The Accounting Podcast

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Blake Oliver: Cfo.com did an analysis of recent studies and found that 61% of medium and large employers have implemented formal policies requiring a minimum number of in-office days per week, so 61% have some sort of minimum days per week. You got to be in the office now.

David Leary: Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: Hello, and welcome back to the Accounting Podcast, the number one podcast for accountants in the world, your weekly news roundup in the accounting profession. I'm Blake Oliver.

David Leary: And I'm David Leary and Blake. We just did our predictions on Monday and I already have one of them that has come true.

Blake Oliver: What is that?

David Leary: So I said this great accounting experiment. We're going to see some results of that. And that happened this week. I don't know if you saw Blackstone, the world's largest PE company now purchased an account top 20 accounting firm. Well, from another PE company. So there's been a flip. There's already been a flip. So this is a flip.

Blake Oliver: Citrin Cooperman. Correct. Well, how long ago were they acquired by PE? Was it a majority investment? Was it a minority investment I forget.

David Leary: Yeah. So they were they had a majority investment from New Mountain in 2022. And at that time New Mountain paid 11 x over EBITDA. And now Blackstone just paid 15 x over EBITDA. So Citron's value approximately in 2022 was between 500 to. What's the other quote here. Yeah 500 to 850 million. And now it's been valued at over 2 billion. So they grew that firm in a quick four years.

Blake Oliver: And they did it. Yeah. They they flipped it. And that's what P is going to try to do I wonder if Blackstone is going to go out and buy more of these smaller PE deals and roll them up. Fascinating. So uh.

David Leary: On the On the surface, right. It feels like this is the the model like, oh, we'll just roll up to bigger P. And I think you can see in some of the article on the accounting media, people are a little excited about this because there's a finish line, but I'm not sure if that's what people should be making their goal, because maybe Blackstone doesn't actually care about accounting firms. And maybe this just aligns with other interests that they have that Citron also happened to have. We can dig into that here in a bit. Should we? That's exciting.

Blake Oliver: Um, I have a little personal update. I got my I got my x ray back of my hand here. I'm holding this up. You see that screw there?

David Leary: I do see the screw.

Blake Oliver: Yeah. Fifth metacarpal. It's incredible. They said I could take off the brace I'm supposed to at home now. I can, like I'm supposed to start using it already. It's been ten days, I think, since I have surgery.

David Leary: A screw or a pin. Isn't that like an like a inside cast. It's like a cast inside your body. I mean.

Blake Oliver: Yeah, it's holding the bone together. Apparently, there's no risk of it breaking. It's going to hurt, you know, and it'll take a while for me to, like, you know, extend it all the way and I'll do a little physical therapy, but I can pick up objects up to 5 pounds. Um, where they say, wear the hand brace when you're out and about so you don't break it by accident. Because if you bend that pin that's in there, that's a bad thing. Very bad thing. So, titanium.

David Leary: Hold your thumbs up. Like, what kind of mobility do you have? Can you do.

Blake Oliver: Oh, I have I have pretty good mobility. I can't extend my pinky all the way. That hurts. But that's just going to take time. But I'll get there. Got it. Um, yeah. It's amazing. Like when I figured I'd be in a cast for, like, you know, weeks. Like when I broke my wrist when I was. I mean, this was more than 20 years ago. It took like, eight weeks to heal, and now I'm already out, so pretty cool. Titanium screws. Who'd have thought? Me together? Yeah. Uh, and I guess, I don't know, it probably won't set off a metal detector. That's what they're telling me. And I can still get an MRI. So that's good news. Yeah. So that's that's positive developments here. And I can get back in the pool in two weeks. They just don't want to get infected. That's why I can't go in the because it's still an open wound.

David Leary: Right. It's not.

Blake Oliver: Yeah. But look at I don't know. You can't really I don't know if you can see on the camera but like to fix it. All they did was they made this tiny little incision right above my knuckle to insert that screw. It was one stitch.

David Leary: One stitch. Wow.

Blake Oliver: One stitch that they removed today. Amazing. Um, so that's that. Uh, so that's my good news. Unfortunately, there's a lot of bad news for people in LA, and, um, I was getting a lot of updates from my family because my in-laws live in Tarzana, which is just on the other side of the Santa Monica mountains from the fires and the Pacific Palisades. So if the winds had been blowing, blowing the other direction that day, their neighborhood probably would have burned down. Um, and there's an interesting tie in to accounting or actuarial science, which has an accounting related element to it, because there's all this talk about how a lot of these homes in the Pacific Palisades were uninsured because State Farm, one of the big insurers for like fire insurance in, in, in the in that area had dropped 1300 policies or maybe more than that.

David Leary: And recently, right in the last few years it wasn't.

Blake Oliver: Yeah. And they dropped them recently like my in-laws, neighbors got their policy dropped by State Farm. They still have theirs for some reason, but I bet you every insurer is now going to drop the policies in, in those areas. And, and the question is, you know, why is that happening? Well, it turns out that California has these crazy rules about what insurers can how insurers can insurers can calculate the cost of insurance. So, you know, step back for a second. How does insurance work? It's pretty simple. You know, you go for.

David Leary: David. They figure out the risk. And then the math that I'm going to have to pay out is this much. And I need to collect this much to offset that. And that's how they calculate. It's it's math right at the end of the day.

Blake Oliver: Yeah. Actuarial math. They project out what is the potential loss from like a disaster. And we have to make sure as an insurance company that policies are priced so that we can pay the claims when they when they happen. And then they do this reinsurance thing where they like, sell the risk off to bigger insurance companies, global insurance companies to make sure they're insured. And it's just, you know, giant industry, right. Well, in California, um, private insurance companies like for this are not allowed to use catastrophe modeling to set to set premiums. So? So they can't use future looking models to set premium risks. They can only use historical numbers. So this creates a problem when you have a climate that is changing and causing more severe disasters, because they're not allowed to say, well, due to climate change, we're now going to have more Santa Ana winds, we're going to have more variable weather, which in the last two years we've had a lot of wet winters in LA, which led to a lot of vegetation growth. And then, you know, a lot of dry weather now and Santa Ana winds, just that makes for a catastrophe waiting to happen. Now, somebody could model that out if they're allowed to do it, but it's nuts. Insurance companies in California are not allowed to do that. They can only price based on the past.

David Leary: So if you got your insurance for your house. Let's say in the mid 80s, because, you know, you've been in your house for 30 years now or whatever. Whatever that rate was, because maybe the risk was lower then, so the rate was lower. They're not allowed to raise the rate because now it's more risky where you live.

Blake Oliver: Yeah. They can only raise the rate based on what has happened in past years, not what will happen in the future.

David Leary: So now they can raise the rates because something just happened. Yes, but that's not.

Blake Oliver: Not based on anything in the future. I mean talk about crazy. And so it creates this problem in the insurance market because you can't price correctly. And so homeowners just get their policies dropped. And then the only way that they can get insurance is to buy it from the California insurer of last resort, which is like a government backed insurance company. And that is totally undercapitalized and is not going to be able to pay out all the all the claims because they have exposure. That's like estimated now at $458 $58 billion, but they only have $7 million in cash.

David Leary: That's not going to work.

Blake Oliver: Right? They have a tiny fraction of what they have to pay out. So who's going to pay these claims? Well, it's going to be taxpayers eventually, right? That's how it's going to work. There'd be a.

David Leary: Federal bailout of some type.

Blake Oliver: Yeah. So it's just a lesson in like what happens when politicians get involved in trying to make economic decisions like top down economic decisions, and they screw up markets. And you get this kind of situation.

David Leary: Because because I'm sure that's a great thing to run on. I'm going to stop. Hey, voters. I'm not going to let the insurance companies raise your rates. And that's how you get elected. It's great to do that and implement that. But the reality is it just doesn't. The math won't work. It's impossible.

Blake Oliver: Welcome to our livestream viewers. Hello boring accountant. Boring says it's raining ash in Los Angeles. Come back Blake. Nope. I think I am good with my decision to relocate to Phoenix. I think a lot more people will be soon. Azriel. Asriel. Hey, how are you doing, James? Great to see you here. Thank you. If you are watching live and you want to know, let us know what you think about what we're talking about or any stories that you think are hot. Do chime in on YouTube or in LinkedIn or wherever you're watching. And if you haven't caught us on YouTube yet, don't forget that you can go on YouTube and search for the accounting podcast. We are at The Accounting Podcast. Subscribe! Hit that notification button and you'll get notified when we go live right there on your phone and you can tune in. Uh, David, let's thank our sponsors. Yeah.

David Leary: So our sponsors today we have Onpay. We have boom tax. We have tax bandits. And Basil.

Blake Oliver: Thank you so much. And Onpay, our congratulations are due to Onpay Onpay raised. How much money, David?

David Leary: $100 million this week.

Blake Oliver: Wow. They raised $100 million in funding from Carrick Capital Partners, with participation from AB private Credit investors, Alliancebernstein and existing investors. And then they have a debt facility provided by MCC Credit Partners. That's a lot of money for OMP. Really awesome. Uh, and if you haven't checked out OMP, well you'll hear about it later in the episode. Actually, David, why don't why don't you tell our listeners about OMP right now?

David Leary: Omp has been probably our first sponsor and are one of our most loyal sponsors we've had since we've done the podcast. They were really the the first sponsor that really committed to us early and stuck with us this whole time. So I feel like we've helped OMP grow as well a little bit. So congratulations to the team. It's exciting to see this happen for them.

Blake Oliver: And what's really nice is that, you know, sometimes we get sponsors and I've never used the product. Um, but with OMP we actually use it for our own payroll, for our various entities, for earmark media, for the earmark app and, and our personal s corporations. We I love it. I love that AMP is a company that's been around for a long time, decades. They're an older payroll company that has added the tech, so you get really good support. You get that like best of both worlds kind of situation. Um, so if you haven't checked out Onpay or you're looking for something new this year, give it a try. And David, let's hear let's hear more about it right now.

David Leary: Forbes and CNBC ranked unpaid number one for small business payroll. Obviously, Blake just told you why Onpay really knows how to get payroll done right? For every client you serve, no matter how complex their software is, easy to use, and backed by outstanding service levels, they handle new client onboarding for free and have experts on call to keep you and your clients on track. The system includes multi-state payroll, local tax filings, integrated HR tools, and more with no hidden fees. And when you join Onpay Partner program, you get a custom dashboard to easily manage all your clients in one place. Plus, gain exclusive perks like revenue sharing or discounts. Free payroll for your firm. Co-branding opportunities and premium swag. And more. Onpay helps you run your practice efficiently while providing exceptional payroll that your clients can count on. Learn more about using Onpay at your firm. And clients that may be farms, startups, restaurants, bars, doctors, nonprofits, gyms, franchises, or dentists. Head to The Accounting Podcast Onpay that is The Accounting Podcast ESOP A. Thank you Onp.

Blake Oliver: Let's talk about Ohio, my favorite state, because Ohio just became the first state to end the 150 hour rule. This change was introduced in House Bill 238, which went to the governor of Ohio, Mike DeWine, in December, right at the end of the year, and he signed it on January 8th. And it's got a whole lot of licensing changes. The bill is a big bill all about occupational licensing. But there's a chunk in there that's about the CPA, the Certified Public Accountant license in Ohio. And the changes are really great for accountants, in my humble opinion. The big change is that now you can get your CPA license. This is effective January 1st, 2026. You can get your CPA license with just a bachelor's degree in accounting concentration, meaning specific accounting classes that are determined by the Board of Accountancy and two years of experience and passing the CPA exam. So no more credit hour requirement, period. It's not even a 120 credit hours requirement, just.

David Leary: A bachelor's degree with an accountant accounting focus.

Blake Oliver: Yes, with specific accounting classes, which is currently about 30 semester hours. And what is brilliant about this is that there are schools that are looking to create three year bachelor's degrees. So there is the potential, the way this bill is written for schools in Ohio or anywhere to offer a three year bachelor's degree with an accounting concentration that will let you become a CPA in Ohio. So it could go down to three years of education, and it could go and one year of experience or two years of experience, I apologize. So basically it's going. It's like going back to the 120 plus two, but without the 120. So it's even better than that. We're getting rid of this idea of hours. And there is still, of course, the pathway for people who want to get a master's degree, which I think is very fair. You get a master's degree, you have the accounting concentration, one year of experience and pass the CPA exam. So you get to decide, do I spend the extra year to get that master's, or do I go straight to work and get two years of experience, and then both groups end up getting licensed in about the same amount of time. But it's not really about the time anymore when it comes to the education. That's what I love about this.

David Leary: It seems like that three year plan, if it's a three year bachelor's, would be a good business model for the universities to really market that and get people to come from out of state to attend and get that degree.

Blake Oliver: Yes.

David Leary: If it's priced right, right.

Blake Oliver: Offer it online. You know, that could be really great. Um, now, the bill also has provisions in there that assist with mobility. So making it easier for CPAs from out of state to come and work in Ohio or to serve clients in Ohio remotely in 90 days from January 8th. Qualified CPAs from out of state can work in Ohio without having to obtain an Ohio certificate and permit, as long as they meet the requirements of having a CPA license in good standing in their home state. They have at least a bachelor's degree. They've completed an accounting concentration and they've passed the CPA exam. So it's coming this this is essentially automatic mobility where if you have those things already, you can go and serve Ohio clients or come to Ohio and work as a CPA. And you don't have to register first with the Board of Accountancy to do this. So this is what hopefully all the other states are going to do is adopt a let CPAs work here from out of state, and then we'll deal with the exceptions as they occur. Automatic mobility. Um, so really exciting to see this. And what's even more exciting is that there are apparently 30 other states that are in various stages of working on this kind of legislation, including the state of California, where I got my initial my first CPA license. So, um, congratulations to the Ohio Society of CPAs. Really well done. Um, it is just fantastic to see.

David Leary: And for those of you listening, you can't see the smile on Blake's face. He's genuinely happy about this. To see somebody get to the finish line.

Blake Oliver: I mean, I would not have put this in my predictions for this year that this would actually happen because we talked about this last year, but the bill got delayed. And, you know, there's a bill.

David Leary: In Minnesota for it feels like three years now.

Blake Oliver: That's right. So, um, it's just proof that the change can happen quickly. And my, you know, real hope is that, um, that Nasba and the AICPA do not make this a big deal and and don't cause problems for Ohio because they could. That was my next question.

David Leary: Have you seen a statement yet, or any propaganda from the AICPA about, you know, this new news?

Blake Oliver: Well, they are like they're cautioning, of course, about it, right. This this change could create problems for Ohio CPAs who want to work out of state that don't meet the substantial equivalency requirements, blah, blah, blah, blah, blah, but they could prevent a lot of that from happening. Nasba could simply decide to say that Ohio's new requirement is substantially equivalent. There's a bunch of states that have delegated this decision to Nasba, and so all Nasba has to do is say it's okay. But if they say it's not okay, that creates a bunch of problems. I don't think they will. I think that would be incredibly stupid, because what would happen then is that these states that have delegated this decision to Nasba would probably pass legislation to take it back. And, and, you know, because this is not where we're headed as a profession. We want to streamline things. We want to make it better. So, um, I'm really happy. And, you know, I would like to think that we helped to make this happen, right? We interviewed, uh, folks who were working on this, uh, over the past few years, we years. We have highlighted this on our show. I know from various CPA society leaders and from people on boards of accountancy that we've heard from, that this has helped to move the conversation forward because previously, you know, before the accounting podcast existed, before there were alternative voices in the profession, it was all top down communication from AICPA and Nasba. And those leaders, including Barry Melanson, were all opposed to this change, even though the grassroots wanted it. And I find it.

David Leary: Interesting the timing of this. Barry Melanson retires not even 6 or 7 days later. This this bill gets passed.

Blake Oliver: Yeah. This is his legacy. To write the 150 hour rule is probably the one thing that you can point to that Barry Melanson actually accomplished in his 30 plus years leading the accounting profession. And it's about to get undone, probably in a couple of years after he leaves his role. Um, I doubt the governor of governor of Ohio really cares about Barry Melanson or even knows who he is. But I just think it's funny, right? So that's it. On 150. Um, now, of course, you know, there's been some griping about this from people who had to get the 150. I mean, I had to get the extra credit hours. And, you know, that was not fun. But I don't think other people should have to go through this. Uh, you know.

David Leary: You took one for the team.

Blake Oliver: Uh, paradox says Texas is next. Saw it in a CPA newsletter today. Oh. That's awesome. Yeah. If California and Texas both move, then that is like the bulk of CPAs in this country, I think. And the other ones are like New York and Florida. And I think Florida is even moving to do something so big deal. All right. What do you want? What do you want to talk about next. Should we continue with app news because we already touched on the on pay fundraising. You got any any news on like, acquisitions or. Yeah, or fundraisers or whatever.

David Leary: Other pieces of pieces of app news here I lost.

Blake Oliver: There was something about Safe Send write. Safe send was acquired by Thomson Reuters.

David Leary: Safe send was acquired by Thomson Reuters for $600 million in cash. And a lot of this is on the March for Thomson Reuters Vision. To simplify everything for the tax preparer and the taxpayer, and save sends already used in 70% of the country's top 500 accounting firms already. So this makes a lot of sense. It rolls right into Thomson Reuters bigger visions and bigger strategies, but I'm not sure everybody's a big fan of this. I saw there was an open letter written on LinkedIn from Matthew Kids, CPA, and I'll just read it out loud and I'll just read his letter. An open plea to Thomson Reuters. You have acquired the pride and joy of my software stack, my first true software. Love and darling, safe send you previously acquired sure pep, part of Thomson Reuters tax caddy and built on docs. You gave us a glimpse of a great cloud based tax software on Visor Tax before ripping our heart out and canceling it. You've been known to acquire darlings, then neglect them to wither and die after taking them off the market, leaving their former lovers and admirers heartbroken. You now have separate tools in-house to build an incredible end to end tax workflow. Dare I say something so seamless that it rivals the revolutionary CSS professional suite in virtual office of the 90s? My beg and plea is for you to show the tax and accounting community you can once again be the revolutionary creative solutions company that gave us the first truly integrated workflow.

David Leary: I'm a scorned lover who's struck, who's stuck by your side despite disappointment and betrayal. My friends say I should move to Pro Connect, but I want to give you one last chance to get it right. In the words of a modern poet, Sabrina Carpenter. Please, please, please don't prove them right. And that's true. I mean, you see this a lot with companies. And two, it's guilty of this, too. They they buy a company that a lot of people love. It works a certain way. And then it just gets rolled up into PowerPoint. Death of big companies. And I think there's reason we've seen safes and we've we did the Expo of safes and and it's a nice product. And if it gets ruined, if you're, if you've already built your firm on it and you're all in and it gets ruined, that's a risk for your firm when an acquisition like this takes place. But what is.

Blake Oliver: What's more likely is that it won't get ruined, but just development will slow down because companies like Thomson Reuters don't know how to build products anymore. Like when was the last time they released anything revolutionary?

David Leary: And a lot of it's roll up, they buy other stuff.

Blake Oliver: Yeah. And then they like, apply sales and marketing to it. And they're not innovative. Like like nobody is going to say that Thomson Reuters is innovative. Did we just lose them as a sponsor? No, they don't sponsor us. They probably don't know what a podcast is, but.

David Leary: It's a safe sound. I mean, $600 million cash acquisition is great. The founders are huge. Employees have probably all did really well.

Blake Oliver: Congratulations to them. Okay, what else is new in APS? Uh, zero is partnering with gusto to offer an integrated payroll solution. Zero had its own payroll for a while. It was not good. It was. They vastly underestimated how difficult it would be to build their own payroll in the United States. And they gave up, and they decided to partner with gusto. Originally, it was just sending people to gusto to process payroll with an integration to sync the journal entries back into Xero. Now they are going to have gusto embedded inside of zero. This is part of gusto embedded product. It's a customizable, compliant payroll, and they say that they've processed 1.3 billion in payroll for their partners. So I'm curious to see how this will look. Um, you know, like actually in the zero product and if anyone will actually care, right. Like, I don't really mind having to go into Onpay and run payroll because then everything just syncs automatically over into Xero. I get the journal entries in there and just reconcile. Um, but maybe it'll be a good source of new users for gusto. I don't know.

David Leary: And if it's built right, and there's. That's the thing I know when Xero first tried to do this, there was no technologies for this to exist. But what's happened is companies like Checkout.com came along and that's basically payroll APIs. So you can build payroll and stick it into, you know, toast Point of Sale has payroll. Now your Xero can have payroll. And now obviously gusto. That's a risk to them. So now they've built APIs. And you can they call it gusto embed. So it'll be gusto powering it. But it may not look or taste like gusto. It'll probably look and taste like the product that it's being embedded in.

Blake Oliver: That's that's my question is yeah. Like how does it look? Does it look like Xero or does it look more like gusto, or is it sort of some sort of blend? The user experience is what we need to see to really know if it's going to work. I saw that ramp integrated with QuickBooks desktop. I was hoping that in 2025. We wouldn't have to talk about QuickBooks desktop, but it's still around and ramp just did their integration. So I guess there's still demand for this.

David Leary: There is not. I do feel like a lot of these integrations with desktop are driven by managers and boards of directors and investors that are like, well, look, there's 2 million QuickBooks desktop people, and they're slightly bigger businesses that are just stuck on desktop. Go chase them. But then they quickly realize it's a very hard integration to build. It's hard to maintain, it's hard to do support for, and a lot of them will eventually get out of it because they'll be like, if I had to bet money, let's go to predictions. Ramp will regret integrating with QuickBooks desktop. We'll see them at a conference like, gosh, why did we ever do this? Because it's not easy to integrate to and it's messy and it's not reliable. And you run into problems if if most QuickBooks desktops are hosted by, let's say, right works, which I think it is, 300,000 desktops are hosted by right works somewhere that somewhere around that number. Well, you just can't install a widget to one of those machines without going through right networks first. So. Right. Networks owns that machine, not the client or the end user. So it's just way more complicated to do desktop anything. And I always tell people don't do it. Just don't even bother. Like let let your competitors spin their wheels with desktop and focus on just making the greatest thing ever for the online cloud accounting software packages. You're better off doing that.

Blake Oliver: Let's go ahead and thank our second sponsor. Boom. Tax. David, if you get the URL up there on the screen I'll read this one.

David Leary: Perfect.

Blake Oliver: It's up. Thank you. Boom tax for sponsoring this episode. Are you dreading tax season. Did you know that it doesn't have to be overwhelming. With Boom tax, you'll discover a simpler way to file your 1099, w-2s and ACA forms. Their process is so easy they boil it down to just three words drag, drop, and done. That's literally it. You upload your data and boom tax handles everything else, from double checking for errors to ensuring every form meets IRS and state requirements. They'll even handle all your recipient copies, saving you countless hours. Boom! Tax integrates with the tools you're already using. Adp, Sage, Ultipro, Insperity, QuickBooks, Xero, and more, making it incredibly simple to pull in your payroll and employee data. No more juggling spreadsheets or spending hours on manual filing. Plus, they include state reporting for new Jersey, DC, Rhode Island, and California. Their e-delivery and print and mail services are fully IRS compliant, and Boom offers unlimited corrections at no extra cost. Thousands of firms across the country have already made the switch to boom tax to streamline their filing process. If you're ready to see how much time you could save this tax season, head over to The Accounting Podcast. Boom! Tax that is The Accounting Podcast promo. Boom! Tax.

David Leary: Thank you. Boom. Tax.

Blake Oliver: Let's talk about.

David Leary: 1999. I have to remember that.

Blake Oliver: Dang it. 1099. Uh, it's that time. Why'd you have to make me think about that? David? Sorry. Um, let's talk about something.

David Leary: Canceled in Ohio. Get you excited again?

Blake Oliver: Yeah. Yeah, yeah. I was feeling good until you brought that up. Um, let's talk about Carvana. Hindenburg research. The famous short seller. The most famous short seller in the world has revealed they have a short position in Carvana claiming. Or is it Carvana? Carvana? I don't know. I always say Carvana, but I feel like it might be Carvana.

David Leary: It might.

Blake Oliver: Anyway, regardless of how you pronounce it, they claim that the company's apparent recovery is an illusion. So Carvana went through this turnaround over the last few years. Uh, it was even looking like they might go bankrupt. Um, but they have recovered, as has their stock price. But Hindenburg says that's not true, that their reported income growth is artificially inflated through questionable accounting practices. And the biggest questionable accounting practice that the firm is alleging is that Carvana sold. They sold 800 million in loans to a suspected undisclosed related party, which contributed to temporary income boosts. And they also allege that Carvana is concealing higher loan delinquencies by granting borrower extensions through its loan servicer, which is an affiliate of Drive Time, which is run by Carvana's largest shareholder. Ernest Garcia, the second, who is the father of the CEO.

David Leary: So they've gone enough to say that this is a father son accounting grift. That's where that's what they've labeled this as. Yes.

Blake Oliver: Ernie Garcia, the third, is the CEO, and he's the son of Ernest Garcia, the second. Um. Carvana relies on drive time for loan servicing and collections, and they share revenues from automotive financing. And then they engage in vehicle sales to each other. And Carvana also leases facilities from drivetime and has profit sharing agreements. So you've got this situation where you've got this public company engaging in related party transactions with what I assume is a private company drive time. Anyway, Carvana is describing this report as intentionally misleading and inaccurate without addressing specific allegations. Shares only dropped about 2%. Um, and it's interesting the analysts who were, uh, interviewed by CNBC, JP Morgan, Btig, they basically said, oh, yeah, we know about this. We've already considered this no big deal.

David Leary: But the big issue I think they have with this is this misstatement of earnings caused the stock to increase drastically like 42 times it went up. And the senior Ernest Garcia, the second, cashed out at 1.4 billion because of this? Yes. So they've been they've been pulling money off the market based on these numbers.

Blake Oliver: Yes. They they pumped up. Well, that's the allegation, right. They they engaged in these related party transactions, pumped up the stock enormously, and they've sold billions of dollars in stock. It's very suspicious. Um, yeah. The stock surged 284% in 2020 for. The reported gain on loan sales from those related party loan sales represented 2.2 times Carvanas net income in the past nine months. That's a lot. So if those loan sales were not done properly, if they were inflated, then what was Carvanas true net income? And apparently a huge percentage of carvanas loans, 44% of them are to non-prime borrowers with many loans in the deep subprime category. So these are These are people who really, you might not expect to ever get them to make their car payment, and you're going to have to repossess the car, that sort of thing. Like, these are not high quality borrowers. So just imagine a situation where you have all these loans, these subprime loans for used cars, and you sell those off to get them off your books, and you do it in an inflated price to a related party. Pump up the stock price. Make it look good. Right. You see how this works? I could I could see this.

David Leary: And the report also says because based on the freedom of intelligence, Freedom of Information Act, they found intelligence that says the company might be under investigation by the SEC as we speak as well.

Blake Oliver: And Carvana also has a ton of debt. The Hindenburg says they have approximately 4.8 billion in net debt, and it's rated as junk by ratings agencies. So if this turns out to be true and they did this stuff like they're not in not in a good cash position. So.

David Leary: So if you have one of those big coins to go to one of those Carvana vending machines, you better go use your coin now because it may not work soon.

Blake Oliver: What are these coins?

David Leary: Well, you've seen Carvana builds those car vending machines, and there's a bunch of cars stacked up.

Blake Oliver: I've seen them on the by the by the freeway, like off of I-10.

David Leary: Yeah. Apparently you get a big coin, and you put when you buy your car and you put it in there and magic happens and your car comes down and rolls out. Oh, that sounds fun. And maybe it's not a coin. Maybe it's you tap your phone. But I think they've created the image that you get some sort of big coin. And if anybody that's attending the live stream, if you've gotten a car through Carvana, did you get a big coin to put in a machine?

Blake Oliver: All right, David, let's move on to, uh, public accounting or back to it, I suppose. Grant Thornton, CEO, quit and is quite sudden, wasn't it?

David Leary: Yeah. So Seth Segal, he had a three decade career and at Grant Thornton. In 2022, he took over as CEO of Grant Thornton. Now he's going to step down and instead he's going to stay on as a senior advisor. But this came just days after the firm closed a PE equity deal that was done to combine the US firm with their affiliate in Ireland, creating a 12,000 person unit. The US arm reported 2.4 billion in revenue in 2023, but has yet to publish its 2024 results. And in a separate deal last spring, they sold a significant stake to the private equity firm called Newmarket New Mountain Capital. So it's hard to know if this is directly related to the PE moves, but it was sudden. Nobody expected this. It wasn't a planned departure. You know, somebody was retiring or anything like that. It just it's a it's a quick, quick step back.

Blake Oliver: Let's talk about returning to the office. Uh, where are we with return to office policies? Cfo.com did an analysis of recent studies and found that 61% of medium and large employers have implemented formal policies requiring a minimum number of in-office days per week. So 61% have some sort of minimum days per week. You got to be in the office now. Um, but despite that, 51%, just about half allow employees to choose which days they work remotely. And I find this interesting because when you allow the employees to choose which days they work remotely and you only require them to be in like 2 or 3 days a week, you end up with this situation where the office is often mostly empty and it's not the best experience.

David Leary: And then it's like everybody's working remotely because nobody's actually in the office.

Blake Oliver: Yeah, and you're on zoom calls with people who are not in the office. Right. So it's this weird situation, and like, it doesn't match up with the reasoning for why these two policies need to exist, which is that the management believes that face to face interaction enhances employee engagement, strengthens corporate culture, and boost productivity. So it's interesting. It kind of needs to be like this all or one, all or nothing kind of thing. You either need people in the office all the time or like the, you know, let's say 80% of the time or more, or you need to let them work, you know, wherever they want, however they want, because you create this weird middle ground when you require people to be in the office, but not everybody's there. That's my personal experience with family members.

David Leary: I always when I was at Intuit and I would travel and I stopped going, and I would never go there on a Friday because nobody to be around. I'm just in an empty building doing a zoom call with people that never even drove into the office that day. So yeah, it's a real thing when people aren't in the office. So if you're going to have a policy, you have to make people come to the office or it's it's a waste of everybody's time. If you just get to pick and choose when you're there.

Blake Oliver: Now, employers were overly optimistic about how many employees would actually return full time When they were surveyed, the employer said that they thought that 43% of employees would be back full time in the office, but only like a third are in the office most of the week. So there are ongoing challenges with these policies. Um, but almost three quarters of the business leaders that were polled planned to require employees to be in the office at least three days per week next year. Well, 2025, because this was this came out in 2024. Um, but half are not worried about employees quitting. Only 6% are very concerned. I think they might be underestimating.

David Leary: Just want them to quit. So why would they be concerned? I mean, arguably they want to reduce their staff and this is an easy way to do it.

Blake Oliver: Maybe. But like we've said before on the show, the best employees are the ones who can demand work from home. So you might end up just losing your best people, not your worst people. That's true. It's the worst people who are happy to come to the office and pretend to look busy. It's easy to look busy in an office. I've done it. Haven't you had those days where you're, like, in the office and you're just walking around from, like, meeting to meeting and going to the water cooler and chatting, and you look busy, you know? But you're not home.

David Leary: You don't feel busy. I go to the pantry six times, I don't feel busy. But where people are like, oh, look, he doesn't have time for lunch. He went to the just to the pantry cabinet to grab a snack because he's working so hard.

Blake Oliver: Under 30% are going to require a five day full time in office workweek. It's really the minority there. And, you know, there might be another factor here and why these companies are trying to get people back to the office still. And we've talked about it before on the show, uh, 54%. They say that lease agreements affect their Toe policies. So that's ridiculous, isn't it? The fact that you have a lease that you pay for means you have to bring people to the office to work there. It's it's a sunk cost, right? You already signed this lease agreement. You're already paying for it. Like it shouldn't dictate your policy, but I think companies often feel like they have to justify the expense. So we make people come into the office. Yep. Um, so I don't know. I'm curious if you're joining us live, if you're here, you know, does your company have an RTO policy? Does it work? What works? What doesn't? Do you like it? Do you hate it? Are you one of those people who just goes and badges in and, you know, gets coffee and leaves? We know there's plenty of people doing that. I want to know. Why? We're talking about accounting firms. Let's talk about client satisfaction. Busy season is a great time to start doing customer satisfaction surveys. And in my experience, very few firms do them or do them well. Are you familiar with the Net Promoter Score, David?

David Leary: Yes, I hate it.

Blake Oliver: Really? Why?

David Leary: Because. Because it's always gamed. And. And Intuit was one of the first companies to use Net Promoter Score. They were arguably one of the founders of Intuit. Actually stopped calling it Net Promoter because I think the person that they co-developed it with owned the rights to the words net promoter. So it stopped using that, that verbiage. But it gets gamed and you'll see this all the time when you, um, take your car to the car dealership to get service. And at the end they ask you, is there any reason you can't put an 8 or 9 or a ten if somebody asked you this question? And if so, I always answer seven every time because it messes up the numbers on Net Promoter, because you don't count the sevens and it drives people mad because they're like, I just need to get them to become an eight. So it would actually count. But it's always gamed. People game the system. It's always.

Blake Oliver: Game. Come on, be fair, always game. It can't be gamed.

David Leary: It can be game. But the other part of it that's really stupid is we live in a day and age where you can measure if people are actually recommending your product or service because of social media. You can tell if somebody says, hey, I used on pay and it was great. You can measure that now and you could never measure that before. That's what it was like. It was a hypothetical question. It doesn't make any sense. It's stupid.

Blake Oliver: You're really screwing up my flow here because the whole article is why firms should use NPS scores.

David Leary: I'm sorry, but that's not. You didn't write the article, did you?

Blake Oliver: No, but I agree with it. And I actually disagree with you about NPS. So in your experience, it is gamed because you've worked at software companies, and software companies love NPS because I.

David Leary: Worked at the software company that helped create NPS. Right.

Blake Oliver: Okay. So, you know, and the problem is, if you put too much weight on NPS scores for evaluating your people, they're going to game the system and they're going to tell the people who are getting the survey, please, you have to give me a ten or I'm going to get fired, right? Yeah. It's like you have to give me a five as the Uber driver, or I'm going to lose my job kind of thing, right? So that's why it inflates the score. But I think if you do it properly and you don't punish people in that way, then the customer will be more honest and you'll get, you know, useful information. And the beauty of the Net Promoter Score is that so many companies do it, that there are really good benchmarks around it. So if you do it right with the right incentives, I think it can be really useful. And the problem in accounting is that hardly any firms are doing it. So according to this article on Inside Public Accounting called amid barely average client satisfaction. Why aren't more firms using NPS to improve? According to this article, only 27% of accounting firms use Net Promoter Score to enhance client satisfaction. And I guess we should probably just explain what Net Promoter Score is real quick for people who don't know. It's a very simple survey that you do with your customers where you ask, um, on a on a scale of 1 to 10, how likely are you to recommend our product or service to a friend, family or colleague? Something like that.

Blake Oliver: Very simple. And you're supposed to do it in a very standard way so that it's, uh, you get answers that are you can compare, um, and then they rate you 0 to 10. And if somebody gives you a nine or a ten, that is a promoter, that means they're very likely to recommend you to someone else if they give you a seven or an eight, that means they're neither a promoter or a detractor. Uh, so it's it's basically they don't count. And if somebody gives you a six or less, they are a detractor. That means that you could actually lose referrals because they might tell people that they didn't enjoy working with you. And to calculate the score, it's very simple. You add up all the promoters, all those nines and tens, you get that number. Let's say you had 100 of those and then you add up all the detractors. Let's say Let's say you had 50 of those. And you you subtract the promoters. You subtract the detractors from the promoters. And those are your that's your net promoter number, right. Because the idea is that the promoters.

David Leary: That's why I love putting seven and eight, because it drives the people counting the scores nuts.

Blake Oliver: So the promoters, the promoters and the detractors cancel each other out and you're left with net promoters. Um, and and so it's like that's what's interesting about it is that like, you get this, uh, industry benchmark that you now have. So only 27% of firms are doing this. And the average in the accounting profession in the industry is 39%, um, which is considered just above average by global service standards. 39%. But let's put this in context. Uh, that is like about where Verizon Fios. Costco gets 79. Vanguard gets 70. A score of 50% would be considered excellent. So we're kind of mediocre as a profession.

David Leary: And the exercise of doing them is actually the important part. Everybody who answers six or lower, you should be calling up, having a meeting with, talking to them, and that that behavior of a firm owner doing that will that's what's going to change your firm. Yes. It's not so much the survey people just like, well, I ran the survey. Now what you actually have to do the exercise of the process of the survey, which is reaching out and talking to your clients and customers.

Blake Oliver: Yes. And in the survey, you typically would after they give you the number, there's a field where they can say, either we're so happy. You're happy. Why did you say that? Or we're so sorry that you didn't have a great experience. Why not? And you have to follow up on that. If you don't, it's worse than if you never did the NPS score, because then people will feel like they wasted their time. Right. Um, and it's really important you have to do it for all your clients. And there's all these tools now where you can just automate the sending of these emails. So like if you're in taxis and you're delivering returns every time you deliver a return, you automate sending an NPS survey to that client across the whole firm. No exceptions. That's the way that you get really useful data. Um, part of the problem is that and the reasons given in this article why accounting firms don't do NPS scores is because the partners fear the negative feedback. They don't want to have to compare how they're doing to other partners. And and one of the worries is really funny. It's that if we survey our customers to paraphrase and, and we find out they're not happy. Like it'll just make them more unhappy thinking about it. Like we don't want them to think about. We don't want them to think about the bad experience they just had.

David Leary: It reminds them of it.

Blake Oliver: Yeah. As opposed to, oh, here's an opportunity to fix things. And I actually ran into this problem, David. I tried to implement NPS surveys in, in two firms that I worked at, because I knew it would be incredibly valuable way to collect feedback and find out how we could improve. And both times it was blocked by partners. They didn't want to know.

David Leary: Would partners be more comfortable with, like, those happy faces that are at the bathrooms at the airport?

Blake Oliver: It's just the just a simplified one.

David Leary: Yeah, like the five happy faces. And you pick how clean the bathroom was or your satisfaction with it. Yeah, that would be easier for firms to deal with.

Blake Oliver: So yeah, you know, what's also great about this is like you can get the positive feedback and then you can follow up and say, hey, can we use you as like a testimonial? Can we collect use this as a quote on our website. Would you be interested in referring other clients? It's a great tool for that.

David Leary: Send them a gift card. Hey, if you leave a 9 or 10, we'll send you a gift card. Don't do stuff like that. You just skew your numbers and you're lying to yourself when you do this game. And that's what's that's what's silly about people gaming. It is. You're lying to yourself. It's Emperor's new clothes.

Blake Oliver: So Anthony says, regarding MPs, I always thought a 9 or 10, you could walk on water. 7 or 8, you were really good. I mean, 7 or 8 is not bad. That's why it doesn't count against you. Right? But it's the people who give you a nine or a ten that are the advocates for you. Those are the people who are likely to say, yes, you know, use Anthony's CPA. Like, I love that guy. Um, the sevens and eights. Like they're happy, but they're not going to go out. And it's your passive people. Yes, the passive happy people. So that's why you don't call it content. That's why you don't count them as promoters. Um, now we're getting a lot of comments on the toe stuff, but I think we should read our next ad, I'll put up the banner. It is tax bandits.

David Leary: Is that right? And I'll read it once the banner is up.

Blake Oliver: All right. Thank you. Tax bandits.

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Blake Oliver: Tax bandits the PCAOB. The PCAOB Public Company Accounting Oversight Board, the auditors of the auditors, said that they find audit firms over $35 Of million dollars in 2024, including a record $27 million fine against KPMG Netherlands for exam cheating. David $35 million. Does that sound like a lot of money to you?

David Leary: For me, yes.

Blake Oliver: But for a top.

David Leary: Ten accounting firm? Probably not. If you look at all their global revenue, because this is a global find, right.

Blake Oliver: This is against all the PCAOB registered firms, which includes firms around the globe. And $35 million represents 0.11% of just Deloitte's revenue annual revenue. It's a drop in the bucket. I can't believe they even publicize this. It's embarrassing. And I just wanted to highlight this. Put this in context, because we talk a lot about the PCAOB and the problems with audit quality on this show, and how can anyone expect audit quality to improve with fines when the fines are Meaningless. Essentially nothing. I mean, if you strip out that $27 million against KPMG for exam cheating, which has nothing to do with audit, by the way, then it's what, $8 million?

David Leary: It's hardly anything.

Blake Oliver: Yeah. It's nothing. So meanwhile, the PCAOB budget was $399 million. Might as well call it 400 million. Rounded up. That's their 2025 budget, $400 million. So the PCAOB has a $400 million annual budget. They only issue fines of $35 million in a year. I mean, can't they at least cover their costs?

David Leary: Wait until Dodge gets a hold of this?

Blake Oliver: Yeah. Um, and, you know, there are, like, close to a thousand people that work at the PCAOB. So we're talking, like, $1,000 a year per person at the PCAOB. And I would like to know what is the PCAOB done to actually improve audit quality? If you look at their own metrics, audit quality has only declined in the past 20 years. I think that we should get in touch with the Doge committee and get them to abolish the PCAOB, because it hasn't done anything that I can tell. I have seen zero evidence that the PCAOB, in all it's existence, has accomplished anything to improve audit quality. That's their job. Pdf.

David Leary: They made a nice PDF in December. There's spotlight on insights on culture and audit quality, the relationship between what culture at audit firms and what's happening. It really digs into the, uh, the work, the deficiency rates, um, the culture, because your systems and structures and decisions and what you're working in the pressure and the hours is affecting. So they're they're bridging those gaps, but you can't change behavior if you don't like. We've said before on the show, you name and shame. There should be a PDF of all the public companies who audits had deficiencies.

Blake Oliver: Right. So if they simply release the names of the companies that had deficient audits that were inspected by the PCAOB, you would see a very quick change in behavior by the audit firms.

David Leary: Do you think this is something we could try to request through the Freedom of Information Act.

Blake Oliver: The names of the companies? I feel like somebody would have done that. I wonder if you could use AI to figure it out. Right. If you take the redacted reports of the audits, like the the audit inspections, and then used AI in public information like perplexity, could you have it, like, try to figure out what company it was?

David Leary: Engineer some of the numbers.

Blake Oliver: Yeah, just based on stuff that we can't even trace as humans that somehow the AI can figure out, I wonder. But yeah, that would be the thing that the PCAOB could do that would actually change behavior of firms. If firms knew that their clients were going to get publicly shamed for bad audits, then the firms would ensure that good audits happened, I think because they would lose the business. Right. Imagine if, like, I don't know, Coca Cola was in the news because their auditor, you know, like their audit didn't pass muster. I think Coca Cola would go shopping for a new auditor.

David Leary: Yeah. Nobody wants to have nobody wants to be in the news for that. It's bad.

Blake Oliver: Right. But they don't care if it never hits the news. Like Coca Cola doesn't even know. They have no idea they had it bad. Nobody even tells the client. Maybe the PCAOB should just tell the clients, I don't know. Um, paradox says I think we should ask, what is the fine relative to the audit fee of the engagement? Yeah, well, you know, if you look at, like, the amount of fines last year, it's zero effectively round it down to zero. It's a rounding error, like $8 million in a year. The global audit industry is like is like billions. Um, so more pcob news. The Pcob proposed a rule that we talked about on the show that would require large audit firms to disclose metrics at the firm and engagement level around how many hours their people are working. What is the workload? Average weekly hours worked by senior professionals, including all engagements and tasks. How many hours the partners and managers are involved versus the staff? How many training hours they get, the experience they have and all of the firms. The big four accounting firms have opposed this new rule, as has the AICPA, as has the center for Audit Quality. Um, and it's kind of clear why. Yeah.

David Leary: Going concern at a great headline on this.

Blake Oliver: Yes. The headline is Big Four firms fight against metrics that would reveal the workloads behind the curtain. Yeah. And of course, what would happen is we would see that these staff are not experienced and they are overworked. And what I love about this article is they published parts of a letter from retired KPMG partner Robert Conway, who supports the rule and wrote in to Going Concern. And he said that the average experience, the estimated average experience of post CPA. How does he say this? This audit staff have an average experience of 1.3 years after they get their CPA. So they've only been CPAs for 1.3 years on average. The staff working on these engagements, how do you expect people with only a 1.3 years of CPA experience to do audits, quality audits?

David Leary: There's two green. It's not logical.

Blake Oliver: There's also a 33% annual turnover rate in years 3 to 5. And, uh, now, I do think it would be interesting if that information were public because it would it would show light on this problem of overwork in the profession. But I don't know if it would solve the problem because it's an input. The hours worked. Sure. If it's too much, that can affect audit quality. But what we really care about in the end is the quality of the audits. So I wish the PCAOB would be focusing on that, actually measuring the quality of audits and then penalizing firms or even better, incentivizing firms to do quality audits.

David Leary: But instead of having these numbers have to be reported to the PCAOB, they should be included in the audit. So when you deliver your audit back to Coca-Cola, you got to tell Coca-Cola. Oh, by the way, the average experience level that worked on your audit was 18 months. Yes.

Blake Oliver: Oh, I love that. Make it part of the audit letter. You have to disclose it in the cover letter. Our staff, we on average 65 hours per week. They have only one year of experience. They have no clue. And we had 30%.

David Leary: Turnover during your audit. Yeah.

Blake Oliver: Yeah. And oh, like half of them went to work for you because all this.

David Leary: Is going to do, they're going get all these numbers and roll them up into a big PDF and hope we read it on the show. Yeah. Kind of the.

Blake Oliver: Only um all right. So that's piece of information. We've got one more ad to read. Right. And then we'll, we'll finish out with.

David Leary: Two more ads to.

Blake Oliver: Read two more. Let's do them. Are you serious?

David Leary: Oh, no. One more, one more. I lost count, you're correct. One more and I'm going to find it interesting to see if you say Basil. Or if you say basil.

Blake Oliver: I'm basil.

David Leary: I've never.

Blake Oliver: I've heard. Basil.

David Leary: Basil? Basil? Yeah. If you say basil. Sorry, sorry.

Blake Oliver: Um, I'm gonna say basil, and I'm gonna read this ad, so. Thank you. Is it Basil? Do you know.

David Leary: I. I think it's basil. It's the plant, right? Basil is.

Blake Oliver: The name.

David Leary: It's the name. Like, if.

Blake Oliver: It's a person, it's the name Basil. So maybe it's basil. I'm gonna say Basil. It could be basil or basil. We don't know because we should probably start asking this of our sponsors. Thank you, Basil, for sponsoring this episode. Is your accounting firm looking for a better practice management solution? Are you tired of juggling multiple apps just to get work done? Well, you need to hear about Basil. It's an all in one practice management platform that finally brings everything together under one roof. Client portals E-signatures tasks, workflows, calendars, invoicing everything you need to run your firm smoothly. Deal with just one product, one user interface, and one subscription. Plus, it's powered by Amazon Web Services, so you know your data is secure. What makes Bazel unique is its beautiful, clean design. You'll feel right at home because it works like your favorite apps. There's no complicated training or lengthy setup. You can be up and running in minutes. And get this, you'll receive complimentary onboarding services. And if you ever need a hand, there are world class support team is there 24 over seven with Basil. There are no hidden fees and no surprises, just straightforward pricing. That makes sense. The monthly cost is a low $30 per team member, and that includes unlimited clients, allowing you to scale your firm without huge software bills piling up. If you're ready to transform your practice and want to give Basil a try for free, go to The Accounting Podcast. Basil.

David Leary: That's basil and it's the the herb is on their logo. When you look at when you go to the website. But I and I've always said Basil. But then when I was checking it out you know Google check. How do you pronounce this word? And like you would pronounce it the way you pronounced it. So now I don't know what is absolutely correct, but but but it is the herb. So however you would pronounce the herb if you went to the store to ask for it at Whole Foods, that would be the pronunciation.

Blake Oliver: All right. Well, remember how I talked last week about my conspiracy theory with Bitcoin? Like the US government is going to start buying Bitcoin to drive up the price. Yes, under Trump that might not happen because a federal judge approved the Department of Justice's plan to sell 69,370 bitcoin seized from Silk Road, which is now valued at about $6.5 billion. Battleborn investments unsuccessfully attempted to claim the bitcoin through legal challenges and freedom of information requests. So now the Department of Justice, if they move fast, they could sell that Bitcoin before Trump takes office, Us, eliminating this possibility that the crypto lobby would get the administration to establish a national Bitcoin reserve, thus preventing that Bitcoin from ever going back into circulation. The recent price drop in Bitcoin could be attributed to fears that the Justice Department will sell that bitcoin, flood the market and drop the price. So it's going to be interesting to see what happens. I guess the US Marshals Service is going to do one of the largest cryptocurrency liquidations ever. Or maybe it'll be stopped I don't know.

David Leary: But it makes sense if you've been acquiring this as either evidence or confiscating it through legal investigations into. I think it took a lot from Silk Road back in the day. And now you have all this, this Bitcoin stacked up. If it's at the all time highs, it's your due diligence. As for the best interest of all taxpayers to sell that and not just sit in it. Sit on it. Why should only the the crypto bros make money on crypto or bitcoin? Shouldn't we all make it as taxpayers if we're sitting on lots of Bitcoin right now? Sell it.

Blake Oliver: Here's the justification for establishing this reserve. Senator Cynthia Lummis, who, by the way, bought a bunch of bitcoin before she started to promote it. She's introduced the Bitcoin Act, which is the one that proposes that the US government not only hold this Bitcoin, but also buy a million bitcoins over the next two decades. She says that the Bitcoin going up is going to allow the United States to pay off the national debt. So so, Senator, a senator wants to use taxpayer dollars to buy bitcoin, promising taxpayers that we'll be able to sell it someday and pay off the national debt.

David Leary: The same grift that's told to taxi cab drivers when you're in Vegas and they're trying to tell you about all the crypto they bought.

Blake Oliver: Yeah, right. It's literally the same thing. Um. I can't believe it. You know, just just looking at the volatility alone, like the idea of having the government buy a volatile asset like this is just nuts. Um, of course, the government buying it would legitimize it is the idea. That's why the bitcoin lobby wants this to happen. And of course, when you hear people talking about this, I think the first thing to ask them is, hey, how much bitcoin do you own? Because I don't think they have the interest necessarily of the American people at heart. It could be the interest of their own wallet. You know their Bitcoin wallet.

David Leary: Buy and hold forever. Hodl right. Hodl. Is that the the word hodl?

Blake Oliver: Yes. Yeah. You know, which begs the question like, okay, if you're just going to do that forever, when are you ever going to sell? Right. Like, I mean, anyway, I've talked about it at length before.

David Leary: We should definitely talk a little bit deeper about the Blackstone buying Citrin Citrin Cooperman. Okay, let's go into that a little bit deeper. So in 2022, top 25 accounting firm Citrin Cooperman in April of 2022 took a pee money from the company New Mountain. So New Mountain took a controlling stake in Citrin Cooperman a majority stake. Well, now they just sold to a bigger PE firm, Blackstone, who's the biggest PE firm in the world. I talked to the numbers quickly before, but they new mountain paid in 20 2211 X over EBITDA. Blackstone now paid 15 x over EBITDA. So the value went from about 500 million to now over 2 billion. So I'm.

Blake Oliver: Sorry I'm.

David Leary: Having the form.

Blake Oliver: I'm having like deja vu. Didn't we just talk about this.

David Leary: Well I just mentioned it quickly, but we didn't get into the whole story. It was just like I thought we were just.

Blake Oliver: Oh, I cut you off the story.

David Leary: Yeah.

Blake Oliver: We were. I thought you were done with the story, so. Oh, no.

David Leary: Not at all.

Blake Oliver: So you gotta tell me if you're not done. Yeah.

David Leary: Definitely not done. Definitely not done. Okay. And so everybody's excited about this because it seems like, hey, this is the exit. Now I sell the P and the P is going to flip it. That's why more P is going to buy accounting firms. But I don't think Blackstone wants to own all the accounting firms that are out there. Like not everybody's going to have an exit to Blackstone. And I also think the reason this happened is Blackstone has other interests that Citrine aligned with. So the randomness places to see information about this acquisition was in music business worldwide. And the reason why is Citrin Cooperman already had a deep tie in the music business because they, in 2022, purchased Barry Mazeroski and acquired his team in 2022. He is an expert music rights valuer. So like, what's the value of the Beatles catalog? This is the guy that would go and tell you. So they purchased this person. Blackstone has also made other music related acquisitions, so they purchased something called the Hipgnosis Songs Fund. So if you're wondering what that is, that was actually on the London Stock Exchange and they own, um, oh, it doesn't have the oh, here it is. They own um, they bought Rick James's catalog and then they wound up purchasing, um, another 30, 30,000 songs from Kobalt Music copyrights. And last September they bought Shawn Mendes Panic! At the disco in one direction. So they have all these catalogs of music. Another 4000 catalogs. So this is a P play. So. Blackstone purchased this company that ipoed and took them off the market to make them private, to own all these music rights. And then they also bought the second oldest performing rights organization in the US that it's similar to an ASCAP and BMI, but they're for profit and they have to another 30,000 songwriters that are represented by that company. So Blackstone might have interest in their music interests, and that's why they picked up Citrin. Not because they want to own accounting firms. There's ties to musical instruments.

Blake Oliver: Pe company owns a bunch of music industry businesses, and Citrin Cooperman services them.

David Leary: What is to service them? They service them and they determine the value of them.

Blake Oliver: Oh, they they value them. So this is interesting. You have a.

David Leary: Catalog of the Beatles songs. It's worth so much. Hundreds of millions of dollars. So. And Citrin Cooperman is the experts in creating, figuring out how much that's worth.

Blake Oliver: Okay, okay. I was wondering where you were going with this. Yeah, because this is the big concern about private equity owning accounting firms, especially if they're big private equity firms, The value to the public in accounting is our independence. They can trust the numbers that we give them. And if your firm is owned by a private equity firm, and they are perhaps pressuring you to give them a good valuation numbers on their other investments, maybe you're not as.

David Leary: Independent or lower on other acquisitions you want to make. Maybe you want to go buy another. I want to buy Blake's music catalog from his cello days. They could value it lower so I can make the acquisition. Yeah. Yeah. It's not independence to really indicate this, but. Well, I don't think they just bought accounting firms to own the accounting firm. I don't know if they love the business. I think it ties into other motivations they might have. Yeah.

Blake Oliver: Yeah. This is a big problem. Independence becomes an issue potentially here. And I'm not sure that you can firewall this. I'm not sure that you can protect against it. I think we will. I think we will see abuse happen. I'm sure we will. It seems like inevitable.

David Leary: If if there's an accounting firm that really specializes in commercial real estate in apartment complexes. And then Blackstone acquires them, maybe we can start questioning what their motivations are on this. But it's just it's interesting because I don't I just don't see that as the exit for everybody. Like, what does he think Blackstone wants to own hundreds of accounting firms. It seems silly to me. Like just cause they have a lot of money doesn't mean that's the step in the exit for everybody.

Blake Oliver: Yeah, I like your conspiracy theory, David. I think you should, um. Let's pull out the tinfoil hats. Let's put them on.

David Leary: Why would the music industry cover? Why would the music industry cover an accounting acquisition by a PE firm? Why would they cover this? Or why would it be news in the music industry unless it's actually something they're.

Blake Oliver: Asia in the live stream says, shouldn't someone with a CPA license be the majority owner of a CPA firm. Well, that's the law in a number of states. I think in most states. But here's the trick. Here's how you get around it. You buy the firm and you split the firm into two entities. One entity does all the non attest non-audit work such as valuation work. And that firm can have a majority ownership that is not a CPA. So the PE firm can own as much as it wants of that non CPA firm is just some sort of LLC whatever. Um the. Cpa firm all that is left in there is the audit work. That's the only that's all that remains. Whatever regulatory whatever by regulation has to be with the CPA firms there. And then you create these agreements between the non attest firm and the attest firm to share resources, you know pay salaries all that stuff. And so it's it's a little hack to get out all the value of that CPA firm into an entity that you can control and is not under the control of CPAs. And I think it is, um, you know, it sort of reminds me of like, SPACs in the way that it gets around regulation and it avoids scrutiny. Hoppin says that is devious. Yes, it is, isn't it? It's kind of brilliant, but it's also devious. And, um, yeah, I think it's long term. I don't see how that leads to a better accounting profession for certified public accountants, because it marginalizes us. It means that accounting firms are smaller, doing fewer things because the actual accounting firm is now just doing audit instead of all this other stuff.

Blake Oliver: So let's go back to like Barry Melanson, my favorite guy. He spent his whole career telling accountants that we need to go beyond the traditional services that we do, right. We need to go beyond audit and tax. And we need to expand into business advisory and all this stuff. Right. Well what do we actually have happening? We have CPA firms becoming more marginalized and CPAs losing control of the firms because of what he's enabled, because what the CPA has enabled, because they aren't actually representing the interests of working CPAs. And, David, I think that's where I would like to leave it this week. Don't forget, dear listener, if you made it all the way to the end of this episode, you really should be getting a free continuing professional education credit for it. And you can get that for free with the earmark app. Just go to Earmark app, find the accounting podcast channel and take a quick quiz. You can earn CPP credit for all the past episodes you've listened to. We put up the new ones within a few days of this episode. Going live on the podcast feed. Start today. Earn your CPA throughout the year and you don't have to cram it in at the end. And if you want to support us, please do subscribe for the low, low cost of $150 a year and you can get unlimited courses every week. And we got all sorts of great stuff. We've got oh my fraud, we've got, uh, what are some other shows? David, you want to highlight.

David Leary: Federal tax updates? We have unofficial QuickBooks. We have an unofficial Sage podcast. Uh, we have other, uh, we have webinars on there. We have text chats, um, a whole catalog of things. Not as much as Blackstone owns of music.

Blake Oliver: 200 catalog, 2000 courses on the app at this point. Um, anything else we need to say before we go, David?

David Leary: Uh, should we quickly mention about Trump? Trump got convicted, not convicted ceremony there. You did convicted.

Blake Oliver: You did it. That's all. That's the only news there is done today.

David Leary: Yeah that's it.

Blake Oliver: All right. Thanks everyone for joining us. We'll see you around here next week.

David Leary: Bye bye.