32:54] Um, did you say within three years they have a three year window for this? Blake Oliver: [00:32:57] It's like a three year. Yeah, uh, window to get it all done. So it's like a huge, um, opportunity. I mean, you know, if you're an auditor and you want to get in on this monthly attestation reports. That's like that's that's monthly recurring revenue, right? I mean, you've got to be doing that constantly throughout the year. So like and we're talking about a market that is projected to go from 234 billion to $2 trillion. It's going to, you know, ten x in the next few years. Now what what is the potential downside of all this? Right. We mentioned the FDIC insurance issue. Right. Um, I think the other issue has been brought up really well by, uh, uh, The New York Times. Barry Eichengreen is a professor of economics and political science at the University of California, Berkeley. He wrote a piece in the New York Times, The genius act will bring economic chaos. And, uh, he's the one who, you know, projects that companies like Walmart and Amazon are going to issue their own digital currencies and basically Walmart coin, Amazon coin could become reality. They could become the way that people, you know, use money. It could bypass traditional banks entirely. And we actually had a period in America when we did this before, we had the free banking era from the 1830s to the 1860s, where banks issued their own dollars. I remember learning about this in US history. Uh. States allowed this. This was after President Andrew Jackson killed the Bank of the United States in 1832. Blake Oliver: [00:34:41] So there was no central bank anymore. And during this period, states allowed anyone with minimum funds to open banks and issue their own dollars. Okay, that sounds like stablecoin issuers, right? Basically, a stablecoin issuer is essentially like a bank now, and different banks issued different banknotes, and the banknotes would actually trade at different prices depending on whether or not people believed that the bank was, uh, you know, liquid well, collateralized. Right. It had the reserves, um, And people lost a lot of money when banks collapsed because they'd be holding this, these bank notes that, you know, we're not guaranteed by anything. Michigan residents lost an estimated $4 million. That was nearly half the state's 1840 income from worthless banknotes. Imagine if today, the residents of a state lost half of their income for the year due to a bank collapse. The bank runs. So we're going to have a situation now where it's not just US dollars that are out there. It could be anyone can create a stablecoin that's supposedly backed by US dollars, but it's all based on this system of trust. So it really rests on the shoulder of CPAs and auditors to actually make sure that this system works, that there's trust in the system. And the argument against this is that, hey, we saw even like a traditional bank unable to, uh, be regulated properly. The regulators could not prevent the collapse of Silicon Valley Bank in 2023. So how are they going to monitor thousands of stablecoin issuers. David Leary: [00:36:19] And. Blake Oliver: [00:36:20] The companies. David Leary: [00:36:20] Footnotes that people are going to miss? And then until it all collapses, then people like it was right there. Look, it was in the footnotes. Blake Oliver: [00:36:28] I mean, uh, think how easy it is to create a fake audit report. Yeah. So if I'm a fraudster, I could issue a stablecoin. I could say that I'm getting audited by this firm, create fake audit reports that I submit to the regulator that is understaffed, doesn't understand this market, uh, and perpetuate a fraud. You know, I'm issuing a stablecoin that's not actually backed by US dollars. Or maybe it's like a little bit under capitalized. Maybe I'm gambling with some of that money. We've seen that happen. So it really falls on the accounting firms. They have to do perfect audits in order to ensure that stablecoins maintain their $1 value. And any, any company issuing less than 10 $10 billion is state regulated. So now we've got these multiple layers of regulation issue where we've got all these states regulating the smaller stablecoin issuers. And are they going to be able to do it right. Do they know what they're doing. David Leary: [00:37:22] So do accountants. Even accountants tend to accounting firms tend to want to avoid risk. They want to touch risky things. Even though there's a requirement to do this, there's probably going to be some small percentage of firms that jump in on it. But most firms are probably going to not want to even touch this, because the it's almost like it's too new and nobody really knows what's going to go wrong yet. Why would you want to get in? Why would you want to be the hey, you failed at auditing this properly because you don't really know what you're looking for yet. Right. Blake Oliver: [00:37:52] Because the only way to make real money is to take on risk. So if you want to make a lot of money in this growth area as an accounting firm, as an audit firm, you need to take on some risk. But you can hedge that risk. You can buy insurance. Right. And now that there's regulation around this. As long as you do a good job on these audits, as long as you do the minimum required, um, you know, and you buy insurance, I think it could be worth it. David Leary: [00:38:18] You know, I agree. Blake Oliver: [00:38:18] There's your own. David Leary: [00:38:19] Analysis. A couple firms, just like there's a couple firms that just really do all the SPACs. Right? Because those are questionable, possibly. And only a couple firms do them. It's going to be the same thing. I think you're going to see 3 or 4 firms do 90% of all these monthly stablecoin audits. Blake Oliver: [00:38:36] Now here's the real risk, right. This is the systemic risk to the economy. Um, the doomsday scenario. So let's say that consumers, businesses, let's say investors lose confidence in a stablecoin like tether, for instance, or, I don't know, a smaller one or just the whole thing. For some reason, we don't know what what would happen. All these stablecoins are are backed by treasuries ultimately. So these are US government treasury bonds. If everyone goes to sell their stablecoins, those stablecoins have to be redeemed with US dollars. So then the issuer has to go and sell their US treasuries. And if that happens all at once, that could create a spike in Treasury interest rates. It would crash the price of treasuries and interest rates could skyrocket. And then that could destabilize the entire economy because the cost of borrowing goes through the roof. But it could also lead to that doomsday scenario, where investors also simultaneously lose confidence in the ability of the US government to ever pay back the US debt because interest rates have now skyrocketed. That causes the debt to become too expensive to ever pay back. And that is what leads to a financial crisis. Now, what could cause this. What could cause people to become. I don't know. To lose confidence in stablecoins. Blake Oliver: [00:40:11] Quantum computing. Because cryptocurrency stablecoins are a cryptocurrency. It's all based on cryptography. We have these public blockchains. We have private keys that unlock wallets on public blockchains. And if somebody gets Ahold of your private key, if they hack, if they can figure out how to hack your wallet, they can drain your funds. The only thing protecting your money in this blockchain world is that private key and the cryptography of the system. And there's the potential that somebody could figure out how to break the cryptography. You can't do it now with today's computers. It would take, you know, thousands of years, you know, hundreds, thousands of years to break the cryptography now with, you know, the computing power we have. But if somebody creates a quantum computer. Then you could potentially hack the encryption. You could start draining people's wallets. And let's say that happens. Let's say somebody figures out how to do this. Well maybe they do it slow and under. You know, the covers. They they don't want people to know about this because then everybody would, you know, do a run on the bank, but they get away with it for a while, they get rich and then they get greedy and then it leaks. David Leary: [00:41:30] And that creates everybody's nobody will want these assets at all, right. Blake Oliver: [00:41:34] Because you can't guarantee the security of it. Yeah. So then everyone tries to sell their stablecoins all at once and that creates financial contagion. Us treasuries, uh, crash, interest rates spike and we get a financial crisis. That's the possibility of this. So, like, there's just something really scary about creating this whole regulatory system around stablecoins that are backed by cryptography. And we're just we're just betting that it's not going to be an issue. And there's already talk about this like in the crypto world. Um. David Carvalho, who's the founder, CEO and chief scientist of Neoris protocol, wrote a piece on Cointelegraph saying that Bitcoin must upgrade or fall victim to quantum computing in five years unless Bitcoin upgrades its core cryptography in the next five years. The trust is built over 16 years could be wiped out by a single quantum attack. Urgent upgrades are needed to protect the world's leading cryptocurrency. Well, okay, we've got the warning there from an expert, but how do you get the entire decentralized cryptocurrency world to actually spend the money to do the upgrade? So this is the true test of cryptocurrency, is can you have a completely decentralized system That responds to a threat like this and upgrades to prevent it. And I feel like it's not going to happen because you'd have to get everybody to spend the money. And I don't know, I feel like, are people going to be willing to spend the money to upgrade to these, you know, more advanced cryptography systems or whatever before there's actually a threat before it happens. David Leary: [00:43:24] Summary accounting firms get your money while you can, grab these audits, cash in on them, make some money. And if this all falls apart and goes away, you know, you got some bonuses for a little while. Yeah. Blake Oliver: [00:43:38] So, you know, the other thing about this that like, I don't know, I think we're going to see is before all that happens is we're going to see a lot of fraud and a lot of people lose their money. And that's simply because we're already seeing it right now with the traditional banking system. Um, have you heard of this Concept of pig butchering. David, I think you've even. David Leary: [00:44:01] Talked to the show before. I educated you on what pig butchering is. Before we go into that, though, let's run our next ad for relay. Okay, pull up the banner I'll read between Blake and myself. We now have three, four, maybe five business entities, 20 or so checking accounts and dozens and dozens of virtual cards. It would be impossible to manage all of this if we weren't using relays. Our small business bank relay is truly part of the tech stack we use to run our businesses. Relay allows Blake and I to each have our own logins. We can grant access to our team and 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, and had to create a payroll checking account just to get a few clicks, and I instantly had access to my ACH info to give over to my payroll provider. With relays virtual cards, we can issue debit cards to our team around the world for needed business expenses. I can instantly spin up a new visa debit 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. Really also has automation features to sweep money automatically from one account to another based on dates, amount or target balances, or even percentages. For example, inbound payments could be split daily to your payroll account, sales tax payable, operating account and savings account based on your predefined rules. To learn more about using relay for your firm and your clients, head over to The Accounting Podcast. That is The Accounting Podcast. Blake Oliver: [00:45:39] Thank you. David Leary: [00:45:40] I'll let you continue telling us about banking things. Blake Oliver: [00:45:43] Well, so there's this, um, this is probably a pig butchering, which is where fraudsters get wealthy individuals to send them their money through the traditional banking system. Usually. Wall Street Journal just ran a story about an awful story of an elderly Oklahoma couple that lost their entire life savings to scammers over the course of a year. Craig Hurt had undiagnosed vascular dementia from a 2015 brain injury, making him susceptible to scammers who posed as Tiffany, a romantic interest with investment advice. The scammers got him to go into the bank and wire money and do it over the course of like a whole year, they lost everything. Um, they threatened to kill the couple, blackmailed, uh, the wife with intimate photos Craig had taken without her consent. And they're suing the banks now? Um, they're suing the. I think the they're suing Arvest Bank, which process wires up to $300,000. They're saying, like, hey, why didn't you, like, stop this from happening? Why didn't you do anything about it? Current financial regulations for banks actually protect against unauthorized fraud, but they have little protection when victims are tricked into authorizing the transfers themselves. So, like, if this is a problem now and it's a big problem now, imagine what it's going to be like when people are using stablecoins where there's even fewer protections. Like, once you send that money, you're not getting it back, right? So it's going to make it even easier to do this kind of fraud if people are are using cryptocurrency. David Leary: [00:47:20] This is why Zelle. I don't know if you've ever sent money in Zelle. They always put that message up every time before you hit send. Make sure you know who you're sending this money to. Once you send it, it's gone because too many people fall for these transfers. This transfer game. Blake Oliver: [00:47:35] Yeah. So, you know, the other thing that bugs me about this whole, like, genius act like I understand why we want to do this. Stablecoins make international transfers, exchanging money, like, so much cheaper. It's so much more efficient than traditional banking rails. And that's where you really benefit from it. And we have used stablecoins to pay international bills. And it's just it's it's way better than doing wire transfers, that sort of thing. Um, but like if we wanted to solve that problem, there's a much more elegant way to do that, which is to simply create a federal, um, crypto currency, a federal stablecoin issued by the fed. You know, just like. David Leary: [00:48:26] The Wild West. We don't I don't want 50 different kind of crypto coins in my wallet. You know, I can only use the Amazon one with Amazon, the Walmart one with Walmart. Nobody wants that. It's like gift cards. Nobody wants 50 gift cards you want. So there's a you can use everywhere. Blake Oliver: [00:48:40] Yeah. So so basically after that wildcat banking period, we realized that was a mistake. We created, you know, the fed. And we said, no more creating your own currencies. Banks. You have to use US dollars. We stop that. We could just create the Treasury could create its own cryptocurrency. They could create a stablecoin and they could, you know, guarantee the security of it. And, um, you know, that that I mean, that would provide the what that would that would make things cheaper. And, um, you know, it'd be like digital cash, right? David Leary: [00:49:13] It would scare off criminals a little because. Yeah, you're doing it on the Fed's, um, chain, right? They could see everything, which they probably can't already with crypto, but. Blake Oliver: [00:49:24] Yeah, well, but you know, the it's like if it's a blockchain, right. It's you've got wallet addresses and you've got money coming in and going out. Okay. Right. And we already have that. It's already public. So like I think just the issue the problem here is that we're we're solving the problem by delegating the stablecoins to private companies. And we're setting up this whole regulatory regime to make sure they're honest about it, where the government could just issue a stablecoin, and we wouldn't have to have all these separate ones, and we wouldn't have to have this whole regulatory regime around it. So we've basically overcomplicated it, and we've we've created a lot of opportunities for fraud. But hey, good news accountants. This is like this is a this is a gift to auditors because we're going to have to be the ones that protect the system, that keep it honest. So we're going to be the heroes or we'll eventually be the scapegoats as well, I'm sure. All right. That's all my news on the genius act, David. David Leary: [00:50:23] I know I want to see your little agentic AI demo thing, so I'm going to cover the alternative pathways, recent news about that with different states. And while I'm covering that, you can get yourself set up for that demo. Blake Oliver: [00:50:34] Sounds good. David Leary: [00:50:35] So over the last few weeks we're a little behind on this. North Carolina and New York, Pennsylvania and Delaware have all passed alternative pathways. So that brings the total to 22 states now. And, um, California just this week passed a subcommittee at the state Senate, their business committee, with a unanimous unanimous vote. So that's going to push us to 23 states. That's basically you're looking at 23 states have done it, 28 states have it. But the ones that haven't are starting to get scared because the ball, that snowball is rolling, going faster and faster and faster. And in fact, the state of Massachusetts now has introduced their bills and to, quote unquote, to quote the Massachusetts Society of CPAs CEO Zachary Dohan Donnan, uh, quote unquote. We certainly don't want Massachusetts to be an outlier among states when it comes to rules around licensing. It's really critical that we align. So states are getting scared that they're going to be the last one, and they don't want to be left out when every other state has done this. So we are almost what I say. 23 so we're two states from being half of all the states changing the legislation in the last basically. Since when did Barry leave Barry Melanson? Blake Oliver: [00:51:50] Earlier this year. January. In January, basically. Yeah. David Leary: [00:51:52] So we're halfway through the year, and almost half the states have introduced and made changes to the alternative pathways. It's kind of amazing. Blake Oliver: [00:52:01] This is great news. More and more states adopting streamlined pathways to CPA licensure. But according to new data from IPA, we're actually losing ground. They say that the percentage of staff holding CPA licenses dropped from 56% to 48% between 2020 and 2024. So the percentage of staff who have CPAs at public accounting firms is now less than half. That, to me, seems like kind of right. David Leary: [00:52:35] If if there's been a 25 year period where there's been less CPAs and a lot, we're hitting that silver tsunami of retirees that had their CPA and now they're leaving the firm. This would make sense. Why? It's blue half. Blake Oliver: [00:52:49] At large firms. It's even worse. It is only 41.5% of staff holding CPA licenses in 2024. Now, David, a good number of them probably left. That's this is the result of the 300,000 accountants who left the workforce a few years ago. Um, but, you know, it also could be simply that firms are expanding into nontraditional services that need different skills. And so the firms say we don't need people with CPA skills. We need people with other skills. And the CPA license hasn't modernized. The education hasn't changed. We're still teaching the same stuff. And so the firms are looking to other licenses. So we need to not just be streamlining licensure, speeding it up, getting rid of the red tape, still ensuring quality while reducing the time. But we also need to be looking into the actual curriculum. What is being taught? What are CPAs learning and is this stuff still really that relevant? And I think the problem is that so much of the education is locked in and is required to become a CPA, that there's very little room to innovate in education, like so many states like California, where I got licensed, require you to take so many specific classes with specific titles, there's really not a lot of room if you're an educator to, I don't know, do a class on cryptocurrency or stablecoins or whatever it is. Right. So here you have all these new accounting majors. We've seen a push of 12% more going into accounting now in schools, but they're not going to be learning any of this stuff that firms are going to need if they are going to be auditing stablecoins and cryptocurrency, because none of these educational institutions are modernizing their curriculum. David Leary: [00:54:38] So now we might pump out more CPAs that firms don't actually want to hire. Blake Oliver: [00:54:42] That's the thought. David Leary: [00:54:45] And then with the with the private equity slant on this 100% agree that for sure that's going to happen because okay, they want to be in those business models where they don't need CPAs. Blake Oliver: [00:54:56] All right. Shall we thank our final sponsor. Thank you to cloud Accountant Staffing. In case you missed the last 100 or so episodes, David and I have been discussing almost weekly that there's an accountant labor shortage, regardless of the route. We just discussed it right now, and regardless of the root cause, the problem is real. My social media feed is full of firms attempting to fill open positions on their teams, but how can anyone increase their staff size if everyone is attempting to hire during a labor shortage? That's where cloud accountant staffing comes in. They'll help you hire full time team members for your firm that reside in the Philippines. How much would your firm change? Or for that matter, your life? If you could add 40, 80, 120 hours of capacity to your firm in 2025? Cloud Accountant Staffing was founded by a firm owner who grew his firm using offshore talent, and now he's applying everything he learned to help you grow your firm, too. If your firm is in need of expert bookkeepers, accountants, CPAs or virtual assistants, head over to The Accounting Podcast. That's The Accounting Podcast. A. All right. And now. Agentic AI. David Leary: [00:56:03] Yes. Blake Oliver: [00:56:04] I hope our listeners have stuck with us, because I'm actually really excited about the potential for this. Uh, although it's it's like the hype and the reality, like, are hugely far apart at this point. So first, let's watch a couple of videos from OpenAI demoing their new, uh, agentic AI in the browser feature. So this is a video called ChatGPT agent does Research and Action. OpenAI Demo: [00:56:36] Um, they awashish I'm an engineer and I work on the product team in OpenAI. People in their daily lives, at work or in personal life. They use a variety of tools, and we are just training the model to take advantage of all of these things, and you're just giving the agent as much power as possible. Today, I asked agent to book me an itinerary to go to a tennis tournament in Palm Springs next year. Find me an itinerary that works around the semifinals, because that's going to be really exciting, and the agent is basically going to give me like a detailed itinerary of like how much it's going to cost, what activities we should be doing at every part of the day. And in order to give it an additional spin, we also asked it to like, look at my calendar and figure out like what flight times would work for me. My dream has come true. I just tell it what to do and then I can walk away. First thing in the model has to do is like, figure it out. Like which tools does it need? It'll bring up the visual browser. I use connectors to connect my personal data, so I give agent access to my Gmail and my Google Calendar so that it can access that data. OpenAI Demo: [00:57:36] Then the first thing that it needs to do is actually figure out what the tournament dates are like. When am I available? How much would it cost? Where am I going to eat? And when can I get the tickets? And it just like, goes through this process for all three days of my itinerary. When the agent is ready, it'll send you a notification on your phone or on your laptop, and you can check what the agent has done. Review it. It did. It did pretty well. It figured out, essentially, that the tournament is basically happening from like March 12th to March 15th. Then it figured out that my meetings on March 12th end at like 430, and it takes about an hour to go from here to SFO because of the traffic. So it figured out like what time or flights actually work for me. And then I figured out basically like which hotel I'm going to stay at when I'm attending the matches and where should I be eating? Everybody has like some, some sort of like uninteresting part of the job, like researching, looking here, doing this. You just want to get to the thing. Blake Oliver: [00:58:37] So. That's an example of ChatGPT using web browsing, connecting to your email, connecting to your calendar, and doing research and creating a travel itinerary. What do you think, David? Are you impressed. David Leary: [00:58:52] By the itinerary? Is it going in, booking and buying things as well? Blake Oliver: [00:58:56] So theoretically, yes, it could do that. I have seen demos of this where if you ask it to like buy a product, it can actually like fill out the form, it can put in your credit card number, it can order the thing. That's possible too. In this case, he was just creating the itinerary. Now, this is not accounting specific, but I could see this being a powerful tool for like booking meetings with clients, which, as we discussed in a previous episode, is one of the top things that tax pros want, is they want an AI agent that can book meetings with clients, you know, respond to emails, do that. So we're getting there. We're getting there. It could look at your calendar. It could read the email, it could find a time, it could respond. Potentially. It's still not perfect. Um, we'll see that when I show my little demo, but you get the idea, right? You can visualize this happening. This is the very first version of this product. And just as we saw with like the first versions of ChatGPT, they were kind of miserable at doing a lot of things. And now we are just blown away by the quality. So who's to know what it'll be like in a few months or years? So let's look at another example more specific to accounting. And this is spreadsheets. The ChatGPT agent can make spreadsheets. 2nd OpenAI Demo: [01:00:14] My name is John. I work on the deep research and agents teams at OpenAI. One great use case that comes up a lot is you have some kind of budget file, and whenever you do that, it's kind of a pain. It takes maybe 4 to 8 hours, and that's kind of your day. I'm going to show you an example where the agent sources information on the city of San Francisco's annual budget, expenses and revenues for the past five years, and it's going to compile that all into one nicely formatted spreadsheet. It goes on by itself. I usually just close my laptop, go grab a coffee, maybe I have lunch. So first it needs to find the data. So it probably does a web search to figure out where it can find this San Francisco city budget information. Once it finds the San Francisco City government website, it will try to access the PDF files so it has its own file system and everything. Then it needs to extract maybe 200 numbers from each PDF. And finally it will have one command that will generate the entire spreadsheet all at once. If you go back to the chat, you'll see the final response and let me just open it now. Yeah, I think it got 98% of the information correct. It also formatted the Excel workbook as I instructed it to. In this case, the revisions were small, so I just made them within Excel because it was just a copy paste. But absolutely you can make them in ChatGPT. I would say just try it out. If it can do 90, 95% of the actual time consuming part of the work, that's going to save you a ton of time. Blake Oliver: [01:01:46] So my question is, how do you know what 2% it got wrong? David Leary: [01:01:52] Yeah, right. I saw an article about this as AI is doing more the human part of this human in the loop, right? Which is you you got to now you have harder work to do. You now need to figure out the missing 3% of the data and then get it in there somehow. But how do you know what's missing? That thing just did weeks of work scanning PDFs, pulling data. You don't know what's missing. Like you have all the hard work now. It didn't actually save you any time. And that's the that's the big issue we're going to see right at AI. You're the human work is becoming more complex. So you're never getting a time savings. Blake Oliver: [01:02:27] So I thought it would be fun to like try using this like live. Um, now this is perplexities new browser, the Comet Browser, where you can access the Perplexity Assistant, the AI tool in the right hand sidebar. And I'm going to turn off the comments on the screen for a moment so you can all see. So I'm looking right now at the zero dashboard. I'm in zero my accounting system. I've got the demo company up and I've also got a PDF invoice in another tab. And this is an example invoice from Sliced Invoices. And it's just got a bunch of demo data. It's got an invoice number order number invoice date. It's a standard very simple invoice with one line item for an hour of web design at $85 an hour. And there's some tax added. So I want to see if comet with perplexity can enter this invoice as a bill in zero. So I'm going to prompt it. Enter the bill in the other tab. David Leary: [01:03:37] Hey, Blake, can you. Blake Oliver: [01:03:38] Move. David Leary: [01:03:38] Up your window a little bit? You can't see what you're typing. Blake Oliver: [01:03:43] You can't see what I'm typing. David Leary: [01:03:44] Hanging off the screen too much there I can now I can see it now. What you're typing. Blake Oliver: [01:03:48] You can see it better. David Leary: [01:03:49] Okay, a little bit better. Blake Oliver: [01:03:50] Okay. So, um, enter the invoice in the other tab as a bill in zero. Let's see if it can do this. So now perplexity starts thinking. It says converting the invoice from the other tab into a bill within zero. It's searching my browser tabs. It's retrieving the content of the PDF in one of the tabs. And now it's going to navigate to the bill section in zero and enter a new bill using the details from the invoice. And it's pulled out the name of the vendor, the address, all of that stuff. Um, and you can kind of see it reasoning as it goes. Right. It's adding the doing one step at a time, right? What's weird about this is that I can open the page that's working on it, but it doesn't actually show me it working. Like I can't see it clicking around, which I would expect. And it's doing that in the. David Leary: [01:04:48] Browser tab that's happening right now. Blake Oliver: [01:04:50] Right. So it's doing it in a hidden browser tab. And this makes me nervous because I'm enabling this AI agent to act in my browser tabs in any of the apps that I've got open. Like how how do I prevent it from doing something potentially really malicious? I mean, so like I'm very nervous to open up my bank account in this browser and use the Agentic AI features. So what's happening on the right hand side for our podcast listeners is that it's really thinking through, trying to enter the info into the fields and and it struggles frequently Trying to enter information because maybe it clicks in the wrong place, just like a person. It doesn't click the drop down correctly, it doesn't hit enter correctly and it has to retry. Um, and so it's. David Leary: [01:05:40] Just the UI changes depending on what you click on on the invoice and Xero or QuickBooks or whatever you click that's now the UI changed a little bit. Yeah. Blake Oliver: [01:05:47] Yeah. So this is interesting because it's basically taking a screenshot, running a prompt, taking a screenshot, running a prompt, taking an action, taking a screenshot, running a prompt, taking an action. It's just doing this over and over and over again so we can see it happening here on the sidebar. And I just wonder, like, how much is this costing? Because a single prompt can cost pennies to dollars depending on what kind of model you're using. And so even if these are pennies per prompt, it's doing a lot of prompts. It's doing a lot of reasoning. So this cannot possibly be cheap. David Leary: [01:06:24] But didn't you say, I think two episodes ago that the average cost of an invoice entering an invoice into the accounting system, or paying a bill cost a company like $25. I think you had some stat like that recently. Blake Oliver: [01:06:36] It's around $20. Yeah. David Leary: [01:06:37] So as long as this comes in at 4 or 5 bucks, who cares? Blake Oliver: [01:06:41] Well, and the issue is going to be the accuracy, right. So, um, it's trying to fix some discrepancies now I guess it's been able to enter the invoice. Oh yeah. Here I refresh the page and you can see now that we've got a draft bill here and it's got the correct vendor name, it's got a date due date reference. It's entered a quantity and unit price but not a description. And it hasn't figured out the account yet. But we do here have a draft bill for $85 that it's continuing to try to save. Now it's trying to approve it and it's getting an error because it didn't enter an account. You have to enter an account in order to save a bill. David Leary: [01:07:23] Because it doesn't actually understand accounting knowledge. Blake Oliver: [01:07:26] Exactly. Well, I mean, it's been trained on accounting knowledge, and it's been it's it has access to like, zero help documentation, but it struggles on some very simple stuff. You would think that when it does the data entry the first time, it would not try to approve the bill until it enters the account. But it doesn't understand that. So really, it's sort of like this vibe coding thing where it just like tries and tries and tries and it tries to fix broken things and then eventually maybe it gets it to kind of work, but it's got all this messiness under the hood. And yes, it works, but it's like super messy code. That is not what I mean. David Leary: [01:08:09] The point of like, Blake, I could have just put the two tabs side by side and typed it in myself by now. Blake Oliver: [01:08:14] Yeah, well, just remember, though, that this agent could work 24 over seven without any human interference, so who cares how long it takes, right? I guess, and this is the first version. So, you know, if you train an agent on how to enter bills into Xero and that's like what it was specifically trained for, I'm sure it could like, do it properly. David Leary: [01:08:34] But I made a very long time ago with a developer that was doing a receipt capture and they were like, look, it only takes like four seconds for it to capture the data or seven seconds. I'm like, nobody cares. You're at the airport, you take a picture, your receipt, you put your phone in the pocket. You get back after your business trip a week later, and then you as long as it's scanned by then nobody cares how fast it goes. And you're right, you're going to have this work when you're sleeping. Work when you're doing other work. It won't be. Blake Oliver: [01:08:59] Well, I suppose. David Leary: [01:08:59] It does have episode like this demos. It's always slower for demos. Blake Oliver: [01:09:03] Well, it's still going, um. Oh, it added the description for web design. Okay. It's it's trying to save it. Okay. So now it says that the bill has been successfully created and saved, and now it wants to mark the bill. It wants to mark the invoices paid because there's um there's a paid. Overlay on the on the draft bill. I wonder how it's going to try to do that, though. I don't think it's going to be able to. I mean, because it would have to like know what account it came from or whatever. David Leary: [01:09:35] And you got to connect it to a payment. Blake Oliver: [01:09:37] Transaction. It's, it's it's still getting this account must be valid error. And it can't seem to figure this out. It's been trying to do this over and over and over again. It knows that it needs to enter an account code. So it's entering sales as the account code for a bill. It's just it's just really struggling here. Right. David Leary: [01:09:59] And it's not asking you for help the way maybe a human intern eventually would give up and ask you for some guidance or help. Blake Oliver: [01:10:06] I'm kind of surprised that it doesn't stop and ask some questions at this point. David Leary: [01:10:10] So what? This leads me to think like, are we going to again, I keep saying I want AI that's trained on the thing I need it to do. Does this leave the window open for zero Intuit to create their own browser with their own, their own AI built in. So that way it can interact with the other tabs. And it's really good at getting invoices in any format from a browser tab. Blake Oliver: [01:10:34] I don't think they need they don't they wouldn't need to create their own browser. They would just need to embed an AI agent as like a sidebar inside of Xero or QuickBooks that allows it to like, take action and do repetitive tasks. David Leary: [01:10:47] The other tabs. That's why it has to be at the browser level. Blake Oliver: [01:10:49] Oh yeah. Yeah, yeah, that's the issue is that and that's the potential of this is that if you open up the other data sources you need in other tabs, then the AI can work across tabs. And that's been the limitation so far of AI in QuickBooks is that it doesn't have enough context. Yeah. You need more than just the bank line and like the information you get from the bank feed in order to properly categorize a transaction. But if it has access to your email and your calendar and could go search that, perhaps it could, you know, correctly categorize transactions. David Leary: [01:11:20] I thought you were on a business trip. This makes sense. And then connect all the dots. It's still so. Those of you listening, it's still working. It's reasoning, working, reasoning, working. And just to make sure to rewind the invoice is a one line invoice, right? Blake Oliver: [01:11:34] It's a one line invoice for an hour of web development services. At $85. It's about as simple an invoice as you could get, and so it's still struggling to enter the account code. It can't seem to figure out how to do that, because in Xero you have to enter. You start typing either an account code or an account name, and then it gives you a drop down and then you have to click and select it. I think it might be struggling with that aspect, but what it did successfully do is enter a draft with the vendor name date due date reference. It got the unit price in there. Um, it got the tax on purchases in there correctly at nine point. I think that's correct. 9.25%. No. Let's see. The tax is 850. Nope. We got the tax wrong. So not there yet. David Leary: [01:12:28] Go back to the the line items of the invoice. Blake Oliver: [01:12:31] The original. David Leary: [01:12:32] Yeah. Yeah. It's not close on the tax. Interesting. Blake Oliver: [01:12:36] Yeah. Okay, so the tax finally failed and perplexity says I started the process of entering the invoices of Bill and Xero using the information provided. And it created the bill and it saved a draft, but it was unable to finalize and mark. The bill is paid because there was an error. Account must be valid. So it couldn't figure out how to assign the account code. And it tells me the next step. And then it asks, would you like me to guide you on how to assign an account code or take the next steps in Xero? So. David Leary: [01:13:02] So like you said, that the hype versus the reality are pretty far apart. Blake Oliver: [01:13:07] Hype versus reality very, very far apart at this point. But I would expect that to close very soon. So this is the first version. Think of this as like GPT two, which was the first version, I think that ChatGPT released. So a few more iterations. One thing that. David Leary: [01:13:24] What did you gain that you couldn't just do with text or a hub doc already like that? Is it solving any new problems or is it just is this just a show off? Like, look, I could do it with this. Like, did it solve a problem that you can't already that's not already solved in market? Blake Oliver: [01:13:39] I think the idea is that eventually you will just be able to have an agent that does these repetitive tasks, and you don't need another app to do it. So just monitor my monitor this email inbox for bills that are sent there and enter them into the accounting system. You could have an agent do that. You don't have to pay for a specialized tool to do it. David Leary: [01:14:00] Or one thing I do a lot, which actually could make sense for whatever reason. Certain apps don't email you a receipt. Yeah. So you got to go to the app, go to the billing tab, it takes you to the straight page and you download the PDFs. Like that would be your browser. Hey, go to the bank, Feed all the transactions that we don't have receipts yet. Go find on those websites. So I guess it's the promise. Like you can see it, but I think the the reality of it doing it, I feel like is still far apart. Blake Oliver: [01:14:27] Very far away at this point. Yeah. But the potential is there. I mean, I'm seeing like a glimmer of it. So, you know, all the all the actual real world examples are fairly simple things, like doing research on products and helping me decide what to buy. I think the official OpenAI announcement, they did a the prompt they did was, I'm going to this wedding. Here's the wedding website. Help me, you know, figure out what I need to wear and how to what I need to book and all that stuff, like planning that sort of thing. David Leary: [01:14:59] I think it's good. That's kind of research. I've done that where I'm like, hey, here's 4 or 5 bands I want to see in concert this summer. Here's conferences I'm traveling to. Are there any overlaps? And it can figure that out and suggest a trip or close cities. But when it comes to actually but again that's the research stuff, right? That's which is fine. It's a time saver. But it's not this this concept of it doing data entry for entry level people and eliminating that front end employee. I just don't see it's it's not going to happen anytime soon. Um, and then Sarah. Blake Oliver: [01:15:30] Asks a good question here. Sarah says, so the audit history shows who entered this. And because I'm logged into Xero through the comet browser, everything that the agent does shows up as me doing it. David Leary: [01:15:42] Yeah, this is an issue that I've had with QuickBooks audit Trail forever. It never shows the app that put the data in. It shows whoever connected the app. So so you never really know. It just shows Blake put the data in, not the app. Maybe Dex sent the data over. You would never know it's Dex. It's like the audit trails have to be much smarter on who they're tracking. Did the work. Blake Oliver: [01:16:03] Zafar says try it with grok, which I would love to try. Unfortunately, in perplexity, comet, you can't yet select which reasoning model it uses, so I don't know which one it's using. I know they use multiple. But maybe Grock could you know. It's got good reasoning. It could do it better, but I still think it would struggle. David Leary: [01:16:23] So this there could be an issue where QuickBooks or Xero just block you from doing this with these browsers, because there's a data exposure risk. Yeah. And they want the magic in there. And an example of this just happened. Do you remember a couple months back, maybe a half a year ago, the Shopify CEO Tobi Lutke, he said that everyone at Shopify must use AI as part of their daily workflow. So internally, he's making everybody at the company use AI. You weren't allowed to hire people unless you could prove I couldn't do the work. Right. Very pro AI. But what Shopify just did, they added a line to the robot text file keeping bots from interacting with Shopify websites. So if you were, let's say you were like in your browser here, you said go to one of the I think there's this pants company who was the company's name. Um, isn't there like, something called Allbirds? Allbirds like a shorts company. So if you told your agent to go to Allbirds and buy you a pair of shorts, it can't do it because it's blocked by Shopify. Now, you aren't allowed to connect in and do scans, and because Shopify is trying to push everybody to go through their special checkout AI tool, right. And obviously, with the moves QuickBooks made, making you pay for the API calls, they're going to block all these. There's no doubt Xero and QuickBooks are going to block you from having external bots do this stuff. Shopify just set the the example of this already. Blake Oliver: [01:17:53] Thanks everyone who joined us today. This has been a lot of fun. Thanks for sticking around with us to the end too. You can earn free continuing professional education credit for listening to this episode. Get a free hour of CPE with the earmark app. Go to Earmark app in your browser or download the free app for iOS or Android and take a quick quiz. Five questions you already listen to the episode, so now get your CPE credit for it. If you are an enrolled agent IRS enrolled agent, you can get CE credits. Look for the courses with the purple Iris CE banner. Only courses on federal tax topics and ethics topics qualify, but you can get a lot of that through the Federal Tax Updates podcast and our new show, Tax in Action by Jeremy Wells, CPA and Enrolled Agent Tax in Action. You can check it out at Tax Free continuing education, get free CPE and learn all about taxes. And I think, David, we had a really, really popular episode in our first ten episode season. What was that? It was on S-corps right? David Leary: [01:19:01] Yeah. The the it's S Corp's. And then I think you did one on 1031. It's just it's the typical stuff people always want to know more about. Yeah, he was really, uh, eat that up. But here's the good news. In the next couple of weeks, I'm gonna make it even easier to find all the IRS approved C courses right in the app. I have a plan for new product features. Blake Oliver: [01:19:22] Thank you. Um, and if you want to send us an email. Well, hold on, let me, let me. David Leary: [01:19:28] Let. Blake Oliver: [01:19:28] Me give the email address out first. First, if you want to send us an email it's The Accounting Podcast at me The Accounting Podcast at me. We love hearing from you all. David Leary: [01:19:37] So, uh, one more story to close out, Blake, because I think this is very personal to you. And we were just talking about product feedback, right? Or product improvements. I don't know if you saw or actually, I remember you railing about this in the years ago back in the you were the second zero user in the United States, and you put in you wanted a feature and they still have not built the feature right there. Product feedback. Right? Yeah. They are now zero. Just announced they're revamping and overhauling its product ideas platform. So the goal is to users can track their idea from submission to potential implementation with increased community involvement and focus on transparency. Xero makes it easier than valuable. Ideas will stand out and gains traction, so you're going to be able to track your ideas. And apparently in 2024, zero delivered 360 communities submitted ideas. So this is right. I wonder where your ideas at this one you've been wanting so bad that. Blake Oliver: [01:20:31] I don't remember if I ever submitted it. The one I really would love is just like bulk bulk reconciliation. Like, I want to be able to click okay on all the transactions on the screen all at once, instead of one at a time. That would be really nice. Zero. All right, David, great chatting with you as always. Thanks to all our livestream viewers who joined us. Zephiel Dray, Luke, Sarah, thank you for commenting. Erika. Celeste Cody, thanks for joining us on this Sunday. We'll see you around here soon.