The Accounting Podcast

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David Leary: We already have this problem in our country where social media knows too much about us and big tech, and they're gathering. They're gathering just tons of data about us. And on the other hand, now I want access to the government's payment system. It's it does feel like I don't know if I want this guy that has all this other data about me also, seeing this data about me.

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

Blake Oliver: Hello, [00:00:30] everyone, and welcome back to the Accounting Podcast. I'm Blake Oliver.

David Leary: And I'm David Leary.

Blake Oliver: And this is your weekly news roundup of everything you need to know in the accounting profession. This week we are talking about undergraduate accounting enrollment up 12%. The IRS is delaying its buyout offer. The buyout offer from the Trump administration until after tax season. What else do we got, David?

David Leary: Uh, Adobe surveyed 1000 Americans about taxes, then [00:01:00] provided really lame tips that I think some of these tips I think accountants will roll their eyes at, because I don't think it's going to make your work any easier.

Blake Oliver: We've also got Illinois discussing a alternative to the 150 hour rule. That's I think that's forthcoming legislation. Is that right, David? And I've also got a lawsuit related to Bdo's ESOP, their employee stock ownership plan. Uh, they've been hit by a class action lawsuit.

David Leary: We also have Musk [00:01:30] claims that he's deleted the team that worked on IRS direct file, and how no tax on tips might backfire on Trump. So I found an interesting article about that.

Blake Oliver: All right. We'll try to hit all of that in the time we've got this week. Uh, before we do though, let's thank our sponsors.

David Leary: So our sponsors this week Onpay Keeper and Cloud Accountant Staffing.

Blake Oliver: Thank you to Onpay keeper and Cloud Accountant Staffing. Stay tuned for information about those products and to support our show. Please do use the promotional links [00:02:00] that we will provide to you later. And welcome to our live stream, viewers. Hello, boring accountant. Just two coffees today. Two coffee emojis. Not the usual. Three or 4 or 5. Uh, it's a Monday, so I think maybe there should be more. Hey, Evan, how are you doing? Um, I gotta say, before we get into the news, David, uh, don't get the flu. I got the flu last week, and I am still recovering, and it's been like, uh. [00:02:30] It's been a while now. It is bad.

David Leary: It's been brutal. This year, we had another employee who. She got the flu maybe three weeks before you, um, and a completely different state. So it wasn't like earmarks. The massive spreader of these were states and states away, but it was really bad for her. So my understanding is the flu is really bad this year.

Blake Oliver: And my wife sent me a story saying that the, uh, reporting that the CDC says that US flu cases have reached a 28 year high About 13,000 people, including [00:03:00] 57 children, have died from the flu this season and they expect that to possibly double. Um. It's bad. Uh, so yeah, I'm still, like, tired. I'm sleeping a lot. Uh, but I was in bed for like, 72 hours straight. I could not do anything. Um. All right. David. Shall we start? Where do we want to start?

David Leary: Let's. Let's. Do you want to start? Do you want to start? Yeah. The employee offer.

Blake Oliver: Let's talk about the direct. Um, well, we've got [00:03:30] direct file, and we've got the buyout offer. So. Yeah, let's talk about. Let's talk about this buyout offer. So, um.

David Leary: So to recap, last episode, we talked about there was a letter sent out to federal employees, and it was the subject line was a fork in the road, if I remember correctly. And they had until February 6th to accept the offer to basically, it's like a lack of better words in early retirement, right? Like, we're going to pay you this money to [00:04:00] leave your job.

Blake Oliver: Yeah.

David Leary: Severance payments.

Blake Oliver: Severance pay. Right. Take. You get. And you're not going to have to work until you're not going to have to work, and you're going to get paid through September or something like that. So it's like seven, eight months of pay, and you're not going to be required to come into the office. And that offer went out to IRS employees. Um, and that has now been modified. The IRS employees who accepted the Trump administration's buyout offer are being instructed to continue [00:04:30] working until May 15th. Uh, and of course, the original, uh, terms were you were just going to be able to stop working immediately. Uh, and that is, of course, to make sure that the IRS is properly staffed through an attack season. Doreen Greenwald, the president of the National Treasury Employees Union, which represents IRS employees, condemned the move as a, quote, bait and switch, stating that employees were employees were initially told they would be paid not to work through September 30th. Rolls [00:05:00] in taxpayer services, information technology and the Taxpayer Advocate Service are being deemed essential for the tax filing season so that the employees in those groups will not be able to stop working if they took this buyout until after May 15th. Iris is still under a hiring freeze. And, um, there's actually a a judge that is reviewing this entire plan right now as we speak this today, and we'll determine whether or not it can proceed.

David Leary: Because I think there was a temporary [00:05:30] hold on the February 6th by midnight, except date and that that's still open. I think my understanding is just temporarily on hold. I do know that I saw that there was an email the National Treasury Employees Union sent out, which that's the union that represents IRS workers, has urged its members not to take the offer to resign. So people are but obviously, I get it. I don't want to do another busy season of tax. I want to resign and take the money, I get it. I could see how that's appealing.

Blake Oliver: So [00:06:00] that judge that I mentioned is Boston federal Judge George O'Toole. And he is weighing arguments about whether to block the program permanently. One of the arguments against this is that Congress has only appropriated funds through March. And so the administration can't make any promises beyond March. As to whether or not, like employees will continue to get paid, although like I find that a bit interesting because we are assuming that the employees will continue to be employed even though [00:06:30] funding has not been appropriated by Congress either. So I don't know. Um, did we talk about the numbers that have accepted when we originally reported on this? We said that the administration thought 5 to 10% of federal workers would take this buyout. And so far, they say that 65,000 employees, which is about 3% of eligible workers, have accepted resignation packages so far. So they got 3% out of the 5 to 10% that they were hoping [00:07:00] for. But maybe they'll get more because they did extend the deadline until, uh, midnight today as we record this on Monday, February 10th. Workers can accept this offer as well because of that temporary injunction that happened last week. So we'll see what happens in general.

David Leary: My understanding is if you can get a government job, it's a pretty good job. And you do that until you retire. It's a good thing. I imagine people taking this are probably people about to head out the door anyways, or have some other opportunity, [00:07:30] right? Like if if this is your job and you you're a a career. I'm gonna use the word service person, right? You're you're serving your country in a in direct, direct way, I guess. Like, if this is what you want to do, I don't see you taking this offer. So 3% makes sense. I and then actually, that's the next question. So does it matter if 3% leave? Does it even make a dent on anything? It's just insignificant. It's.

Blake Oliver: Well, it's billions and billions of dollars [00:08:00] of salaries. That's true. And if it's people that don't want to be there, maybe we'll be better off as taxpayers as a result. I want to say welcome, Natalie. Natalie Lennon from Australia. She says good morning in the chat. Great to see you, Natalie. And, David, I think it's time to thank our first sponsor on.

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Blake Oliver: Thank you Onpay. Now let's talk about some good news in the profession. Undergraduate enrollment in accounting [00:09:30] actually grew in 2024. It increased by 12% in fall of 2024 compared to 2023, reaching a total of 257,278 students. So over a quarter million accounting students in undergrad. And this is the highest since the fall of 2020. And it's approaching the pre-pandemic enrollment of fall 2019, when there were 257,000 [00:10:00] students. Round that up to 270. No. 276,000. Um was the high in 2019. Four year colleges experienced the most significant year over year increase with a 14% rise. They added 23,000 students now. Graduate level accounting enrollment actually decreased by 2.8% from the previous year. So what's up with this accounting increase? [00:10:30] Why are more Gen Z? Why are more young people enrolling in accounting? I think it's got something to do with these changes to the 150 hour rule that we're seeing roll through states. Students are realizing that accounting is going to have a better ROI, because they don't have to go get that master's degree in order to sit for the CPA exam. That's my theory anyway, and I'm open to hearing more if you're listening and you have a reason. A theory for why accounting is increasing, let us know [00:11:00] in the chat there.

David Leary: I mean, sometimes I feel like we're in a, like a siloed speaking to ourselves in a mirror, in a, in a chamber. Right. Because like, all these stories about AI is going to kill and kill all accounting jobs because of the stories and fear stories like that, you would assume the number would be going down even more now. But obviously people are confident, hey, if I get an accounting degree, I'm I can get employed, right? And you're right, they're probably weighing the ROI on it if you don't have that extra year of school. Hence why [00:11:30] that's the real stat there. You said undergrads are up, but the masters are down, which would tie it back to the.

Blake Oliver: That would make sense, right?

David Leary: Yeah. Makes sense.

Blake Oliver: Yeah. Fewer people going to get the Masters because they know that in a short amount of time, like in Ohio, they're going to be able to next year sit for the for the exam without having to get those extra 30 semester hour of credits.

David Leary: Yeah, just go work and get your two years of experience and make some money. And don't go to get to The Graduate.

Blake Oliver: And this this actually fits with [00:12:00] the study that MIT Sloan did, which found something like, I think it was 14, 15%. It might have been 14%. Um, they found a 14% decline in the number total number of CPAs after the 150 hour rule came into place. So if we start to unwind that, we should expect to see an increase, a corresponding increase of around that amount, which 12% fits. So look, small changes like eliminating that extra education have [00:12:30] a significant meaningful impact. Is it enough? Maybe we can do more. I'm sure that there's plenty more that we can do, but this is a great first start.

David Leary: And the latest state to propose an alternative path now is Illinois. I don't know if you saw it. They proposed a bill. A pair of Illinois representatives who are both CPAs could. Incidentally, they proposed House Bill 2459 to create two additional pathways to CPA licensure in Illinois. So previously you had to hit the 150 hours. And this Illinois CPA [00:13:00] society believes this will no longer support the profession's current and future workforce. So the two new pathways. So you have one way, which is a bachelor's degree with 120 credit hours, including a concentration on with accounting and two years of relevant work experience. And then obviously passing the CPA exam. Or the alternative is obtaining a master's degree. And with a bachelor's with a concentration in accounting and completing at least one year of relevant, relevant work experience and passing the exam. So one path is [00:13:30] very similar to the existing path, but then you get to have this. Just get a bachelor's degree, hit 120 hours with an accounting concentration and work take the exam. So what I thought was interesting, the I Illinois CPA president, CEO Jeffrey Brown and his statement made a comment. Similar new pathways to licensure are also being explored and pursued legislatively in many of our neighboring states, including Michigan, Missouri, and Wisconsin. I find it interesting that he's calling out [00:14:00] what the other states are doing. Like some, it kind of tells me that maybe they're working together on how they march forward on this. And there's no mentions in this article at all about the AICPA. None. It's like they're not part of the game, like this was going to happen with, with or without them. And it feels like it's happening without them now.

Blake Oliver: I agree. Um, all right. Let's talk about direct file. So last week we saw a tweet, a [00:14:30] very strange tweet from Elon Musk, which is now on the screen here. Um, the tweet is simply this group has been deleted, and it's a retweet of a screenshot about the IRS direct file system. So what? What is happening here? What has. Has the direct file system been deleted? Is it is it not happening? This, by the way, is the system that allows taxpayers to file their [00:15:00] taxes directly with the IRS to not need to use something like TurboTax. It is proven very popular. It has saved taxpayers millions of dollars. And it was created by a group called 18 F, which is a digital agency inside of the government, and they work with other agencies to create software such as Direct File. They worked with the IRS to create direct file. So like what is going on? So it turns out though the group still [00:15:30] operating like I don't understand direct file.

David Leary: Still.

Blake Oliver: Exist.

David Leary: I'm displaying the direct file website on the screen as we speak. It still exists. It's running. What's interesting about this though, I went down the the the funnel, right? The click funnel is about 18 F, so I'll read the about screen for 18 F because I never heard of it until this this tweet basically I don't know if you do. You know do you know this existed?

Blake Oliver: No, I'd never heard about this.

David Leary: So about 18 F we help other government agencies [00:16:00] build, buy and share technology products. 18 F is a team of designers, software engineers, strategists and product managers within the General Services Administration. We collaborate with other agencies to fix technical problems, build products, and improve public service through technology. And the name is basically short for the address of the GSA headquarters, which is 1800 F Street. So it's like a skunkworks type group inside the bigger General Services Administration. We used to have at Intuit [00:16:30] something like this. It was called Intuit Labs, and you would use them to build kind of experimental things when you didn't have the resources to do it. And other companies, this is not something new. A lot of tech companies did this. Yahoo had some sort of garage like this that they had all these skunkworks projects going on at Yahoo! Early in the days it became all these separate startups, etc.. So this is what's interesting about this is you would think Doge would like to have an operation like this, right? Because [00:17:00] they could help improve their basically sharing knowledge. It's almost like a bunch of really good mercenaries that are really good at rolling out tech to government agencies, right? And you would think this would be right up Doge's Alley. And obviously they're not. And some of it if you go back to that tweet if I bring this back up. So this got shared by somebody accusing Atnf as a far left government wide computer office, which I thought is a little bit of a reach on that.

Blake Oliver: Yeah, I don't get it. Um, so it's [00:17:30] not really clear from Elon's tweet what exactly is happening. What we do know is that Atnf Twitter account has been removed. So apparently if Elon decides you shouldn't be on Twitter, You get deleted from Twitter.

David Leary: That's what it is. They got deleted from Twitter. Okay.

Blake Oliver: It's strange, but like, you would think that a group like Atnf, which is designed to make the government more accessible, to make tax filing easier to do, all this stuff would would continue to operate that it would meet the mission. So I don't [00:18:00] know what's up with that.

David Leary: And from what I can tell, they don't get direct government funding. So it's an operation that exists. And so when they do work for the IRS or different government agencies, there's some.

Blake Oliver: Sort funded by them.

David Leary: Inter transfer budget stuff that goes on. Yeah. Yeah.

Blake Oliver: Um, so you want to talk about Doge now and their access to treasury systems. I've been hearing all about this, you know, 19, 20, 22 year old tech guys [00:18:30] getting, uh, hired, I guess, as Treasury employees so that they can then get access to the Treasury payment system. Uh, and people are freaking out about this, but my first reaction is actually, this is brilliant. If you want to figure out where the money in our government is going, what's the best way to do that? It's actually not to look at the budgets. It's simply to go over to the Treasury and get access to the payment systems. This is what I would do if I was an [00:19:00] auditor, and I wanted to see where is the money flowing inside of business? Get access to disbursements. Get access to see the payments going out the door. And then figure out what you can cut. And that's what Doge has done.

David Leary: And so a lot of this was there's another tweet from Musk. Again I'll bring that up on the screen. He claims that they work together with the Treasury on this. And they jointly agreed. But he called [00:19:30] out, you know, some bullets of issues. He has he has with this. So apparently there's already an existing do not pay list of entities that Maybe it's half being implemented, half being ignored. So there's in this list is people that are either they don't exist anymore. They aren't even alive or they're bad actors. And so he starts with that like they need to which I agree with. Right. If there's a list of people we're not supposed to be paying, stop paying those people. So [00:20:00] he found that. Um, and then he said that over $100 billion a year of entitlement payments are to individuals without a Social Security number or even a temporary ID number. So if that's happening, he's saying that's very suspicious. Also, just this is a simple bookkeeping thing. A lot of payments are going out with the comment field just being blank. So nobody knows really what the funds are for. It's just it's just it's just laziness. Right? Just that's just going out the door.

David Leary: Um, he did say in this tweet that they had a rough. So he was trying to ask if [00:20:30] anybody at the Treasury had a rough guess of what percentage of that number is obvious fraud and the consensus in the room. It's about $50 billion a year. There's just obvious fraud going out of this. The payment system. So if they can just get tighter bookkeeping, right processes and approval processes, that would be a big deal. But it's the the chaos method of going after this maybe isn't the best route. Right? This is this is this is a lot of chaos happening. And it's so hard. It's confusing what's going on. [00:21:00] But and then because of the chaos, people don't even see his points. Like these are kind of okay points to be making, but nobody's going to ever see it because of the I'm going to put a 19 year old in and this other person in. And it's just he could probably go to that is it. It's not it's 18 F he could probably go to F-84f and say, hey can you use I to go and pull these transactions and categorize them. Maybe that would be a better use of that. That other division.

Blake Oliver: I don't know. I mean I it seems to be working politically if, uh, [00:21:30] a great example is, uh, all the fuss about these, um, what was it? Government employees with $36,000 a year. Subscriptions to Politico that are getting paid by through their budget. Apparently, Politico has some sort of like enterprise subscription, and it's tens of thousands of dollars per seat per year. And so they're receiving millions and millions of dollars from government agencies. And it's all about [00:22:00] it's like access to detailed information about policy and and policy proposals and legislation and that sort of thing. But it's through Politico, a, a news site with a like political bent. Right. That like, is perceived as being left leaning. And so it doesn't look good regardless of what those subscriptions are for. And, and it makes the news and people say, wow, look at all this government waste. Good job. [00:22:30] So it was kind of brilliant to get access to those systems and to look for that kind of spending.

David Leary: Yeah.

Blake Oliver: The, uh, and as Gator says, political pro is like LexisNexis or a Bloomberg terminal. It is not a political thing, right? But people don't understand the subtlety of this. They see Politico, the magazine, Politico, the the website, the news site, and then, you know, they see payments going to Politico. And so that gets [00:23:00] people riled up.

David Leary: It's it's the it's the soundbite.

Blake Oliver: But also like I see the point if, if government agencies are giving millions of dollars to Politico, could that possibly influence the reporting. Right. Like money is flowing follow the money is what we always hear. So, uh. It's fascinating. This is. Go for it, Dave.

David Leary: You say it's not like Politico is, uh, the NPR [00:23:30] where the, ah, legislature has carved out money for them. Right. But I get it. These are like these Bloomberg style terminals. I don't know, I'm kind of I have to hundred percent agree though. It it gets the headlines and it gets people riled up the way they want to be riled up.

Blake Oliver: Madman Dan says the issue is more complex than a 19 year old or youngin can understand. I assume that's what you mean there, madman. It's the conflict of interest and questionable background of the people [00:24:00] he is using.

David Leary: That's the one thing I wonder about is we have we already have this problem in our country where social media knows too much about us and big tech, and they're gathering they're gathering just tons of data about us. And on the other hand, now I want access to the government's payment system. It's it does feel like I don't know if I want this guy that has all this other data about me also seeing this data about me. Right? Yeah. [00:24:30]

Blake Oliver: Well, it's not like Elon himself. Elon himself doesn't have access to this information, right? It's it's it's it's employees or. I don't even know. So I guess it's it's they're affiliated with Doge, which is not an actual department of the government. It's a committee that the Trump administration has put together that Elon is running. And then those employees, I guess, become or not employees, those members then become employees of the Treasury Department so they can get through their security [00:25:00] clearance and get access to this information. But it's not Elon himself.

David Leary: Yeah.

Blake Oliver: So theoretically, he should not have any of this individual information. Right? But in theory, apparently, I guess there's reports of like, uh, these guys loading the information onto thumb drives. So we'll see. We'll see what happens with that. Um, David, let's thank our second sponsor of this episode.

David Leary: Second sponsors. Keeper. Did you want to read the ad?

Blake Oliver: I'll read it by combining [00:25:30] client communications, file review reporting and task management keeper has everything you need to run your bookkeeping or cast practice. Keeper is an all in one app that allows you, your team, and your clients to easily collaborate to make your monthly close as efficient as possible. Starting with a beautiful custom branded client portal optimized for bookkeeping work, your client can answer questions you have about uncategorized transactions, allowing you to categorize and automatically post them to QuickBooks online correctly, all without ever leaving keeper. Keepers [00:26:00] month end file review feature will surface transactions that may not be posted correctly, and with keeper's customized reports, you'll be able to increase the value that your firm provides clients by giving them reports they'll actually read. Keepers built in task management ensures nothing falls through the cracks, and it includes time tracking, so you can see where you and your team spend their time. Keeper has a very affordable and clear pricing model that starts at only $8 a month. To learn more about why thousands of bookkeepers and accountants trust keeper to manage their month [00:26:30] end close and to get 20% off your first three first three months. Head over to The Accounting Podcast. That's The Accounting Podcast.

David Leary: Maybe Doge could get keeper. And send out all those uncategorized transactions and get justifications back into the accounting system. Just just a thought. If keeper is looking for a big sale, Doge is out there.

Blake Oliver: All right, David, I want to talk about AI and automation and this concept of agentic [00:27:00] AI.

David Leary: Before we spin off on AI, can I talk one more politics story? If you want to call it that.

Blake Oliver: Okay. Go for it.

David Leary: Go for it. So no tax on tips may backfire on Trump. So I read an opinion piece. This is from a senior policy analyst at the Tax Foundation. And he has this data in here about how, you know, it's not even defined yet what this tips are right. Is it going to be.

Blake Oliver: So this.

David Leary: Was.

Blake Oliver: The promise during the campaign to exempt tips from federal tax. [00:27:30]

David Leary: Correct. And does that mean income tax and payroll taxes? Both. Does it only mean income taxes? It's not really clear. Is it just leisure and hospitality businesses? Right. And the Tax Foundation put some numbers around this. So if it's just income and payroll taxes it's about 118 billion. If it's just leisure and hospitality it could be 62 billion. But for perspective the Tax Cut and Jobs Act was 3.6 trillion to 4.3 trillion. So in a way like the impact of no [00:28:00] taxes on tips is a lot smaller than these other things. And we've talked about in previous episodes like, well, why don't you put all your income as tips? The good news is tips have a clear definition for tax purposes. The payments must be made free of compulsion and the customer determines the amount. It cannot be the result of a negotiation. Those restrictions make it illegal to misclassify ordinary wage and salary income as tips. So to some extent I think we're protected from people playing the game if no taxes on tips goes through. [00:28:30] But the interesting argument in this piece was about the backfire. So would you agree that one of Trump's main goals is to increase U.S. manufacturing and manufacturing jobs?

Blake Oliver: Yeah, definitely.

David Leary: So who is going to take U.S. manufacturing jobs and get their wages taxed? If you could work a hospitality business and avoid taxes. Right. Right.

Blake Oliver: I guess that's a fair point.

David Leary: And my $0.02, if truly that's the goal. If you want to get more U.S. manufacturing, give the factories a tax [00:29:00] cut and then create a policy of not taxing factory workers. If you really want to move the needle in the direction you're going. And at the end of the day, this is like I'm not sure Trump knows what his goals are. He says something out of his mouth here, but his goal is manufacturing over here. The only goal I think he ever successfully focuses and executes on is to win the election. He's really good at that. Right. But it's just it's all over the board. Like, this isn't like this could backfire on him because who's going to leave these jobs Hobbs. If you [00:29:30] get used to not paying taxes, it's going to be very hard for an incentive to leave that job because the cycle, even if you're going to make way more wages minus the taxes, you're still coming out ahead. Psychologically, that's a hard thing to jump to.

Blake Oliver: Yeah. Well, I'll tell you what. If, uh, if this passes, if if we do see tax exempt tips, then, um, I'm going to see I think we'll see a lot more professional services firms accepting tips. You [00:30:00] know, uh, I'll take I'll take half of my invoice as a tip, please. Thank you very much. Yes. It's optional.

David Leary: Right when you when you go to your return. Yeah. And I'm just going to ask you another question. We know it's going to be the tip question, but you just send that over and that's best for your return. And then wink wink tip.

Blake Oliver: Yeah, yeah. Um. All right, David, may I talk about AI now? So.

David Leary: Yes.

Blake Oliver: What? Thank you. Uh. So I spotted this clip [00:30:30] on Instagram from this account. Um, Griffin, I think it's Grenada. G r e n t e on Instagram, and I just I love this story, um, about what happens when you try to automate something and you don't really understand the full scope of what you are automating. So I'm gonna play this.

David Leary: Clip, this guy before, do you know his background?

Blake Oliver: I don't I don't.

David Leary: Consultant [00:31:00] a talker. All right.

Blake Oliver: Uh, yeah. It's like, uh. Anyway, just bear with me. Here we go.

Instagram Clip: Okay. You take a hotel doorman, you go. His function is opening the door. Therefore, we'll replace him with an automatic door mechanism, and we'll save 30,000 pounds a year. What you're not realizing there is that in terms of meaning as distinct from function, the doorman has a whole load of meaning. Um, about him, which goes beyond [00:31:30] far beyond the narrow function of opening the door. He doesn't only open the door, he also hails taxis, liaises with representatives from local organized crime um, talks to doormen at other hotels, provides a measure of security. Okay, so you get rid of the doorman, you save 20,000 pounds. And what you discover is that six months later, the hotel. You know, the RAC rates in freefall. They're vagrants asleep in the doorway. And the whole place has gone to shit. And your regular customers don't want to stay there anymore because they miss Dave. Right. And [00:32:00] I think that happens all over the place where you, you you bring in a reductionist mindset from tech or from finance. They define something complicated in a very narrow, functionalist way. They replace the function with something else, and then they declare the job done and lay claim to the cost saving. But what you do is, okay, you take a hotel doorman. You.

Blake Oliver: So I love this because this to me is the same thinking. The idea that you can replace [00:32:30] a hotel doorman with an automatic door opener is the same type of thinking that we see from private equity venture capital, saying, you can replace the bookkeeper or the accountant with an AI agent because they're reducing what the accountant or the bookkeeper does to one function. In the case of the bookkeeper, it might be coding transactions into the general ledger or a small set of functions that includes [00:33:00] coding transactions but also paying bills. They've reduced what that person does to specific tasks. But there's a lot that you miss. There's a lot of detail, a lot of things that that person does that you don't think of as tasks and that can't easily be automated. And so people are going to be really disappointed if they try to do that. Right. Like and that's why I'm very skeptical of any startup that [00:33:30] says we are going to build AI agents that do all your bookkeeping for you, because you need a human in that loop in order to handle all the other stuff that happens. It's like like the doorman at the hotel.

David Leary: And we'll probably find this out about some of our cuts that are happening in government, too. There's probably jobs that people are doing or tools being used that maybe aren't communicated very well.

Blake Oliver: I don't.

David Leary: Think so. And we're going to cut it. You don't think [00:34:00] so?

Blake Oliver: I don't think so at all. I think that there is absolutely a ton of waste and that you could I mean, you look at what Elon did with Twitter right now. He he comes in, he cuts like 80% of the workforce. The app still works.

David Leary: Yeah.

Blake Oliver: Twitter keeps functioning now it's enterprise value may have plummeted because advertisers don't want to advertise on it because you know it's turned now down into like a free speech platform. And advertisers generally don't like too much free speech because the speech ends [00:34:30] up being, you know, distasteful to them. They don't want to be associated with all of it. But that doesn't mean that what Elon did didn't work. He did slash the costs by like 80%.

David Leary: I'm and maybe it's easier for me to see that with a corporation like Twitter, because I worked in a corporation most of my life, and I saw just the wasteful people that were in the corporation making PowerPoint slides, etc..

Blake Oliver: How many people into it, David, when you were there like a, you know, did [00:35:00] nothing. I was a net zero. I always for the company.

David Leary: So QuickBooks desktop every year you'd have to you'd have a date and time and has to be done because there's only so much manufacturing time to put it into the CDs and get it stamped like it's a physical good, really. Quickbooks desktop was. And I always felt like when push came to shove, those last like 72 hours when you're trying to trying to, like, get the last bugs fixed and checked in. There was like 15 people at Intuit getting that product out the door, out of the teams of hundreds, [00:35:30] because a lot of people just their job was to build the PowerPoints. Their job was to do this. They didn't either have that like the doorman. How's all this extra knowledge? Right. You have to be part of that. But I have not worked at government. I've only experienced it on the other side. Right. You go to the DMV, you're like, geez, there's a lot of waste here. But yeah. So I it's hard to know for sure because I just haven't been that involved working for a government agency about how inefficient or the amount of waste. But I imagine it's got to be there the way a corporation is.

Blake Oliver: Oh, yeah. Even more. Right. I mean, big corporation, [00:36:00] government department, probably very similar people hide, but it's even easier to hide inside the government because you have all these unions that protect you. It's really hard to get fired. So you can you can contribute very little and just continue to exist. Uh, and so like, I, I really love this idea of cost cutting, of getting out the waste of, uh, of of gutting the government of of the waste that it that we don't need to be paying for as taxpayers. And I just can't understand [00:36:30] why this is controversial. Why is this why why are people opposed to this? Well, right.

David Leary: Everybody has the one government agency they interact with or care about. We kind of care about the IRS funding. We if you look at listen to our previous episodes, we care that the IRS is not underfunded. We care that the IRS provides good service to all our accountants and tax professional friends. So every agency probably has a set, a customer base that cares about that agency. So when these things get cut, it gets very scary, [00:37:00] right? You're afraid you're going to lose services like if the IRS gets. We've already seen the impact of IRS cuts over 15 years. Now you're going to go and do that to a bunch of agencies in a two week period. It's going to impact those agencies. There's no way around it.

Blake Oliver: But not every agency is directly dealing with Taxpayers or citizens, right? There's like, I feel like the IRS is a case where, yes, the budget has been cut years at year over year over year [00:37:30] for 15 years, but also they haven't done anything to modernize their systems in like 30 years.

David Leary: Yeah.

Blake Oliver: So like what is the answer? Is the answer more funding or is the answer getting rid of the people that just stand in the way of progress?

David Leary: I forgot who it was on the All In podcast. They're talking about an extinction event, right? This is going to create an extinction event. And whoever survives are the ones that are meant to be. Those are the government agencies will still keep. And which [00:38:00] is interesting way to to think about this.

Blake Oliver: So I started talking about AI there, and I want to highlight another article that I read recently on Accounting Today. Um, and this one the headline is is Agentic AI Small Steps Big Aspirations at Accounting Firms. And, uh, it's kind of a roundup of different AI initiatives at a few different firms. And I wanted to just kind of go through these examples. Um, [00:38:30] because while there's not like a ton of detail, I find it is helpful to think about where this is going. So, uh, is using AI agents, they call them mini agents that identify errors in tax data and propose corrections for human review. The system processes high volume data. So, for example, multinational VAT compliance across 20 countries. And they can feed this AI agent [00:39:00] all this information and then try to find errors in the data. Uh, another test they're doing is autonomous agents that can track jurisdictional regulatory changes, flag updates and suggest stakeholder engagements. So I am really bullish on this. Setting up AI agents that will search the web, monitor changes in laws or statute or what's going on anywhere [00:39:30] in the world, and then highlight that for humans to then flag for certain clients. If you think about how much you know, how many people are employed that just have to, like, stay on top of regulatory change and then update the team when it comes to tax or it comes to audit, whatever it might be.

Blake Oliver: That's a lot. Um, Wipfli is doing something similar like that. They've got a researcher agent and [00:40:00] then they've got a curator agent. So the researcher agent monitors for regulatory changes, and the curator agent then distills the insights for their mid-market clients. So I assume writes about those regulatory changes so they can send them out to the clients. Armanino is Is using AI agents to automatically categorize and route client provided audit documents to appropriate audit tasks. So you take in a bunch of documents from a client. Let's use [00:40:30] AI to name them to assign them to different tasks for review. I think that's a great use case. Um, they are exploring using AI for substantive testing to analyze audit evidence directly, although they have not done it yet. It's theoretical still. And then a firm called Shelman is using agents that can map client IT infrastructure pre audit for cybersecurity discovery [00:41:00] and help to streamline on site reviews. So um you know take documentation about IT infrastructure and then map that to audit tasks.

David Leary: Ah is there anything in this article that. Are they building this in house? Are these off the shelf third party tools they're getting.

Blake Oliver: That I do not know. We don't know. Um, I mean, it could be as simple as, like, just creating, like a custom GPT that has training on this sort of thing, [00:41:30] right? But, I mean, you can build these AI agents now, uh, yourself. So, you know, these are larger firms, right? So I assume that they are building tools internally that then access, you know, OpenAI or Claude or, you know, perhaps some model that they're hosting themselves to do this kind of work.

David Leary: So this would explain why I have a story on a company called Wise Layer. They raised $7.2 million to build [00:42:00] AI and finance professionals. I'm going to share my screen here so you can see how this is happening. Hopefully you can see this.

Blake Oliver: I do.

David Leary: So they've basically broken it down to very specific tasks with very creative names. So you've got reconciliations by Rick. You can do can do. Lisa. Counting by Lisa. You could do Prepaids by Preston. So there's these bots. Now they've given them physical video.

Blake Oliver: Oh, no.

David Leary: Chatbot type appearances. The funny thing is, is Lisa from accounting. I reckon Lisa, the Lisa accounting. I recognize [00:42:30] her from somewhere. I don't know why. She must be another AI person.

Blake Oliver: It's like they've used. They've used, um, like, stock photography to create these corporate looking AI agents.

David Leary: Yeah, and I can't tell if you're right. It's got to be stock photography. And I don't know if this is just the marketing page or if this is the actual product, because all you can do is book a meeting. But they but it's very clear they're they're breaking down the functions of an accounting job into one little agent. Accruals and reconciliations, [00:43:00] fixed assets, lease accounting prepaids discrepancies. And this aligns with a lot of the examples you just gave these very specific agent jobs that are happening. This happens to be a company doing it. But they raised $7.2 million to do this. They say they have over have over 100 companies currently using layers AI workers, including mid-sized firms and public companies, and they have over 300 integrations into every major ERP, billing, P2P and more systems. Um. We'll see. Um, they [00:43:30] have all the perfect quotes though, like the, the they expect to be like at 89% accuracy very soon or was it 98? Sorry, I might be transposing a number here.

Blake Oliver: Whatever it is, I'm sure it will blow our minds someday. David.

David Leary: So, Angela, who is the accruals and rec? She she. That bot automates about 90% of a company's accrual process with their novel and secure AI. They'll get to about 98% [00:44:00] this year. So they're pretty confident.

Blake Oliver: I don't know what to make of. I don't know what to make of numbers like that. Like, what does that even mean? 98% of accruals, like, okay, if I have like what? What does that mean?

David Leary: I don't know. In general, historically speaking, in tech, the last 10% is harder than all the other percentages. Like every time you move up one more percent, it was harder than the previous 90%. And then 92% is harder than the previous 91%. So to make that kind of jump does feel like a little bit of an [00:44:30] aggressive statement, but you're going to make that when you just took the money to do it, right.

Blake Oliver: All right, David, I think it's time to thank our last sponsor of this episode, Cloud Accountant Staffing.

David Leary: I can read that if you bring up the the banner or actually have the banner open, you got it.

Blake Oliver: I got the banner. Go for it.

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Blake Oliver: All right. Let's talk about the BDO lawsuit. Bdo USA has been hit by a class action lawsuit alleging that the company's executives inflated revenues and valuations before selling a significant portion [00:46:00] of stock to the employee stock ownership plan. I interviewed Wayne Bersin, the CEO of BDO, on the earmark podcast. Go check out that episode if you want to hear, uh, about that initiative. Basically, instead of going the private equity route, BDO went the ESOP route. So private equity is you take money from an outside investment firm to buy out your partners. Esop is [00:46:30] different. You borrow money and you sell equity to the employee stock ownership plan, which then gives that to employees on an annual basis.

David Leary: So they're being accused of pumping up the numbers, overinflating them and then selling to the employees, which is that's executives.

Blake Oliver: Executives allegedly overstated company revenues to inflate the valuation, leading the ESOP to purchase 42% of BDO stock for 1.3 billion, a price above fair market value, according to the [00:47:00] lawsuit. The transaction was reportedly structured to benefit BDO executives, who influenced the valuation process and appointed trustees favorable to their own their own interests despite the ESOP significant stock purchase. Bdo executives retained control over the company's governance and voting power, leaving ESOP participants without meaningful influence. The ESOP was financed through a high interest loan facilitated by BDO, resulting in significant financial strain on [00:47:30] both the company and the ESOP. The lawsuit alleges violations of the Employee Retirement Income Security Act, including breaches of fiduciary duty, prohibited transactions, and imprudent investment decisions.

David Leary: That's really disappointing because we we we had that interview when he came on the show. And at that time, our point of view was like, wow, you did. You did right by the employees on this. Well, obviously they did not.

Blake Oliver: Well, this is all [00:48:00] again, allegations. This is part of a lawsuit. We'll see what happens with it. Uh, is this, you know, really the case? Is it not a judge? A jury will decide. Um. And that's all I got on this. I want to thank Adrian Gonzalez, a going concern for her coverage of this. Um, as a as it continues. So, yeah, I think the thing that the thing that is the fishiest about this for me is the fact [00:48:30] that the executives still retain a full control. So it's like the the ESOP has purchased all of this equity, but it doesn't get control.

David Leary: They don't get a vote on the table proportional to what they have. Yeah.

Blake Oliver: Right. So. You know, what is the what is the value of that ownership stake if you don't have control, if you don't have influence, would would a private [00:49:00] equity firm have done a deal like this. If you treat this as an arm's length type of transaction would. Someone independent have done it? Or was this structured in a way that really benefited the executives and the partners getting the the buyout.

David Leary: And esops private? It's not like if I work for a big corporation that's a public company and I'm getting employee stock purchase plan, I'm able to buy that or I'm getting employee stock options. It's [00:49:30] based on value that the street's valuing those those options at and there's somebody looking out for you. But you're right. Are the employees not being looked out for in these esops.

Blake Oliver: I see David, I know we've got more to talk about, including that Adobe survey, but that will have to wait until next week. Um, or actually later this week we're going to do another episode. Uh, because I gotta run. Don't forget, dear listener, you can earn free continuing professional education credit for listening to this episode and all episodes of the Accounting podcast. Just [00:50:00] go to create your free account and earn one for free per week. If you start now, You could get your whole CP requirement done for free before the end of the year, but you could also support us for $150 a year. Get unlimited access to earmark courses. Um, we really appreciate our subscribers. Thank you to everyone listening who has subscribed. Anything else? David, before we go.

David Leary: Not anything that can't wait till the next episode.

Blake Oliver: All right. Thanks everyone who joined us live. Don't [00:50:30] forget, you can subscribe to us on YouTube, go to at The Accounting Podcast on YouTube. Hit that subscribe button. You can join us when we go live, uh and chat with us. Great to see you all. Rafi. David. Boring. Accountant. Nightbirde. Tina. Madman Dan Gator NYC. Uh thanks everyone. Christopher R5. Ahmed. Great to see you. Evan. Natalie. Trevor. See you around here next [00:51:00] week. Bye, everyone.