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later in the episode. Everybody wants me and nobody wants a nine to five job anymore.
And so this next generation that come out, they decide to want to be a accountant,
they graduate, they get their CPA exam, they work on an audit and realize it means nothing.
Like, could you imagine, like, the psychological blow to all the work you put in for the last
five secures of your life to find out the work you're doing absolutely means nothing?
Coming to you weekly from the Onpay Recording Studio, this is the Cloud Accounting Podcast.
Welcome to the Cloud Accounting Podcast. I'm Blake Oliver.
I'm David Leary. Blake, I've got a virtual background on here.
That's right, because you are in Seaside, Florida. David, what are you doing out in the panhandle
of Florida? I am here for the accounting salon. I was unable to attend last year,
and so I made the trek this year to accounting salon. And just what accounting salon is, it was
an experiment. This is the fifth year in a row now, the fifth event that we've done, and it's a
man to add your art and myself. We met at a conference and kind of this idea of like,
where do people go that teach at the conferences, go to learn things from each other?
And there's nothing existed. And we kind of just as an experiment, I was like, well, I know
some QuickBooks people. And she said, I know some zero people, and they're all, you know,
off cast practices. And we brought them to New Orleans on year one. There's about 18 people,
and it was basically in Amanda's backyard, right? Like we had in her boat or pool house.
We all stood around and had a conference to some extent. Yeah.
That's what I'm doing in Seaside, Florida. Do you know that this is where they filmed the
Truman Show? So if you've seen that movie, The Truman Show, that is the bubble I'm living in right now.
I did. And I wish I could be there. I've always wanted to see that place. So maybe next year.
But we got lots of new shows. And it's like the Truman Show, because we're streaming.
Like we're streaming, right? It's like people are watching me in The Truman Show.
Except on The Truman Show, Seaside, Florida had a much better internet connection because they
were streaming in high definition all over the planet and a bubble. And I don't understand,
how is it that your connection is so bad? I feel like, I mean, this is a story we've talked about
on the show that like broadband in the United States is like not where it needs to be for us
to be competitive globally. Because like, you're barely moving for me. Well, let's get to the news.
We got a lot to talk about because we spent all of last episode demoing AI inside of practice
management solutions. And there's so much going on still with AI accounting today ran the CPA exam
through chat GPT and said it failed miserably. I saw a story about check fraud on the rise in the
Wall Street Journal, which I couldn't believe I'm trying to reconcile these two things. Here we are
cloud accounting AI and check fraud is still a thing. There's been a TurboTax settlement. There's
a story in accounting today about how audit firms who remove partners or audit firms remove partners
who fault clients internal controls. The three failed US banks all had KPMG in common.
Like, I don't even know where to begin. Should we start with this CPA exam thing, David? I think
that's that's, yeah, let's talk AI because I think that's the most that was the most story I made
the most notes on this week as well. I see. Yeah, I have lots of questions, I guess, on that.
Okay, so and welcome to our live stream viewers. Michael and Brian, great to see you both. Brian
says, chow, I can't blink film from Italy. I'm a little reluctant to do it like because of the
Internet thing. And so I decided let's do it now. Before I leave, I'm going to Italy for a couple
of weeks for Expenseicon. I'll see you there, David. I'm going a bit in advance to see the sites.
I've never been, so I'm excited. Hello, Heather. Welcome into the stream.
So just to speak to you. When we're both in Italy next week and we're going to record together,
are we going to try to stream us recording together at the same time? I mean, in the same
it might as well. We'll give it a shot. We'll see if the if the resort can can be
worse than this. Apparently, I don't know how it's looking. How rough. I mean, you're still on
the stream. You haven't been disconnected yet. So we'll see. Hello, Heather. Welcome.
Okay. So accounting today had chat CPT take the CPA exam and it failed. David, takeaways.
Well, they didn't just say it failed. It failed utterly in all four sessions.
Yes. It got 39% on reg audit 46, FAR 35 and BEC 48. It did not pass any part of the CPA exam.
But there's a catch to this. Did you see what they did that might invalidate these results very soon?
So they didn't experiment. And they did this in their home office of it's RZN and that's their
parent company of accounting today. And they were the surgeon CPA review, the publisher. So they
basically gave it a practice test. And if you scroll down the bottom of the article, they kind of
talk a little bit more about how they did it. And it looks like they just gave it a.
They didn't train it. And maybe that's my takeaway, right? They said, they said,
they primed it with this question with this prompt. Chat GPT, you are going to take on the role of
the student who's taking the CPA exam today. Repeat this information back to me. And then
they would paste in an exam question and get an answer, an exam question and get an answer.
But nowhere did it say, oh, we gave it the textbooks of an accounting graduate's courses or any
education. And that's the first, that's the part I was confused on. It's like, well, of course,
if you don't give it training, how's it going to have the answers? And so that's my confusion
over this. I'm not a confusion to just like, it's very clickbaity. But if you read it, it doesn't
make a lot of sense. So my problem with the methodology is right up at the top. They used GPT three
instead of four. It says we use two laptops, each running a separate chat GPT 3.5 pro account.
Because using GPT four would have made the experiment impractical due to metering.
Currently, even if you pay for GPT four, you can only do 20 or 25 questions or prompts per,
I don't know what it is, but I got limited earlier today.
And it usually tells you to stop, right?
Yeah, it does. So here's the thing. You can't do this experiment on three and then say that
GPT failed because the bar exam, GPT also failed at that with version three, but then version four
passed it with huge marks. And I think anybody who's used GPT knows that there's a huge difference
between version three and version four. It was a, it was an order of magnitude difference in
quality. And that's what got me really into chat GPT was the version four improvement.
And so this morning, I was so frustrated with this, I decided to as quickly as possible,
try and replicate at least some of this. So I opened up GPT four, chat GPT version four,
and I went to the AICPA, CPA practice exam that you can find online.
And I just started pasting the multiple choice questions into chat GPT.
And I gave it a similar prompt. I said, you are taking the CPA exam, that's your job.
I'm going to give you exam questions. You pick the best answer.
So I gave it 10 multiple choice questions from the audit practice exam. It got 10 out of 10, right?
10 out of 10. Now, it, there are also exercises in the audit exam, right? Which I couldn't get it
to do because I can't paste in a spreadsheet with the formatting. So I was only able to give
it multiple choice questions, but it aced them 10 out of 10. The first two quizlets,
the quizlets are five questions each. So 10 questions. Then I gave it the far,
the financial accounting questions. Okay. It got seven out of 10, correct. And the ones that
it missed all had to do with math calculations, calculating some value. And we know that AI,
right now, chat GPT can't do calculations accurately because it's not hooked up to a
calculator. It's a language model. So if it does calculations properly, that's just done luck,
right? So like, I mean, this, this is completely misleading.
And I, I think, right, big takeaway. Yeah.
I think it's a bad story because like, if, as somebody who's now fiddling with chat GPT,
like I'm going to say I'm a prompt expert or an F some title, but like, I fiddle with it enough
to get a good vibe here. What's going on? And I think if somebody has not used it yet or doesn't
understand it, they're just going to see this headline. And if you're in a accountant,
you might get a false sense of confidence. Right? Exactly. Just that makes sense. And then I look
at this another two other aspects is I would like to see what happens with students who are allowed
to use chat GPT when they take the exam. Because that's going to be your real world. It's going to
kind of be your assistant. It's like student plus chat GPT, how what were their scores together,
you know, working as a team would be interesting. And then the other piece of this, which is really
surgeon CPA needs a better marketing department and PR department. Because I would have done it
like this. It failed miserably. Then we told it to study using our study materials and now look,
now it passes. And that they blew an opportunity to market surgeon CPA review.
And the reason you mentioned surgeon is because they did this experiment with accounting today
together. I don't know if we mentioned that earlier. Yeah, they're used their,
their practice test or whatever from surgery is their practice test. Right. So GPT is coming for
audit. I am convinced that most staff level audit work will be automated by generative AI.
I mean, open AI's own research paper said that auditing and accounting is 100% exposed
to automation through their technology. And that means that at least 50% of the tasks
in that job or profession can be automated. So at least 50% of the current tasks that
account senators do can be automated with generative AI, which is not a bad thing. It's a great thing.
But I think a lot of those tasks are at the entry level. So then that creates all the questions
about what are those students going to do if they're still being prepared in an old way,
an education system that hasn't changed. Still doing stuff on paper.
Yeah. So don't pay attention to these experiments. If they're not using GPT-4,
it is not going to be accurate. And we got 100% with GPT-4, chat GPT-4 on the audit,
on 10 audit questions. So I got another story in this vein, David.
Before we leave the Thorsa Court in this article, and because I'm somebody who's never taken the
CPA exam, and I was a little confused. So this is Wes Bricker. He's the vice chair and co-leader
of trust solutions at PWC. And he said, there's more to accounting than just having a lot of
accounting knowledge. There's also the matter of professional judgment, skepticism, and experience
with chat GPT-lax. I'm wondering, like, does a college student have professional judgment,
skepticism, and experience out of college? And then when they're taking the exam, do you get tested
on those three things? So I can't reconcile, like, who cares if chat GPT doesn't have it?
Because is it testing for that? I mean, it tests knowledge of what those terms mean,
but you can't gain professional skepticism from a textbook, I don't think. You have to
learn it on the job, right? Which is why I don't think that the audit partners and the
managers and directors who are using, supposedly using professional skepticism,
are not going to get automated. But, you know, all the rote work, yeah.
In just the... Everybody should go read this article because it has a lot of quotes from
accounting professors and senior partners, and they're almost all telling themselves,
of course, chat GPT can't do our jobs. And I think they may not be right. I don't know.
So I got a follow-up here. We were talking about the potential for AI fraud on the podcast.
And the number one tech reporter at The Wall Street Journal has just validated our concerns.
Joanna Stern wrote a piece at the end of April titled,
I Cloned Myself With AI. She fooled my bank and my family. So Joanna Sterns does great work
on tech reporting. She's always testing the new iPhones, all the new gadgets for The Wall Street
Journal does these awesome videos that I love watching. And she's testing out in this article,
this service called Synthizia. Have you heard of Synthizia, David?
No. It's an AI that creates a voice and image and then puts, you know, you type the words
and the avatar speaks. It's an avatar. So I could upload a still image of you
and a couple samples of your voice and then give it text and it'll move your job.
Exactly. And you know, I've seen some of these in action and they look a little stiff,
but like they're getting better and better and better. And you can see them totally being used
for like corporate training videos, that sort of thing, right? The beauty is you don't have to
hire a professional actor and pay them every time you change your script. You just update the avatar
with whatever new text you need to write. So she had, she's also been testing out an AI
voice clone developed by 11 Labs, an AI speech software developer. She gathered 90 minutes of
her voice from previous videos she's done, uploaded the files to the tool, and then under two minutes
it cloned her voice. So she can type in any text, click generate, and then within seconds her voice
says it aloud. Now I'm going to play some of these clips for you, David. I want you to close your eyes
and I want you to tell me, I want you to tell me what you think is a,
is if this is a real voice or not. Hey, dad, what are the last four digits of your social security
number? Pretty hard to tell, right? You want an answer right now? That's that's the yeah, I would
not know. That's just a small quick audio. Yeah, here we go. I'm gonna play it again for you.
Hey, dad, what are the last four digits of your social security number? That was an AI voice
clone created by 11 Labs. Here's another one. Hey, dad, what are the last four digits of your
social security number? That was Cynthia. This is Joanna Stern's real voice. Hey, dad, what are the
last four digits of your social security number? So you can see, right? You can hear the difference.
But it's a lot harder to hear the difference when it's these short questions like this, though,
Blake. Like if it was a three sentence paragraph, I'm there's no doubt I would have nailed it. But
when there's short five, what are these seven word sentences? It's not long enough for you to pick up
the weird speech pattern. Yeah, right. So here's the scary part. She called up Chase's credit card
system, the voice biometric system, and she fooled it using the synthetic voice. So she dialed up
customer service at the biometric step when the automated system asked for her name and address,
AI Joanna responded, hearing the bot's voice, the system recognized it as her and immediately
connected to a representative. And then, I mean, right, it beat the biometrics.
I'm shocked because I think we, so many predicted this was going to start happening. I talked about
on the show just high level five weeks ago. I am shocked that the banks have not shut down this
voice recognition stuff yet. I feel like there's a huge risk for the banks to, and it's not so much
the banks are going to falter because they're going to have a lot of clients that get fleeced
because of this. Yeah, I mean, they got to stop it right now immediately. And I don't know if there's
a way to like disable this voice authentication on your own account. I would recommend doing it because
anyone can take recordings of you if they're recordings out there. They could clone me, they
could clone you. Anybody who's on social media or has ever done a podcast before,
somebody can find your voice. Good. There were podcasters who don't have any money.
Don't worry about it. I have more AI news about Intuit. Oh, yeah. Before we go to that,
we've got some listener feedback here in real time. Heather said she fooled the system. That's
an AI talking to an AI, right? That's exactly it. So right now the AI can fool the AI.
How long before it can fool a human and how long before we have AIs that are looking for other AIs?
Michael said, well, this is frightening. Michael, yeah. Heather also said, I think it's the
inflection that differs. The first was definitely fake. The second was closer. Yeah. But inflection,
I think is something they're going to figure out. That's just a matter of training the model,
comparing having the model train itself. It's not that far off. It's to have more randomness.
Exactly. Yeah. To stumble over words, to mumble. All right. What's your TurboTax story, David?
So it's not even TurboTax. So this is an article from TechCrunch. And the article
titled the article is bad. It just says Intuit Shift. So on the surface, you may even read the
article. What do you care about Intuit Shift? But it's basically an article about Intuit's AI journey.
We've talked about this on the show like chat GPT AI. This is all great. But unless you have it
tied to serious data, how does it really become useful? Intuit already has 700 AI related
patents that they've been working on the last half a dozen years or so. And now they're
applying all that against they have 730 million customer interactions and 58 billion machine
learning predictions daily from the last five years. So Intuit's probably pretty close to unleashing
this. They have the data. They have the patents. They have the technology stack. And it was talking
about how in 2022, they laid off Intuit, laid off 700 employees. And then they
rehired or basically hired 700 new people with AI skills. And that's the same thing Brad Smith
kind of did when they moved from Intuit moved from desktop to cloud about five years in a row.
They lay off 700 people, rehire 700 new people with a different skill set. And it really helped
Intuit move into from a desktop company to a cloud company. It's kind of sounds like this is
happening again. So you're predicting that we're going to see some big breakthroughs from into it.
We haven't seen any yet though that use generative AI. No, but I think we're going to see something
soon. It's coming. And because of these jobs. And you intend to have it be, you know, it is a
to augment the platform to augment accountants and bookkeepers and financial experts. It's not
to replace anybody. They go on to talk about that. And then they were talking about how
sometimes it's not even in the price themselves, but you know how TurboTax live and QuickBooks live,
you can do video chats with them. So they're using AI in that service. So if we were on a video
chat, it'll record our audio and make notes. And then the end summarize the notes with some
bullets of here's what David the accountant and Blake the client talked about on a QuickBooks
live service. And that's about thinking what people could do that themselves with their clients.
There's their services that plug into zoom, I think like otter.ai. And so every time you meet
with their client, it'll pump out a summary of that zoom call. Actually, I want to be surprised
that teams is probably going to do this already or for very soon. So there are ways to, for you as
a firm can still compete with somebody like Intuit because these tools are becoming more and
more off the shelf. Marissa said interesting. So QB will be smarter, right? QB needs to be smarter.
It already screws up nearly all categorization in bank feeds. Yeah, why can't they get that right?
David, it's getting better, but it doesn't. Yeah, I don't want to go there. It's just manning enough.
Michael said me enough. I heard recently that some of the thought leaders in AI say there's a
10 to 20% chance AI will destroy humanity as we know it. A one in five chance. Yeah, that is
terrifying. And as somebody who grew up on sci-fi as a significant portion of my reading material,
and I read a lot, I mean, I read a lot about the dystopian futures created by AI's and I don't
know. There's not much we can do about it though, right? So I just do not think about it.
It's, I don't think it's going to kill us out of spite. It's going to kill us because it's going
to make a really stupid mistake. That's my fear. And like, I had it create all these calendar
appointments for my trips. And one of my appointments, the address was not to the airport.
It's just map to someplace else. Like, so it's some helpful. It's not smart enough to,
if you're putting in my flight information in my calendar, it probably is going to be an airplane
flight at an airport, Jacky Vee-Dee. And it didn't put the input and airport in for me to go to.
It just puts it. Did you ever see that movie, Dr. Strange Love? David. Dr. Strange Love.
Classic film. That's not a Marvel movie. That's like a different one. Classic.
And this is old, old black and white film. In the 70s?
I don't even remember. Oh, it's, yeah, it's old. It's a Kubrick film, Stanley Kubrick, I believe.
And it's so bizarre and totally relevant. I recommend everyone go look up Dr. Strange Love.
It's basically about the creation of an autonomous weapon that destroys the planet.
So that's my concern, is AI attached to weapons operating autonomously.
And I think this is already starting to happen. And anyway, I don't know, I want to stay positive
with this, David, right? There's a potential for it to destroy humanity, but it's only a 10 to 20%
chance, right? We've got a good 90 to 80 to 90% chance that it frees us from all work and we can
all just log on to our computers and tap a few buttons and it does everything for us, right?
So let's focus on that.
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I didn't see any other AI stuff this week. Did you?
I'm sure there was, but I want to get to the story that I teased on LinkedIn about firms that
remove audit partners who fault clients' internal controls. You see this one, David? I know you
don't really pay attention to the audit beat the way I do it. The title is interesting.
Yeah. I like my attention. You explained to me like I'm a five-year-old. Explain this with
this means. What I really should do is copy-paste this into chat GPT and say, explain it like I'm five,
which I highly recommend trying. Do that for anything. It's amazing how good it is at that.
Then nobody will need to listen to our show, boy. People will just do that and eliminate us.
Well, no, because copy-paste is a lot of work. This way, you can just queue up your podcast
episode and hit play while you mow the lawn. This was a study released in March that found that
firms are far more likely to remove a partner from a continuing engagement when the partner
has issued an adverse internal control opinion for any clients in the previous year.
This is an accounting today. I'm reading from the article here. The researchers found that
individual partners who issued negative opinions about a client's internal controls
experience unfavorable changes in their client portfolios in the form of lower fees
and less prestigious client assignments. The negative consequences for partners were
most dire when their adverse opinions were issued about the firm's more important clients.
It hurts their careers.
If you do a better job, if you do your job, if you do your job as an auditor and you fault
clients' internal controls, you create a problem for the firm and you get punished for it.
I mean, we've all known this is true and now the researchers have proven it.
They've demonstrated this to be true. It makes you wonder how can the current state of audit
continue when it's this obvious that auditors are not independent of their clients?
Why would this happen? What's the reason for this?
Are you asking me the reason?
This is a hypothetical question, I guess.
I mean, my guess is because they have a consulting contract over here, right? They don't want to
piss off the client. I guess. It's a paying client.
What they found too is specifically that when engagement partners issue adverse internal
control opinions to any of their clients, they're more likely to be reassigned after the opinions
are issued and especially with clients for whom they are doing Sarbanes-Oxley for a
4B internal control audits. So negative consequences.
So I'm trying to understand what's the motivation of doing the audit correctly at all.
Your career gets screwed up if you don't report stuff you find.
Nobody wants to report it because it could impact your consulting engagements.
Why do the audits at all at this point? In any way, shape or form.
Well, I think this is the problem why a lot of people leave audit, right?
It's because if you want to do a good job, you get punished for doing a good job.
And you find that out at the staff level, the manager level, like the more you dig, the more you
find, the more you get reassigned. Because what does the firm ultimately want?
How does it make money by issuing opinions? They don't want to have to issue an adverse opinion.
They don't want to lose the client. They don't want to cause problems for the client.
It creates more work for the firm and creates problems for the client.
Like this is the fundamental conflict of interest that no amount of ethics training can fix.
It's the system. So then I see articles like PCAOB turns up the heat on auditors.
I had that one open. I live up more on the same page.
So during a virtual keynote session Thursday at Baruch College,
I guess they were doing a financial reporting conference in New York,
Erica Williams, who is the chair of the PCAOB, pointed to growing trends in significant audit
deficiencies highlighted in part one dot A of the PCAOB inspection reports.
We found that audits with part one a deficiencies increased 5% in our 2021 inspections to 34%
compared to 29% in the 2020 inspections. And that means that a third of the audits we inspected
had deficiencies of such significance that PCAOB staff believe that audit firms fail to obtain
sufficient and appropriate audit evidence to support their opinions on public company's
financial statements or internal controls over financial reporting. A third of all audits.
So I'm mostly going by this math.
Chat GPT could just good enough to get these same results.
Right.
It's current form.
That's my theory.
Even though I'm past the exam.
Yeah. So you know, you wonder why we have trouble.
Why do we have trouble recruiting and retaining like, let's just say this.
Why do we have trouble getting students to want to become accounting majors and then stick around
and go into public accounting? I mean, a third of the audits that they're working on
are so deficient that investors should not be relying on the financial statements.
Like they shouldn't be relying on the audit opinion that the financial statements are accurate.
Like that's a huge failure rate, right?
I mean, would you even pass the CPA exam with?
You have like the this generation, you this the everybody wants to have their work and careers
be fulfilling or what's what's the word I'm looking for here?
But you want to you want to have meaning in your life, right?
Meaning, right? Everybody wants me. Nobody wants a nine to five job anymore.
And so this next generation that come out, they decide to want to be accountants.
They graduate, they get their CPA exam. They work on an audit and realize it means nothing.
Like, could you imagine like the psychological blow to all the work you've put in for the last
five, six years of your life to find out the work you're doing absolutely means nothing?
Yeah. And it's sad to me because like, that's not accounting broadly.
That's just accounting and auditing, I should say, that's just auditing for publicly listed
companies, which you do at the big four doing these massive audits that have these inspection
problems. That's not what we do for small businesses. That's not what the people that you and I
talk to every day, the small firm owners are doing. They are actually helping small businesses
survive, thrive, they're getting through tax compliance with them, helping them plan,
helping them retire, helping themselves businesses. That's really exciting and amazing and fulfilling.
And we talk to those people all the time when we go to conferences and we have guests on the show,
and that's not what these young accountants are being exposed to. They're just being ground
through the machine of getting these audits out the door that are deficient, or a lot of them are,
right? Just doing the bare minimum to pass a PCAOB inspection. And they're not even passing those.
And then the problem with the PCAOB we brought up before is a lot of people on the PCAOB
either come from the big firms or go take a job at a big firm right afterwards.
They're not going to punish their friends for these actions.
Yep. They call that a regulatory capture. That's the name of it.
Okay. So while we're on this, it matters what is this nail them, nail the big four.
Three failed US banks had one thing in common, KPMG. This was a story in Financial Times
that I just tweeted a picture of this headline and said KPMG in the hot seat.
And that tweet got, I mean, last time I checked it was like 179,000 impressions.
I don't get that much action on Twitter. Is this your greatest tweet or LinkedIn post ever?
It might be my biggest tweet of all time, which I did not expect, but this was very,
very popular, at least popular to like and retweet and share. Yeah. All three of the
failed banks, the big failed banks recently, Silicon Valley Bank, Signature, and First Republic
were audited by KPMG. I found it really fascinating just how much of the banking industry KPMG audits.
There's a chart here in the story. KPMG audits, the largest proportion of US listed banks by total
assets, like $6 trillion of assets audited by KPMG. PwC is next at $5 trillion, EY, way lower at two,
and Deloitte has less than $1 trillion in assets that they're auditing for banks.
And I think it's 14% of US banks are audited by KPMG.
So just by seeing this, isn't there like an audit or an accounting ethics
guideline as far as like undue risk or introducing undue risk? Is that a concept?
Oh, like, there's a risk assessment that has to happen. You have to assess the risk of financial
statement, misstatement. But we're not, so it's just like, I can't audit my brother-in-law,
if my brother is the CEO of a company, I privately disengage myself from that engagement.
But there's no overall guidance for somebody like KPMG of like, maybe you have too much,
too many banks, maybe too many eggs are in one basket here. There's no
I think this is I think you bring up the good points. It's like this whole too big to fail idea,
right? Which happens with banks. We've got, you know, Chase and Bank of American, Wells Fargo,
and I think there's one other and we know they're too big to fail. Like they will be bailed out by
the government if something happens, just like in the Great Recession. And we have four big auditing
firms, but really we don't. We only have two when it comes to banks, KPMG and PwC.
So like it really is a it's a duopoly there. And we all know that, you know, the fewer
providers there are, the less quality you get and the higher prices you get. Like this is,
this is what our system has created is a system where, you know, there's just no,
there's not accountability because there's only two players. Like who's going to pick
up the audits if KPMG gets fired? I guess PwC. Who's going to pick up the audits if PwC gets
fired? KPMG, right? Like it just goes back and forth. So I just wanted to share that with our
audience. I had no idea that it was that concentrated. And of course the question now is like,
will KPMG be held accountable for any of this? It all rests with the PCAOB.
PCAOB will probably inspect these audits and they'll look at the work papers and they'll look at the
analysis and they'll have to decide did KPMG fail to issue a critical audit matter about
this interest rate risk? And I don't know, I guess I feel kind of the same way I feel about the whole
case against Trump in New York where there's a case there, but it's super thin, right? It's like,
it's not great. And the way auditing standards have been written, I think KPMG probably
is going to be hard to make a case against them that they should have done something
because of the way the law is. So the same way as with the Trump organization,
what's the actual crime? It's normally a misdemeanor. It's falsifying business records.
It's a misdemeanor and they're going to try to elevate it to a felony through adding another
crime. Like that's kind of a, it's a stretch, right? They've got to add the other crime,
make it a felony, convince the jury of this. Same thing with KPMG and the PCOB.
You got to really make a strong argument that they should have issued a critical
audit matter and a lot of this is up to subjective judgment. So who's going to question that audit
partner? Well, especially because the accounting rules for banks arguably need to change and
KPMG is just going to work off what the current rules are. They don't have to apply extra judgment
regardless of what that guy said in that article, the beginning of the show about how account
and supply experience and judgment, like apparently they don't really do that.
Well, we've protected ourselves by regulating, by writing the standards such that
the auditors are not held accountable, that we've protected ourselves. So people from KPMG
do audits of banks and then they go work at the FASB and PCOB and they look out for their buddies.
Like this is natural, but that's created the situation we're in now. And you know who bears
the brunt of it? It's these young 20-something auditors who were on these engagements that
are like, oh no, what have I done? Right? The engagement team is bearing the blame for all of
this, but it's really the regulators who are the accountants too, right? They're to blame for it.
It's 25 years, 30 years, 40 years of history, but you're right. The 20-year-old kid in the team
is honest, the one that's going to get the axe for this. Yeah, and you think that guy is going to
or girl is going to want to stay in accounting after this? Having been on the audit engagement
team, it's like it's not the place you want to be. All your friends are making fun of you.
Right? Oh, you got it, Banks? Nice job. We're KPMG, nice job.
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What else you got David? Shall we go into app news? Before we go into app news, I just saw some
interesting numbers when you think about, you know, as you're offering your services and, you know,
are already competing with TurboTax and H&R Block and the tax shops and all that. And so this is
from insider radio.com and essentially it's about the ads that were ran for leading up to
tax day 2023 by the top 20 brands. And it has both the radio ads and TV ads. As you want to bring
it up, I think you have the article. It's very interesting numbers when you start thinking about
the scale. So this is from inside radio. And this is the chart says top 20 brands by total ads
leading in tax day 2023. So for those listeners that can't see this TurboTax ran 637 382,000
ads on the television. Wow. Do you really think your Google ad spend is going to work? They're like,
that dwarfs Jackson Hewitt. Jackson Hewitt's next with 145,000 TV ad spots.
But they did more radio. Interesting. Jackson Hewitt owned radio. H&R Block, I know dialed back.
Yeah, they barely did anything. Yeah, 86,000 total across TV and radio, but mostly TV. Quickbooks,
Quickbooks by comparison had what 67,000? Hmm. Yeah. I wonder what they spent on that.
Well, hey, you brought up TurboTax and you brought up into it, right? Wasn't there just like a big settlement
for TurboTax? Am I going to get some money? Because I did use TurboTax at one point. I don't know how
the settlement is, but people are getting checks because of the whole free, free, free, free. The
free, free, free thing. So TurboTax customers to receive checks for 141 million in a settlement. This
is on AP. Just came out last week. In a settlement last year, TurboTax's owner Intuit Inc. was ordered
to pay 141 million to some 4.4 million people across the country. Those impacted were low-income
customers, consumers eligible for free, federally supported tax services, but paid TurboTax to
file their federal returns across the 2016, 17, and 18 tax years due to, quote, predatory and
deceptive marketing, unquote, New York Attorney General, LaTisha James said, oh, yeah, I remember
this one. So the checks are going out. How much are they getting? 29 to $85. All right.
Oh, that's like the price of TurboTax and TurboTax live. So you can use it for your next year's
return. Do you think they'll send it out as like a free coupon for your next year of TurboTax?
No, I think they go out as real checks because lawyers don't want a percentage of coupons.
Joe's real checks. They got his real checks. Do you see we got a lot of listener mail this week?
Yeah, we did. Shall I pull up some of that? So this is from Jason Brown. Jason Brown said,
you guys constantly harp on the 120 slash 150 hour issue. And sure, there are issues with the
system as it stands. However, I don't think the solution to the accountant shortage is to devalue
the CPA license. How about paying more? I work in private industry and the jobs I see when I apply
are generally offering atrocious pay and no remote options. On the few occasions, I do find a role
that meets my requirements. There are so many applicants that I don't even get an interview.
If the pay and benefits were right, there would be plenty of CPAs. As things stand now,
I would encourage my child to be a software developer instead of a CPA because companies
hiring developers are willing to pay for employees. CPA firms could take a lesson there.
So pay, pay more and solve the talent shortage. The problem is that you can't force firms to pay
more. The market determines what accountants are worth when it comes to their salaries,
I mean, especially in private industry. So I think this goes back to what we were talking
about with audit and financial statements and making them useful is that if investors aren't
finding audit opinions useful, if audits are failing, if financial statement information
isn't trustworthy, if it's not giving them what they need, they're not going to value it.
And if they don't value it, then it's just viewed as a compliance activity. And so,
of course, salaries will be as low as possible because when you're fulfilling a strict compliance
role, that's what happens. It's just what's the least I can pay to get my financial statements
printed? What's the least I can pay to get somebody to audit those? It's a commodity
that gets driven to the ripple effect. If Wall Street doesn't value accountants,
why should Main Street value accountants? Yeah. But again, that's where you want to be.
If you want to be valued as an accountant, you're not going to get it working in financial reporting
at a big corporation that's just doing it because they got to do it because of the law.
It's going to be working with small businesses to help them grow or working with private companies
to help them grow, not doing the compliance. And I think that's what I see successful firms do,
is they do the compliance, but the value is not in the tax return. The value is in everything else
that goes around getting the tax return done. The same thing with the bookkeeping. It's not about
just putting together a trial balance to give your tax preparer. There's all the other things that
come into it like, I'm going to manage your payroll for you. I'm going to manage your bills for you.
I'm going to help you with whatever comes up, I'll be your money guy. That's where the value is at.
Just changing the world. One listener at a time, I think things are starting to shift. I think
people are starting to see audit for what it is. Start to question it. I think when
the messaging was controlled all from the top down, AICPA, NASBA, they repeated the big four talking
points and nobody ever heard any other point of view. Media like podcasting has completely
changed this. You and I, David, nobody's, can have a show and can have an opinion and people will
tune in and hear it. We listen to our listeners who also, probably many of them have no voice in
their state societies or boards because those are dominated by people in positions of power
and it's starting to change. The talent shortage is actually a good thing because it's forcing
these folks who have not listened to actually listen to their members.
Did you say, I think on Twitter, was there a survey or you published on Twitter, there was a
survey at BDO Alliance or something? You put the tweet out about 150 hour rule?
I'm so glad you brought this up. I almost totally forgot. One of our listeners messaged me
and asked to stay anonymous and said that there was a poll at the BDO Alliance meeting in Las Vegas.
I think it was the week before last and gave me the results. So, shall we look at the results here?
I tweeted this out. You just quickly explained, BDO Alliance is not, it's not BDO. It's firms that
partner together and get support, tech support, software support from BDO. Is that kind of a BDO
Alliance or...? I actually don't know the answer to this question. I'm familiar with the concept of
these alliances, smaller firms joining together under, like, Apprio has one too. I don't know
what it's called, Apprio Alliance. So, if you're a small firm, it's like being affiliated with
Apprio or BDO, but without actually being in the firm. Yeah, you get resources, right? That's my
understanding of it anyway. Feel free to correct us, viewers, if we're totally off base here.
So, anyway, at the BDO Alliance conference, which, it's a lot of managing partners
of these smaller firms getting together with BDO, they did a poll on the 150 hour CPA rule.
And the results are this. Okay, keep as is 30 managing partners voted for that. That is 20%
of the total. So, 20% said, just keep the 150 as is. Should we modify it? 33%. 49 of the managing
partners said, yes, we should modify it. So, a third said modify and remove entirely. This is the part
that kind of blew my mind. These are managing partners, right? 46% want to remove it entirely.
That's 68 of the voters. So, if you add together the people who want to remove it entirely
or modify it, that's 80% want it to change. 80% of managing partners of the BDO Alliance
want to change the 150 hour rule, either by removing it entirely or by modifying it.
Only 20% want to keep it the same. There's some comments about this though.
If you see the comments we're getting. Brian said that, yes, the BDO Alliance is smaller local and
regional firms. And I guess, you know, if you think about small firms, regional firms are
feeling the pain of the talent crunch most acutely. So, and to them, the benefit of that like
Masters is limited. Oh, Brian also said that you think it was an audit partner's meeting
because it doesn't come in for tax partners. Okay, interesting. So, audit partners.
Even still 80%. It's a lot. Yeah, Sarah says my husband's firm is a BDO Alliance firm. Thanks
for joining us, Sarah. Great to see you. David Hall says most organizations typically do not
value most support functions until crisis or collapse. Some accounting firms position themselves
to meet the market for crisis services and have premium rates. Yes, going back to the discussion
of like, how do you create value? That's a great point. Crisis services, right? Charge for the
urgent response.
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So, I'm going to Italy and I had the pleasure of purchasing Medevac insurance.
I've never experienced this before because like the last time I traveled, I was in my
twenties and I didn't think about that, you know, you don't think about it when you're young and
healthy. And it gets the coolest thing. You pay a few hundred dollars and if you get sick,
if you're hospitalized and you need, you know, you can't travel home
because you're in the hospital, they'll fly a jet to you that's like equipped like a hospital
bed and everything. Like it's, it's like a medical jet and fly you home from anywhere in the world.
Now that's value, right? Like for the amount I pay to have the peace of mind knowing I can just
get home on like some private plane with, I would just stay in Italy for a while.
Just a good, that doesn't seem like good use of money.
Caprate in Italy.
You want to touch on a couple quick app news?
Yeah, what else you got?
So just really quick, quick, quick.
Milio has now launched inside of Shopify. So Shopify has now built in
Billpay and that's powered by Milio and then Milio also launched an iOS app this week.
I saw that as well. So if you, if you want mobile Milio, that's available there.
Gapify, who, it's almost like setting up accounting automation as a service,
right? They, they use proprietary tools to, if you want to automate your AP processes in house
through RPA, they can come help set all that up. They just, they just raised 10 million dollars.
And the other one is, it's kind of interesting. If you go to translucent.io,
this is the former receipt bank founder. He launched it a new, it's,
it's called the CFO super app. And it looks like it does some sort of multi,
multi entity reporting. It has some live sheets, BI analytics, it helps doing the close checklist.
It also apparently is going to help pull together data that's,
you know, not alt finished. I don't know how to say that. So you have half a transaction over
here. You have the receipt scan over here. Maybe you have something else over here if through a
bank feed and it's supposed to pull those together to clean up that data as well. But it's like,
it's like, they said a CFO super app. So I always wonder about apps like this because
just at first glance, it looks like they're trying to ingest all the data into a single
data warehouse. And my problem with that is always been keeping it synced properly. Like one
SaaS tried to do this back in the day to be a, you know, one platform to manage all your data.
And I always had sync errors, like never got it to work perfectly. And then the sync errors,
which is destroy my life, end up being one of my least favorite things I ever tried to do.
So and at this time, it does look like it's a little heavy for either the UK or down under,
because it's, it's connecting to exact MYOB penny lane sage. I mean, it does quick person zero as
well. But a lot of these other products tend to be, you know, down under left to keep an eye on it.
So you said that's the founder of receipt bank.
Receipt bank. Yeah.
That's awesome. I mean, if somebody can do it, right, somebody with a track record like that
might, might be able to. Anchor integrated with Zapier. Did you see that, David?
Oh, I did not, I saw it in the app, but I did not see news about it.
I saw, I got an email about it. So anchor is a proposal software.
You know, consider that in addition to ignition, depending on your needs. And
then now that they have Zapier integration, I think it's going to be really powerful.
You could do a lot with it. And I think my favorite thing about it is what it's $5
per payment flat. So if you're doing high value, you know, ACH, then you don't get hammered on like
percentage fees. Yeah, it's, it's, it's set up for, um, that subscription business model,
right? Getting people to pay up front, pay you automatically and taking you, you know,
your firm or your company, you don't have to be in the billing process.
Other new, you spoke about insurance for your flight to Italy or your, your, in case,
but QuickBooks has discontinued their insurance. So in QuickBooks in 2020,
they were going to announce plan to offer QuickBooks commercial,
customer, some business insurance through a company they partnered with called Next Insurance.
And they were going to offer that through QuickBooks online payroll. And apparently the, uh,
it just, the distribution models never worked. And so they're pulling the plug on that and
they're going to kill that product, the QuickBooks Insurance product.
Was that workers' comp insurance? This, I don't think this was workers' comp. I don't know,
this was work. No, it's not workers. So the workers' comp product's been around for a very long time.
And that led into, well, that's been working. Let's do other business liability insurance.
That's got it. Yeah. And it just didn't seem to work. It just couldn't get the traffic or the
traction in their ROI goals. So that's going away. I got one more here on the tech news front.
KPMG signed a deal with MindBridge for AI and audits. So MindBridge is a statistical
machine learning and rules-based analytics engine for audit. They're going to incorporate it into
KPMG's audit platform, Clara, and use it for all their audits. It's a big deal for MindBridge to get
this deal. Of course, the, the, the, these announcements, you always have to take them with a grain of
salt because it might just be like KPMG has made it possible now for audit partners to use MindBridge.
MindBridge then has to go and recruit every single audit partner to use MindBridge.
So getting to actually use the, yes, that anybody who's been on the software side of this business
and has sold something to a big firm and the big firm's like, yes, we're going to put that on
6,000 clients. Two years later, they put it on two clients. Yes. It's great. It's headline. So it's
a great article. But yeah, it's always time for us. I forget what we call that, but it's,
it's like the, the penetration into a firm of that size is usually the, the hardest thing.
So this is just the beginning of their journey. We'll see what happens. Well, David,
that's all my stories for this week. And we're coming up at the end of our time.
Working listeners follow you on that. I will see you. The next time I see you will be
in Italy. Yes. They can't follow us there, unfortunately, but they can follow us online and get updates
from Expensicon. So. Hashtag Expensicon. Yeah. Hashtag Expensicon. So you're at David Leary.
I am at Blake T. Oliver. Follow us on Twitter and LinkedIn. Those are our favorite spots to be.
And subscribe to the Cloud Accounting Podcast on YouTube. Get notified when we go live.
Join us. You can chat with us. It's always fun to see you. Thanks everyone who joined us
for our live stream. I mean, it's, it, ever since we started doing this, David, it's made it so
much more fun to record. I love talking to you, of course. Don't get me wrong, but it's just so
much fun to get the live input from our list. Well, I like how we can say something wrong.
And somebody's like, Oh, no, this is what it is. And they clarify it for us. Oh, yeah, it's great.
I don't have to go fix that in post production anymore, right? We can just do it live in the
episode. All right. And then I think our plan is that Expensicon is we're going to try to shoot
and record little videos every day and hopefully get those off the next day. Like we think we
have a loose plan on this. So watch for that every day. You should see some some Cloud Accounting
Podcast videos going on. We're going to try every day. Daily content. I'll see you, uh,
I'll see you in person in Italy, David, double base and I'll get back to my other conference.
Bye everybody. Bye.
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