The Accounting Podcast

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Adam Zaki: [00:00:04] So then what becomes the value of the CPA? Then? Just the person who could check the box of the I done audit. Is that it?

David Leary: [00:00:12] Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: [00:00:20] Hello and welcome back to the Accounting Podcast, your roundup of news in the accounting profession on a weekly basis. I'm Blake Oliver, and David Leary is on vacation for the first time in I think seven years. He's taken a week off and he deserves it. David Leary is in, uh, Ireland with his family, checking out all the sights, seeing everything there. I'm jealous, but not really because I'm joined by Adam Zaki from CFO. Welcome, Adam.

Adam Zaki: [00:00:51] Thank you so much for having me. And I think I said the same thing last time though, too. I'm a huge fan of this show, so a little bit of a fanboy. Um, and big shoes to fill. Today I'm a big fan of David. I know there's only two of you, but I'm a big David fan. So happy to, you know, fill in when he's out and hopefully we have a great show.

Blake Oliver: [00:01:07] I think we will. Uh, I love hearing your perspective, Adam, because at Cfo.com, as a reporter, you get to talk to so many important people CFOs, comptrollers, uh, government officials, regulators that we don't always talk to here on the program. So I'm eager to hear your take on issues like the CPA pipeline, the 150 hour rule, what's going on with the PCAOB? I know we have a new accountant at the SEC, so we'll be talking about that and more on the show today. But I want to start I want to start with tariffs because tariffs are on my mind. Anyone who listens to the show knows that. I just I can't stop thinking about them. And we've got some data on consumer prices about what's going on with tariffs. Like what has been the impact so far. Adam, you and I were talking before we started recording about what what what what it feels like. And you said, you know, so far it doesn't really feel like much, right?

Adam Zaki: [00:02:06] Yeah. I mean, especially from the CFO perspective, I think the hardest part is the uncertainty aspect of it is like, you know, you CFOs can manage higher costs. They can build strategy around things that impact finance. But when you have to strategize around politics and make predictions about things that happen in Washington, not only do they not teach you that in business school for CFOs, but that is what separates the great from the good CFOs. And you can see it in company performance, right? I mean, I just had an interview with the CFO of Keurig Doctor Pepper, and basically what he said is his entire approach. That's a massive company coffee, soda. They're moving things all around the world. And that approach was much more proactive, like they've been working on bringing supply chains back to America for a long time, right. Because they kind of they saw this coming. So if there's a CFO out there that still doesn't know what to do because of tariffs, I mean, they're probably not the best CFO on the market, right? And so and so I think that the proactive ones have been put in the work and they're executing now. But like I said, I think managing politics and trying to forecast around politics and uncertainty is the hardest part.

Blake Oliver: [00:03:19] Well, the challenge when it comes to tariffs is that the potential outcomes are so divergent. On one end, we have the Supreme Court, which could completely invalidate all of virtually all of the Trump tariffs so far, including the threatened ones. The Supreme Court has been asked by two family owned toy companies, learning resources and hand to mind to strike down Trump's tariffs on an expedited basis. They want a ruling by the end of the year, bypassing the normal appeals process due to economic urgency. We've talked about this on the show over the past several weeks. Uh, there is some shaky legal ground, especially for these reciprocal tariffs that Trump has threatened. And it could be that even if they go into effect, the Supreme Court strikes them down. And so there we are, back to the beginning or back to very low tariffs, which are a completely different story than 100% tariffs, right? 10% that could be absorbed by consumers, by businesses, by the manufacturers in the foreign country. But like 100% tariff as we've talked about. I don't know any CFO who could survive help their company survive 100% tariff if their sourcing completely from a country that's impacted by that, right. And that's why these toy companies are desperate. Because where do all the toys get made? I mean.

Adam Zaki: [00:04:46] In China.

Blake Oliver: [00:04:47] I turn over my kid's toys, you know, every single toy that I bought for him, I think from the age of 0 to 10 has been made in China. So yeah.

Adam Zaki: [00:04:57] We believe as well to same thing, right. A company that has most of their goods made overseas, I would imagine most in China. Right. On an earnings call, she came out, laid out a great plan for the company to kind of navigate the uncertainty of tariffs and then found another job. Right. So I think that's another thing too, is CFO turnover is so high. The demand for good CFOs is there that CFO is in a gig. They're getting crushed by tariffs. It's making their job hard where knowing everything you just said, if the CFO then has to go to the board and explain what the company should do, that's very, very difficult. And they may be able to probably can find another job where they will have to do less of that, if not none of that. And so I think that's what you'll see to these companies that are heavily impacted. They're going to have turnover among financial leadership and probably among other executives as well. But definitely on the finance team for sure.

Blake Oliver: [00:05:47] So the tariffs that are in effect at the moment are these global baseline tariffs of 10%. We've got that on China as well. There's some other tariffs like these fentanyl linked goods tariffs an additional 20%. So without going into too much detail it's basically like 10 to 35% on goods from China 10% globally. There's these tariffs on non Usmca goods from Mexico and Canada. But most goods are included in Usmca. So that doesn't apply. There's tariffs on steel and aluminum. Those are at 50% for all countries automobiles 25%. But again the reciprocal tariffs have been delayed. Those are the ones where it can go up to 50%. Those are delayed until July 8th at the earliest. So as we record here in mid-June, we're getting towards the end of it. You know, we've we've got a few weeks. But the question is whether Trump's going to punt on implementing the tariffs again. Now, the good news is that the inflationary impact of the tariffs so far has been pretty small. The consumer price index, it only rose 2.4% year over year in May. So that's not bad right. That's that inflation actually eased compared to previous months. Um some categories groceries and clothing have seen sharper price increases. But we've also had declines in gas. Airline fares vehicle prices. So we're not seeing the impact here. Now in June, even though economists expect the tariffs to eventually push inflation higher, they are saying the forecast, the consensus is that inflation is going to go up about 0.8 percentage points for 2025 due to the tariffs, which is not terrible, right. Less than 1%. Um, Janet Yellen former Treasury Secretary Janet Yellen, she thinks that inflation year over year is going to go to about 3% or maybe a little higher this year as the tariffs work their way through the economy. So you know it's not ideal, right. 2% I think is the target that the fed sets. But you know 3% I mean it's not horrible. But again the question is what's going to happen when those reciprocal tariffs go into effect. If they do.

Adam Zaki: [00:08:08] And and I think one thing that's blatantly obvious we have to bring up is the impact of Israel and Iran conflict on all of this stuff. Is are all these predictions now out the window because the geopolitical, regardless of the political impacts, right. The geopolitical impacts on businesses, like if we go back to a Keurig doctor, Pepper, these global companies, you know, these things really affect the CFOs of these companies, right? These are things that keep them up at night. How do we handle things like this. And it's those types of things that throw predictions out the window, you know, and create more uncertainty. And CFOs think long term. They think quarter maybe two quarters year out, two years out. And so if you're dealing with uncertainty day to day, those forecasts and those predictions are so challenging, so challenging.

Blake Oliver: [00:08:57] I don't know how you do it. I mean, when you can't go more than a month out. Right. And if the if the reciprocal tariffs get punted again, that just delays the problem. It doesn't actually provide any certainty. And that's I think what we need. You mentioned Iran. I wanted to talk about that briefly because whatever side of this you're on politically, whether you think it's a good idea or not, there's definitely going to be an economic impact if the United States gets involved, if there's a direct conflict between the U.S. and Iran. And the biggest concern there is, well, it's two things, right? There's just simply the cost of war, which if you look at what Israel is spending, it's about 1 billion to $2 billion a day. So there's that. And when we're already running a deficit, adding more every day might not be that popular. Let's say it lasts 100 days. You're looking at 100 $200 billion more. That was not budgeted for. Economically, though, the big impact would be obviously gas prices. So if gas goes up to $100 a barrel, what's the impact on the US economy? What's the impact on overall inflation? It seems to me like that threat is really what limits Trump's options when it comes to what he's going to do in the Middle East, because for all his rhetoric, what he doesn't want and what the Republican Party doesn't want is really bad inflation going into a midterm election.

Adam Zaki: [00:10:34] You know, I don't think people, everyday people even outside of accounting are thinking like that, right? Most people just don't want war, but they don't realize the consequences of war that go into things like inflation and things like that that affect everyday people outside of general violence, of a conflict like that. So I think that the impact goes far beyond business. There's a lot to talk about, but we're still in the very early stages of it. I mean, we haven't even felt the impact of tariffs yet. And that's been written about about how that's going to destroy the economy eight different ways for months now. And so the impact of these things take time to be felt. But I mean, if a CFO doesn't have their eyes on this conflict, I don't know what they would be thinking about, especially if you're at a midsize or large company for sure.

Blake Oliver: [00:11:18] Actually, Adam, I just thought of one guy who has a less enviable job than a CFO right now, and that would be Federal Reserve Chair Jerome Powell, because everyone's looking at him and saying, what are you going to do? Are you going to raise rates? Are you going to lower rates? And he's looking at the possible outcomes. The same way we are in these CFOs are, which is well, it could be a disastrous situation with extreme inflation, depending on how things go with tariffs and with Iran. Or it could be the complete opposite. And he's basically saying we're taking a wait and see approach. The quote from Jerome Powell is we haven't been through a situation like this, and I think we have to be humble about our ability to forecast it, which in Federal Reserve speak is essentially we have no idea what's going to happen.

Adam Zaki: [00:12:10] You know, I'll tell you- I've always thought whoever's doing his media training needs to be one of the highest paid people on that team. He he is able to go to a press conference and handle tough questions very, very well. And we could go into CFOs and how their demand for public speaking is growing. But I mean, if you're looking to learn how to speak on the fly and public speak well and answer tough questions on the spot, go study a couple Powell press conferences because he's great at talking around issues, but providing enough nuance to, like, answer the question. So so there's no follow up for the reporter from a reporter's perspective. It's it's very tactical and very interesting how he approaches communication. It's why I love watching this stuff outside of, you know, what he does well.

Blake Oliver: [00:12:56] And it's amazing to see how he stays so calm when President Trump calls him, quote, a stupid person, unquote. And he also says the fed is, quote, needlessly inflating federal borrowing costs, unquote, and, quote, costing the country a fortune, unquote. And of course, Trump wants the fed to lower interest rates, believing that it will stimulate the economy. It will lower borrowing costs. So he doesn't have to worry so much about the debt.

Adam Zaki: [00:13:27] I mean, don't you think? Can I just the only thing that comes to mind is that the a contentious relationship between the fed and the president is, like, as American as apple pie. I mean, this goes back to Andrew Jackson, right? Right. I think that this is not a problem that we will probably ever see solved in our lifetime. Do I think the fed will be abolished? No. But I think that people who want one side or the other of a solution to the Federal Reserve's involvement in our politics and in our policy, that answer is not going to be decided overnight. They've been trying to figure that out for about 250 years. Right. Maybe a little less than that. But but I think that's that's also something that people fail to realize is like, this is something that's been happening in history for 200 plus years.

Blake Oliver: [00:14:13] And we repeat the cycle over and over again. It seems like that I keep I keep talking about that. I apologize for beating a dead horse on this when it comes to the, uh, you know, the historical tariffs, right? Mckinley's tariffs, like we've seen this happen before. And like you said, we've also seen the fed at odds with the president, although not quite as directly perhaps.

Speaker4: [00:14:36] Sure. Um, well, the.

Adam Zaki: [00:14:38] Technology you could.

Speaker4: [00:14:39] See it, right.

Adam Zaki: [00:14:39] You can read it and see the words.

Blake Oliver: [00:14:41] You can tweet it, right. Um, so it's it's like you said, it's it's an amazing composure from the fed. We'll see if they stick to their guns, if they hold, if they continue to hold rates steady rates are at around 4.3%. They doesn't look like they're going to cut in July. And the job market is, uh, strong right. Unemployment is low at 4.2%. So unless that number budges, it's hard to imagine them making any changes. So I guess we'll see what the impact is of tariffs and inflation on the job market. And I actually as I think about this in the moment, I feel like the job market's going to stay very strong. Right. Like unemployment is going to stay low because you know all of this is intertwined. Everything the Trump administration is doing is intertwined. So you deport a bunch of people. Right. Which is also the big story of June.

Speaker4: [00:15:37] Sure.

Blake Oliver: [00:15:37] And what happens to the job market, right? It becomes tighter. So it's like all of these policies are conflicting with each other in so many ways. And, and and I don't know I don't know if we don't know what's going to happen.

Adam Zaki: [00:15:53] I question if the amount of deportations is sustainable. Right. I don't think that we're going to be able I mean, the numbers are crazy. The amount of people that we'd have to deport every day to go back to where we were.

Speaker4: [00:16:02] Right. I think they were.

Blake Oliver: [00:16:03] Targeting 3000 a day.

Speaker4: [00:16:06] Yeah, it's a logistical nightmare.

Adam Zaki: [00:16:07] They don't have the money for it.

Speaker4: [00:16:08] I mean.

Adam Zaki: [00:16:09] This is a political debate in and of itself, but I just think it's a very tough issue that impacts business. And it makes my life easier because it gives me so much stuff to write about. Right?

Speaker4: [00:16:19] So yeah.

Adam Zaki: [00:16:20] Keep it coming.

Blake Oliver: [00:16:22] It's not easy for business. And I guess, you know, the the silver lining of all this chaos is that it's great for advisors, it's great for accounting firms. And I want to point out a few stats that are really interesting in that, in that regard, which is we see optimism going down among accountants, but profits are up. Optimism is.

Speaker4: [00:16:49] Down. Say that one more time.

Blake Oliver: [00:16:50] Optimism is down. Economic optimism is down among accountants, but profits are up. So let's talk about the optimism part first. Right okay. Avalara does a confidence report where they survey accountants. And they found that between January and April, net sentiment among accounting professionals swung from plus 19% to -39%. It's a 58 point drop. So I brought this up on a previous episode. That's a huge swing. And inflation costs and pricing. That's the number one concern. So accountants are very concerned about inflation as they should be, because anyone who looks at these stories and sees what's going on in the news thinks war in the Middle East tariffs. That's going to drive up prices. We know this to be true. And also deporting a bunch of workers that are like working in hotels and restaurants and and farms like that's going to drive up labor costs. It all drives up prices. And that's the big concern. But then you look at like surveys of accounting firms. And zero just did one. And they find that um well I lost the story. But it's something like 75% of small firms are have seen significant increases in revenue. So what that means is that all this chaos in the business world creates a lot of need for our services.

Speaker4: [00:18:20] Sure.

Adam Zaki: [00:18:20] I think it's I think people, especially from the CFO perspective, you can kind of pass a little bit of the burden of responsibility if you outsource some of the burden that these things are bringing on your business, right. If you if you go to Gardner Deloitte or get a consultant in house to help you strategize around your tariff response, and that it doesn't work out. As a CFO, you can go, well, that's what Gartner Deloitte told me to do, and I just listened to them. And so I think that plays into it a little bit too, is, you know, people are looking for a great insight, but also looking to pass the burden of responsibility.

Blake Oliver: [00:18:51] I want to talk. I want to pivot now and talk about the CPA pipeline and 150 hour changes. Adam, I know you've been tracking that, and you've got actually a great tracker on Cfo.com that lists out all the states and what they're doing with CPA licensure. But first, I want to thank our sponsor of this episode and that is Cloud Accountant Staffing. If you are in need of staff and you want to hire offshore, check out Cloud Accountant Staffing. They will help you hire premium offshore accountants in days, not weeks. You get Pre-vetted time zone aligned talent from the Philippines, Latin America and South Africa and they vet them and you get white glove support. So check out Cloud Accountant Staffing comm if that's what you're interested in. And also welcome to our live stream viewers. We are live streaming here on a Thursday instead of a Friday. I know Friday is our normal day. Welcome, nightlight. Welcome, Firelands. Boring accountant. Chess. Great to see you all for coffee emojis from boring accountant. Today I have basically had a whole pot at this point. We are broadcasting a bit early this week because I'm going camping this weekend with my son. I'm taking him camping for the first time, so wish me luck!

Speaker4: [00:20:05] Very cool. Yeah, good luck with that. Yeah.

Blake Oliver: [00:20:07] Formative formative experience that I hope will go a lot better for him than it did for me.

Speaker4: [00:20:12] Wow. So with that.

Blake Oliver: [00:20:14] Yeah. Thank you, thank you, thank you. I got to go get the s'mores. Uh, materials. That's very important. Need to get the s'mores right.

Speaker4: [00:20:22] Start a fire in the woods.

Blake Oliver: [00:20:24] I hope. I think our campsite will allow us to. It depends when we get there. But, you know, Arizona, it's, like, very dry.

Speaker4: [00:20:30] You do it from scratch, though.

Adam Zaki: [00:20:31] If I gave you two sticks and a rock, could you make a fire?

Blake Oliver: [00:20:33] I never got that Boy Scout merit badge. No. Can you?

Speaker4: [00:20:36] No. I'm from Long.

Adam Zaki: [00:20:37] Island.

Speaker4: [00:20:38] Please. Oh.

Blake Oliver: [00:20:40] Hey. Welcome, Stephanie. Great to see you in the chat as well. Hello. All right, Adam, give me the rundown. Uh, what is going on with CPA licensure? The 150 hour rule? We've had changes from a few states in the last week or two.

Speaker4: [00:20:54] I think.

Adam Zaki: [00:20:55] So far. You know, it's hard to count because some states are in different areas, but the numbers either 19 or 20, I have to confirm that number. But we're either at 19 or 20 states that have made some type of change to this. But what's so interesting is, you know, New York just passed it, which is big, because New York obviously has probably, if not the most amount of CPAs working within its borders. Right? I know that I think you talked about this on your panel where you had all the CPA society leaders. I think Texas and New York were the top two, but I could be wrong on that. But huge state, huge pathway reform. And it's all kind of the same thing, right? Two years of experience, 120 credits in New York. Very interesting that they don't use the word bachelor's degree. This is something that Calvin Harris, who's the CEO over at the New York State Society of CPAs, was iffy about when I interviewed him. They weren't sure if in their changes they were going to use the term bachelor's degree or 120 hours. Clearly they went with 120 hours. That's kind of the differences that we're seeing between the states. Some states call it bachelors, some states call it 120. But every state is rolling out almost identical changes. It's almost about every two and a half, three weeks we see a new change. It's like a cadence. It's very interesting. And I will tell you that over the past year, any time I put the word or words 150 our CPA shortage accountant shortage licensure changes. These stories are the top performing stories on Cfo.com. And this was not the case 2 or 3 years ago when I started here three years ago now, right where our accounting coverage and the coverage of these changes of this space, although it doesn't affect CFOs, like most CFOs I interview, are not accountants. They either let it lapse or when they were in public accounting and never maintained their CPA or came through fpna or investment banking and never even was in accounting to begin with. And so I.

Speaker4: [00:22:50] Think, I.

Blake Oliver: [00:22:51] Think actually, Adam, it's important to note that, yeah, over the past few decades, the percentage of CFOs who are CPAs or were has gone down to about a third, roughly.

Adam Zaki: [00:23:02] I would even say that's a big number.

Speaker4: [00:23:04] I would say.

Blake Oliver: [00:23:05] It's.

Speaker4: [00:23:05] Less. Yeah, yeah, yeah. Interesting. I mean, just because.

Adam Zaki: [00:23:09] Of the CFOs that I interviewed, very, very few, I think I've interviewed maybe 1 or 2 that are an active CPA. I just it was actually just the, the, the topic or the title of the story that I put together with an interview of a CFO of a company called Trintech. Um, their CFO.

Speaker4: [00:23:23] Is an.

Adam Zaki: [00:23:24] Active CPA. Very. I met him at the Gardner conference. And, you know, it was very interesting. He talked about the benefits of being an active CPA. And I've heard from CFOs who come up through public accounting that it's very, very challenging when you are a controller or a VP of finance to work for a CFO. That has never been an accountant.

Speaker4: [00:23:43] Because that's very common.

Adam Zaki: [00:23:44] And it's and it's increasingly more common. And so when an accountant finally becomes a CFO, they take it from this perspective of, I'm going to do everything that the CFOs I worked for who didn't know anything about accounting, didn't know. Right. And I think that it creates an interesting kind of classic but new way perspective of the CFO position. When you have a fairly young person who grew up in public accounting in their first CFO position, it's more common, I'm finding, but less common overall. But let's go back to the changes.

Blake Oliver: [00:24:15] So yeah. So you said New York, New York. So did they pass the legislation? Is it is it through now?

Adam Zaki: [00:24:20] It just has to be signed by the governor.

Blake Oliver: [00:24:22] Okay. So they're going to adopt the, you know, 120 hours, four years of education, two years of experience.

Speaker4: [00:24:28] Two years.

Adam Zaki: [00:24:28] Of education, 120 hours. Not a bachelor's degree.

Speaker4: [00:24:31] Two years.

Blake Oliver: [00:24:31] Of experience.

Speaker4: [00:24:32] Right? Two years.

Adam Zaki: [00:24:33] Of experience.

Speaker4: [00:24:33] Yeah. Okay, 120.

Adam Zaki: [00:24:35] Credits. Um, and then after the governor signs it, the law goes into effect 180 days after signature. So three months.

Speaker4: [00:24:42] Gotcha.

Blake Oliver: [00:24:42] And are they doing what the other states are doing where they're keeping the 150, like if you. Yes did that.

Speaker4: [00:24:48] Okay. Yeah.

Adam Zaki: [00:24:48] So so there are as far as I know, there are no states that have repealed the 150 hour requirement. And this is another point that Calvin Harris kind of stressed is that there was a growing narrative that the 150 hour requirement was going away, that states were saying, this is not an optional pathway. That is not the case. Like if anybody wants to go out and get 150 hours and use that towards their CPA licensure, they can do that in most states. Still, it's just an additional pathway. It's another option. So none of these states are removing the 150 by any means. Um, Pennsylvania as well. Made a change. Uh, their bill is Senate approved. It now has to go to the House of Representatives. So they are on step three of the process. Step one is Senate. Step two is House. Step three is governor. And so they're about, you know, a little more than halfway there. And Maine Maine is a very interesting one because Maine just made a recent change. They wanted to do the same thing. New York did 120 credits, two years of experience, but a an organization called the Office of Professional and Financial Regulation in Maine, who's in charge of the credentialing for all the state licensing said it would be too much work, and they pushed back the bill. And so it looked like they can't or it looks like they came up to a compromise where Maine was one of these states where you needed 150 hours just to sit for the exam. There are a few other states that had this requirement where some states will allow you to sit. If you have the bachelor's and you're pursuing your master's. But Maine was one of these states where you could not sit unless you had 150 hour requirement. That is no longer the case. So now in Maine, you can sit with 120 hours of credits, but you still need the 150 to become a CPA. That's the key. They didn't remove.

Speaker4: [00:26:38] That and they want to.

Adam Zaki: [00:26:39] Do.

Speaker4: [00:26:39] The work.

Blake Oliver: [00:26:40] Not because it was a bad idea, but because they're too lazy.

Speaker4: [00:26:45] You said.

Adam Zaki: [00:26:45] It.

Speaker4: [00:26:45] Not me. But but yeah.

Blake Oliver: [00:26:47] That's what it sounds like.

Adam Zaki: [00:26:48] It's it's bureaucrats. It's regulators that got presented with a great idea, but they argue they don't have the means to do it. Their, their quote was um, or their, their it was an administrative burden and cost. That's the reason why they pushed it back. Right. And I think that, you know, this is a society that does more than just CPA stuff. They're in charge of licensing, like I said, all the stuff in the state. But I mean, this is why these organizations and regulators exist to to make productive change and help these types of industries grow. And you know, we all know the narrative that government lags behind. But I mean, the issue with Maine is that their CPA candidates are going over the border to New Hampshire and Massachusetts to go get licensed because it's just easier.

Speaker4: [00:27:37] Right, right.

Adam Zaki: [00:27:38] Why would you get 150 hours to go take it in Maine, when I could have my bachelor's and sit forward in Massachusetts and and it's just a drive, you know, 45 minutes, an hour, depending on where you are over the border. Right. And so I think that Maine's argument of it, of their argument of how it creates uncertainty for both students and it's too much of an administrative burden, is a bad argument.

Speaker4: [00:28:02] It's a total bad argument.

Blake Oliver: [00:28:04] Well, you know, maybe they'll come along as laggards because you said it's it's something like 19 states now have have got the legislation in process. I've heard that 30 total are either considering it, working on it or have gotten it passed. So we're going to. It looks like we're going to get there this year in the next 12 months. I wouldn't be surprised based on the the current trend. And it's happened really fast. I mean, are you surprised, Adam, to see how quickly this has shifted? This seems like lightning speed compared to what it used to be like.

Speaker4: [00:28:37] Well, I.

Adam Zaki: [00:28:38] Think there was a bit of a catalyst that your co-host, David Leary, alluded to in a previous episode that I think the retirement of Barry Melanson of the AICPA played a lot into this. He was a proponent of the 150 hour rule. He was he was one of the last people doing press arguing for this. Like, it's very hard to go and find a story for someone talking about how great the 150 hour requirement is in 2025. But Barry retired on December 31st, 2024. And like I said, it's been almost like a three week cadence now where every three weeks we get a new state. We're making these changes. And I think, you know, when I interviewed Calvin Harris again, it was all in one interview. We did. I did a story with him probably about a month and a half ago. But I asked him about this. I said, were you guys waiting for Barry to retire? And he said, no, but he let me read you his quote. I have it here because.

Speaker4: [00:29:38] I think.

Adam Zaki: [00:29:38] That.

Speaker4: [00:29:38] It it.

Adam Zaki: [00:29:39] Really alludes to what he was trying to say. His quote is, do people quietly hope to move forward after Lance's tenure? Maybe. And I think that says it all right, is he didn't want to come to me and say, yeah, Adam, we were waiting for let's let's get this guy Barry out of here. And once he's out, we'll make these changes. He didn't want to say that to me, of course, but I think that is very telling, right? That I think.

Speaker4: [00:30:03] There.

Adam Zaki: [00:30:04] Were people in state societies, whether they were CEOs or decision makers in these state societies that were talking about this. And he did tell me, he told you on the webinar that you had with them. These societies are in constant communication with each other, so it's not as much of a colluding aspect. It's not like they were going behind closed doors and talking. They're already talking. But it's a matter of I think they were waiting for Barry to retire, and they had the 120 hour, two year requirement or two year experience requirement planned out. And I think that was agreed upon because if they all had different requirements, it would have been a mess. Right. If right now they were all rolling out different requirements to get CPAs in different states that were some states needed 120, others wanted one, 50 others went less. No bachelor's degree. Who cares? That would make it very, very difficult for things like reciprocity, right? And so I think there needed to be uniformity. They saw this coming. And I think they kind of went behind the back of Barry. Quote unquote. Right. I mean, not not totally behind the back because they're speaking, right. They're constantly communicating with each other, these societies. But they had to have a plan to roll out. It's very obvious you don't need the CPA to realize that they were all colluding with each other to do this. I mean, do you think I'm on to something here?

Blake Oliver: [00:31:18] It. It feels right, you know. I mean, you're the one doing these interviews. You're talking to people. I also have a few contacts behind the scenes. And that's what I'm hearing as well, is that it was like they were waiting and they were ready. And now it's moving very quickly. So I also think it's proof, though, that when the grassroots is mobilized, change can happen quickly. And so all those people who are saying, oh, it'll take forever because it took 20 years to get 150 in place. It'll take 20 years to remove it. I think that is just false. You can do it in two if you really want to do something in this country. You can do it in a year or two. If you have the support and you're mobilized and you don't overcomplicate things. Right. I want to zoom out a bit from the state level to the federal level. Let's talk about the new chief accountant at the SEC. This is a role that is not widely known about, but is actually, like super important. So who is this guy?

Speaker4: [00:32:17] Yeah.

Adam Zaki: [00:32:17] The reason why I wanted to bring this up to your viewers is because I think this guy's tenure has a very it's something that your viewers can learn from, especially the younger accountants. So his name is Kurt Hoel. I had a long career in public accounting. But what's interesting is that he kind of came in and out. And a question I love to ask CFOs who worked in public accounting is why didn't you pursue partner? Like what made you get out? Because once you're in, you can kind of especially years ago, you could stay on track and have a pretty good cutout career for yourself if you choose to do so. Right. And so I think looking at this guy Kurt Holt's career, I think accountants can look at this and go, even if I started Deloitte or even if I started in UI, I'm not doomed for 40 years there, right? Or I'm not doomed to only being in public accounting. I mean, so Kurt started at Deloitte, he went to the SEC, then he went back to EY, did 26 years at EY. So he put in his time in public accounting. Make no mistake. But then he left. He found. He finds his own boutique accounting firm. And then he takes this job as the SEC chief accountant. So that's a very quick.

Speaker4: [00:33:24] Synopsis of this.

Adam Zaki: [00:33:26] Career. But it goes to show that if you're a young accountant and you're looking at Big Four and you're going, is this going to be my life? You know, I mean, you guys brought up that Deloitte commercial, that wacky Deloitte commercial that came out where they have the partners coming on a call during a birthday party, as if partners.

Speaker4: [00:33:44] On the weekend.

Adam Zaki: [00:33:45] And parties.

Speaker4: [00:33:45] Right. Yeah.

Adam Zaki: [00:33:46] And so if you look at that commercial and you go, is this going to be my life? It may not be. And I think that young accountants need to realize that you could be a CFO. There's so many options in this space outside of public accounting. So many.

Speaker4: [00:34:00] Well.

Blake Oliver: [00:34:01] Kurt Hole may have his dream job, but he might come to regret it. Adam. And the reason I say that is because as the chief accountant of the SEC, he might suddenly have to take on all the responsibilities of the PCAOB, which will be eliminated in the one big, beautiful bill if it passes. And I believe unless correct me if I'm wrong, but the Senate isn't going to strip that part out of the bill, it looks like. So the odds that the Public Company Accounting Oversight Board, the auditor of the auditors, will get eliminated is very high. Um, and who would have to take that over? It would be the SEC, and I wonder. I wonder who who'd be put in charge of that? Maybe the chief accountant there. I'm curious. Adam, what's your take on the PCAOB going away? Do you think it's a good thing or bad thing? Neither.

Adam Zaki: [00:34:54] I think we need something. Right? I mean, the PCAOB is kind of undefeated, you know, ever since they've been put in place, we haven't had an Enron. There hasn't been some catastrophic accounting nightmare that has impacted and hurt people at scale in the United States. We've seen them overseas, but we haven't seen them here in the States. So I think we need something. Is government too big? And it's if you and I walked in the PCAOB, could we find people and go, what are these people doing all day, all day? I am sure we could. I'm sure we could. But to gut it is very, very difficult because like I said, if they they're giving out million dollar fines for billion dollar crimes, that's a very, very common critique of the PCAOB.

Blake Oliver: [00:35:37] But and also focusing on these enforcement actions around tests.

Speaker4: [00:35:43] Sure.

Blake Oliver: [00:35:43] Ethics exams right where but not really on like the audit quality itself. Yeah. So like you said, it's the amounts but also just like the the efficacy of it. It's something I've questioned myself. But yeah.

Speaker4: [00:36:02] I interviewed Erica.

Adam Zaki: [00:36:03] Williams a year on May 16th last year. So a little.

Speaker4: [00:36:07] Over a chair.

Blake Oliver: [00:36:08] Of the board.

Speaker4: [00:36:09] Of.

Blake Oliver: [00:36:09] The PCAOB.

Adam Zaki: [00:36:10] Be still in her position. And the way she kind of was talking to me about the PCA would be, and I remember hanging up the call going, I feel like I was just being sold, like she was selling me the legitimacy of the organization because I was questioning her on things like the auditor relationship. You know, one of the biggest questions I had coming into this position, I have no formal accounting training, is that you could go audit. If you work in public accounting, you can audit a company. Let's say let's let's say you're auditing the Tampa Bay lightning, a hockey team, and you buddy up with the finance team over there and you can get a job, especially if you give them a good audit, right? If you do well. And so that type of relationship always skeeved me out a little bit. And when we talked about that, you know, she just kind of defended that the pcaob's job is to protect investors. Right. But I think it's a little bit more than that. I think that's her press training talking. But but I really think that she made great points on the future of accounting and how she's from the school of thought that the way to solve the accounting shortage is to just pay accountants more.

Adam Zaki: [00:37:15] And I thought that was very interesting for someone in her position to say that, because she's not a typical accountant. You know, she I'm not sure if she spent time in public on what firms in public accounting or where she grew up in, but I don't remember. But I think it's very interesting, someone in her position to just say, hey, if we throw money at the talent, that'll solve all the problems because they're trying to take all the resources away from her and her organization and saying, we could do it without you. And so I think that there's a fine line in the middle. I think we need something. Whether we need a PCAOB to be the PCAOB, it is at the size of this today. Maybe. Maybe not. But if the SEC takes control of this, it's going to be a little bit of a disaster, especially at the beginning, because they don't have the resources, the people, the manpower, like they even just like a logistical perspective from operations. You know, you.

Speaker4: [00:38:00] Got to train.

Adam Zaki: [00:38:00] People to do these things.

Speaker4: [00:38:01] How would you fund it?

Blake Oliver: [00:38:03] The, the, the big beautiful bill doesn't transfer the $400 million Dollars to the SEC that the Pcob collects now from public companies. So where would the where would the money come? And the other issue that I've learned about recently is, is the salaries. Government salaries are capped.

Speaker4: [00:38:19] Yes.

Blake Oliver: [00:38:20] And to hire the people that you need to audit the auditors, you got to pay a lot because audit partners make a lot of money. Managers, directors, partners at the big four make hundreds of thousands of dollars or even millions a year. And you can't you can't attract the talent to match that level of talent in the private sector, in government, if you're paying those like SEC government mandated salaries, you got to attract you got to attract people who have done audits before and who can demand those salaries. And they're not going to take a, you know, 50 to 100% pay cut.

Speaker4: [00:38:59] So especially not 100% in.

Adam Zaki: [00:39:01] The context of the accounting shortage, I mean, those people are few and far between, especially five, ten, 15, 20 years from now.

Speaker4: [00:39:07] Good luck.

Adam Zaki: [00:39:08] Good luck. Going to find an all star auditor in 20 years.

Blake Oliver: [00:39:11] And so that actually was like a smart reason. Like that's smart. Something smart Congress did when it set up the PCAOB as a nonprofit because it can pay. It doesn't have to pay, according to the government pay scale. So it's like, I don't I don't know, another solution for that. Um, so it definitely would weaken audit oversight, right? Like that is.

Speaker4: [00:39:30] The.

Blake Oliver: [00:39:31] Inevitable conclusion is that it would weaken audit oversight, which to me seems like given that oversight is already so lax, it would inevitably lead to another Enron eventually.

Speaker4: [00:39:43] But could the.

Adam Zaki: [00:39:44] Pca will be run on 150 million instead of 300 million?

Speaker4: [00:39:47] Maybe. Maybe.

Blake Oliver: [00:39:48] Well, it's it's 400 million now.

Speaker4: [00:39:50] It's. Yeah. Could it run on half?

Adam Zaki: [00:39:52] Maybe.

Blake Oliver: [00:39:52] I think if it was, it was it was more effective. If it was more targeted. Right. More effective? Yes, I think it was better run. It could run on less money. But, um, but the problem is, like, they like, they're just they're not they're not really scaring the auditors all that much. You can release this deficiency rate. But what does it mean? It's complicated. Nobody understands it. Not even the accountants understand it. And, you know, so, like, all this stuff, there's all this stuff that I feel like Erica Williams and the Pcob could have done over the years to, to make themselves more relevant. They just never did it. So it was like their it's their fault in a lot of ways this has happened because they didn't prove their value.

Adam Zaki: [00:40:33] I think that's a private sector mindset in a public sector role. Right? I think change is very difficult in government.

Speaker4: [00:40:40] And.

Adam Zaki: [00:40:40] For regulators to go out and embrace and make change. You know, people have great cushy jobs in government. You don't want to take that away from anybody. I think that's a mindset that we don't have in the public sector or not as much, at least right, where to make changes that could influence people, especially when it comes to their livelihoods. I think it's much less likely to happen in government.

Blake Oliver: [00:41:00] All right. So I mentioned the one big beautiful Bill. So let's talk about it a little bit. It is now getting taken apart and put back together in the Senate. What is changing in the Senate version of the bill? I'm happy to see this. The controversial revenge tax that we talked about on this show that has not been widely talked about in the press or in the Non-accounting press, I should say. That is getting watered down. So this is that provision that would allow the Commerce Secretary to declare that some foreign country has unfair, um, taxes on US businesses and then like basically tax the foreign investors on their US investments and increase that up to like 20%, creating what some have called a capital war to match our tariff war. And this would delay it. The Senate version would delay it until 2027. Seven and it would cap it at 15%. I guess that's still pretty high. And it would make the increase gradual five percentage points per year until the cap is reached. I still feel like giving the executive the power to tax foreign investment in this way is like a bad idea.

Speaker4: [00:42:20] Agreed.

Adam Zaki: [00:42:21] Agreed. And I'm and I'm a fan of young Republican Blake in the show I am.

Blake Oliver: [00:42:26] I mean well so but I'm I'm like, I'm a Republican who doesn't exist anymore in modern politics. I feel like because, like, the executives should not have the power to levy taxes directly. Like, that's totally counter to the intent of the framers of the Constitution. Congress that sets tax rates and tariffs are taxes. And this is a tax. And we end up with a king, right? Is what we end up with. Or just like an executive is way too powerful.

Speaker4: [00:42:56] Sure. And I think.

Blake Oliver: [00:42:57] Republican the word comes from Republic, right? I like I like a republic.

Speaker4: [00:43:01] I just think it's.

Adam Zaki: [00:43:02] It's so polarizing. You know, the it's in media, I see it. It's same thing. Back to accounting. If I put Trump in a headline it's a chicken finger story, right. It's easy to put together. It does. Well now we call those chicken fingers in journalism. But I think that it's that type of thing where it's very hard to stay politically neutral when I cover Trump and these types of things, and it's difficult to do it in a way that provides insight to my readers they haven't heard before. You know, it's very easy to sit there and bash or promote a policy, but to do it in a unique way is so hard. And that's the biggest challenge I'm finding as a reporter right now, is what I'm trying to cover all this stuff, let alone CFOs forecasting around this stuff like we talked about before. But just being able to get straight facts and straight sources of information is nearly impossible nowadays. And that's what I try to give to my readers. But it's like it's so hard. And the uncertainty with stuff that you're talking about right now goes into it. It just creates a really, really tough environment to try to predict business from a journalist's perspective, from a CFO perspective, from a young accountant, from from a, from a mid-career accountant trying to look at their next ten years of their career. It's like when you look at the economy, how do you predict anybody's five, ten year plan? What I wonder if you're a business or a person, it's impossible.

Blake Oliver: [00:44:19] It is. It is impossible.

Speaker4: [00:44:21] It's impossible, it's impossible.

Blake Oliver: [00:44:24] Here's some other changes in the bill. So the Salt deduction.

Speaker4: [00:44:29] That's.

Blake Oliver: [00:44:29] That's a big one, right. So the Senate has no senators. There's no Republican senators from high tax states from blue states apparently. So they have reset the salt cap to 10,000 from the increase 40,000. And so some Republicans in the House are now saying that there's no way they're voting for the bill unless that salt cap gets lifted, because there's a lot of Republicans in California and New York, even though the states go blue federal in federal elections. And I guess, you know, with Senate elections, there's a lot of Republicans and and they're not happy that they're going to be paying a lot more in taxes. Right? That's the one group that's really getting screwed in this whole tax cut package. It's the.

Speaker4: [00:45:16] Great point.

Blake Oliver: [00:45:17] Right? It's funny. It's funny to me. And it almost is fitting honestly, because it's sort of like that's that's it's the high earning Republicans, the rich Republicans in blue states. It's like MAGA just wants to stick it to them. And that's who's going to pay a lot more in taxes. The only group that's going to pay a lot more in taxes under this bill.

Speaker4: [00:45:42] You know.

Adam Zaki: [00:45:42] So I never looked at it like that. But it's a great way to put it. You're so.

Speaker4: [00:45:45] Right.

Blake Oliver: [00:45:46] Yeah. So I mean, that's why this is so fascinating to me because there's a lot of CPAs who are high earning Republicans in blue states.

Speaker4: [00:45:55] Sure.

Blake Oliver: [00:45:56] It's probably a big chunk of this group. It's like New York, California, Texas. Well, not Texas, but, you know, New York and California. Like, that's that's the group. And these accounting firms are going to pay. These partners are going to pay tens of thousands more in taxes because of this.

Speaker4: [00:46:13] And you've seen the stories out there.

Adam Zaki: [00:46:14] I think I wrote up a couple stats around this not too long ago about the salary expectations among young people Gen Z wants. I think that number was $270,000 per year to be financially successful. I mean, if you if if taxes are affecting people's income as well, to the point where they're turning to their employer and going, I need more money because of what the government is doing. I mean, from the CFO perspective, that's another thing that is affecting the business that is outside of their control, which which leads to difficulty in forecasting more uncertainty and employee sentiment. I mean, is another big SEO slash hot topic for us, right? But I think that compensation plays a huge part into that. We go into paying accountants more, but if we do things with the salt tax to get people to pay more money in taxes, it hurts employers. It hurts businesses. I think people fail to realize that a lot of the time.

Blake Oliver: [00:47:03] Well, I'm glad I live in Arizona, which has a I think we have, what, a 2.5% flat state income tax now. Wow. Yeah I know right.

Speaker4: [00:47:13] It's I, I.

Adam Zaki: [00:47:14] Don't know what my state income tax is off the top of my head, but I'm in New York. It's probably much, much higher than yours.

Blake Oliver: [00:47:19] Here, I'll make everyone feel better. It's going to be 110 degrees today. So yes, low state taxes, but we pay for it.

Speaker4: [00:47:26] Trade off.

Blake Oliver: [00:47:27] Although I can afford to leave the state during the summer, so it's like it's complicated. You have to do a real analysis of this. It's like, how much is it going to cost me to leave Arizona for 2 to 3 months a year? Is it worth the offset?

Speaker4: [00:47:40] Um.

Blake Oliver: [00:47:41] I think it is. So what else is changing in the bill? Or what else? Have the Senate? What else has the Senate changed? Uh, the tip that no tax on tips. They put some limits in place on that. Maxing out the exemption at $25,000 per individual, it's 12,500 per individual. Oh, overtime, sorry is maxed out at 12,500 per individual and $25,000 per couple. The no taxes on overtime and actually, probably a good thing they did that because I did a little analysis of it back of the envelope and like it would create some like serious benefits for like high, uh, high earning tipped workers. And like a good example is like a blackjack dealer in Vegas, you know, they can make like six figures and so and like half of that might come in tips. So that would be kind of like unfair, I suppose, to everyone else.

Adam Zaki: [00:48:40] What's been unclear to me, and I was a waiter before I was in journalism in college, right, is when I if I got a credit card tip, that was the only type of tip I paid tax on. Like cash went in your pocket most of the time, unless you're working at like a Chili's or something corporate, you're probably not going to claim your cash tips.

Speaker4: [00:48:58] Right?

Adam Zaki: [00:48:58] So you. But. Sorry.

Blake Oliver: [00:49:00] No. Yeah. No. So it's a good point. Right. So, like, this is the thing about this whole provision is that in order to get the deduction, you have to claim the tips.

Speaker4: [00:49:10] Yes.

Blake Oliver: [00:49:10] And and like, it's better just, you know, it's not legal, but it's common practice just to not report the cash tips. So who's really going to benefit from this. Yeah.

Speaker4: [00:49:21] And I don't know why. Yeah.

Adam Zaki: [00:49:23] That's why you ask a waiter when they tip out their supporting staff. It's not based off the tips they get. It's based off their sales. Like a waiter will tip a bartender 3% of alcohol, not x amount of tips, because cash tips are untraceable. A waiter can stick a $20 bill or $50 bill in their wallet and say, I never got that. So. So I think that that's what confused me about this bill is like, so now waiters and waitresses continue to get like I would get checks that were voided. I would get checks for $0.25 or nothing because my my hourly pay was covering the tax on my credit card tips. So will that change? Because I just don't know how much this is going to help. I mean, a blackjack dealer, yes, but most tipped employees are bartenders, waiters, valets. Yeah, they're not making 100 grand. They're making 30 grand. They're probably not even paying taxes.

Speaker4: [00:50:14] Right?

Blake Oliver: [00:50:15] Most tipped workers don't pay tax anyway.

Speaker4: [00:50:18] Yes.

Blake Oliver: [00:50:18] Right. Because they they don't hit the. Yeah. They don't hit the threshold.

Adam Zaki: [00:50:22] They're just not waiting for their tax return at the end of the year. Now they're just going to be able to keep the money up front. It's probably going to be the biggest change they'll feel.

Speaker4: [00:50:29] I would say.

Blake Oliver: [00:50:29] That's I guess so um, we'll find out. I don't have the patience to do that analysis because I don't get any tips myself. Maybe I should maybe I should set up a tip jar for the podcast.

Speaker4: [00:50:40] Do a Patreon.

Blake Oliver: [00:50:41] Hey, it's tax if it's tax free. Um, okay, I want to highlight some business deductions that are very important. This is good news for our clients. The Senate is making three business tax breaks permanent instead of expiring like the House version. So R&D deduction permanent. You can deduct your R&D costs like immediately. Don't have to capitalize that amortize that interest expensing on depreciation and amortization I actually don't know what that means. Um let's see. Oh the 100% bonus depreciation for machinery and factories that's permanent under the Senate version. That's good. Um, I guess the House version I didn't even know about this, but the House version was going to tax university endowments by up to 21%. A wealth tax on universities. Senate maxes that out at 8%. Okay.

Adam Zaki: [00:51:36] This is like a horrible idea.

Speaker4: [00:51:38] I mean.

Blake Oliver: [00:51:39] Yeah, but it's like it's like, come on, be consistent here. If you're going to oppose wealth taxes on private families, then how can you support a essentially a wealth tax on nonprofits, which are in many ways just extensions of the families that endowed them with the money? You know what I mean? Like, it's it's I don't like.

Speaker4: [00:52:02] The Future of Higher.

Adam Zaki: [00:52:03] Education is a podcast episode in and of itself. You know, I just did have a great interview with the CFO of UTI, the Universal Technical Institute, all about how they are leveraging this future of higher education. It's coming out soon. A harmless plug, but very, very interesting company there and a great commercials in the 90s to I don't know if you remember, Universal Technical Institute.

Blake Oliver: [00:52:23] Universal technical Institute I remember UTI.

Speaker4: [00:52:26] Yeah. They yeah they great commercials.

Adam Zaki: [00:52:28] Yeah. But their CFO. Very very interesting.

Speaker4: [00:52:30] Guy. That's interesting.

Blake Oliver: [00:52:32] Um, I love to I'd love to hear that. Uh, okay. Almost done here. Electric vehicle credits. Elon Musk is still screwed in the Senate version. Uh, the Senate eliminates the $7,500 EV credit, and they just changed the timeline. It's 180 days after bill passage instead of end of year, because I guess they don't know when they're going to pass this bill. They're trying to do it before July 4th. The Senate, surprisingly, is making even more aggressive Medicaid cuts and adding work requirements for parents with children 15 plus. So you have to work 80 hours per month or do community service 80 hours per month to get Medicaid, unless you have a medical reason why you can't. And there's also a provision added for gun taxes, uh, like they're going to eliminate taxes and regulations on many firearms and silencers under the National Firearms Act of 1934. So somebody stuck that in there. So there you go. That is what is going on with the big beautiful bill in the Senate. What do we talk about in the brief time we have left? Adam? What else what else are you working on? What is top of mind?

Speaker4: [00:53:41] Um, well.

Adam Zaki: [00:53:42] For your audience, I'm working on a cool series. I'm halfway done. I've published two of four stories. I'm doing a series on how. Big Four is using different types of artificial intelligence within their function. So I've already spoken to Kpmgs Chief Technology Officer of the US audit, Thomas Mackenzie. That story's published in live. They have like this AI. It's a, um, it's a global cloud based audit platform called Clara. So we talked a lot about how they're using that. But and then I did PwC as well, their USA tax leader. But the point of this is the reason why I bring this up is because, um, like I said, I'm only halfway through. I have two more interviews to do with EY and Deloitte, but I think that, um, the common loophole is going to be keeping people in the process. Right. And this is what both of these people stressed, especially young people, because those are the types of people going in and working at these firms are young accountants.

Speaker4: [00:54:37] Right.

Adam Zaki: [00:54:38] And so working alongside partners, but they're doing a majority of the work. The partners are just kind of checking the work. Right. And so I think that, uh, the ongoing narrative here and it's, it's it happened on an episode of your podcast. This guy Chayton, who came on your show.

Speaker4: [00:54:54] Mhm.

Adam Zaki: [00:54:54] This college student talked about how he wanted to learn things like zero and software in the accounting trade or in school. Right, in the process. But if we don't have the fundamentals of somebody like Chayton doesn't know debits and credits like the back of their hand, like full, full disclosure, I took accounting 101. I learned credits and debits. I dropped accounting 101, I pursued journalism and I was a business major in college. When I took accounting, I said, Holy crap, this is not for me. You know, fast forward, I'm here. But but I think that people like, I could never go be right now, go work at one of these companies and start doing audits. If you gave me all the technology in the world, I wouldn't be able to understand the nuance maybe a little bit with my time at CFO. But I think that accounting students and young accountants really need to realize that they are going to be checking I and they are going to be the the auditors and the police of the technology being used. So although they're learning stuff that maybe they aren't using, like you and I both learned trigonometry in school, right? We're not using trigonometry, but it's the thought patterns. It's the thinking process. It's how to evaluate information and collaborate with others around you. When there's a problem or a challenge, and learning how to think and approach information in different ways. That's what's important. And so although someone like that says, I want to I want to know how to use Xero. I want to know how to use gusto, because when I go to a, when I get a job out there, I don't know what these software programs are. I think that is the type of stuff that you will learn at a company like KPMG and Deloitte, and they will teach you how to use the software.

Adam Zaki: [00:56:29] But the young professionals, these my message to them is these decision makers at these big four firms are relying on young people to back up all of this technology they are selling. And if the young people don't know the fundamentals of accounting, they will not be able to fulfill that duty. And then the technology that's being sold and bought by CFOs is going to go nowhere, right? It will ultimately fail if the technology cannot fulfill the functions because the people checking it don't know what they're doing. So I think it's so important to stress to young accountants that if you were in school and you're like, I'm not going to use this, why am I learning this? It's about the thinking process. It's the same reason why you learn trigonometry in high school, because you need to learn how to formulate and evaluate in order to do these types of jobs, in order to be strategic and make decisions based on data. You have to be able to evaluate it like the AI is maybe not as good, and that's why we're bringing in the AI to help you. But you have to be able to think like a human being in the context of the information that's being presented to you. And without that education, that's going to be so hard. And I'm watching that episode with Chad, and I'm looking at my phone and I wanted to, like, scream at this kid. I wanted to go. You have to learn the fundamentals before you get certified in gusto, because if I went and got certified in gusto right now or got certified in QuickBooks, I wouldn't know what I was doing right. I don't.

Speaker4: [00:57:59] Know the jargon.

Adam Zaki: [00:58:00] As well as an accountant.

Speaker4: [00:58:01] Please.

Blake Oliver: [00:58:03] I mean, um, you've given me a lot to think about. I my issue with accounting education is and I don't mean to criticize all accounting education. There are educators out there that are doing great work, but then there's also programs that they're not teaching those critical thinking skills. Right. I mean, at a minimum, these programs need to teach you the debits and credits.

Speaker4: [00:58:31] Sure.

Blake Oliver: [00:58:31] You need to be able to, you know, after intermediate accounting, you should be able to construct a statement of cash flows using the direct and indirect methods, given an income statement and a balance sheet. Oh, and by the way, you should also be able to construct the income statement and balance sheet from a trial balance. You have to know those fundamentals. Unfortunately, too few students manage to get through accounting without even being able to do that. And then somehow they pass the CPA exam without really being able to do that. Which you can do because it's mostly multiple choice. And if you can memorize enough terms and definitions, you can muddle through it and pass without really knowing your debits and your credits. Honestly, I've met a lot of CPAs who don't. So that's a problem currently. And then you add on the need for critical thinking, because now we're auditing AI systems. And review is even more important now than doing the work. I don't know. I don't know how you learn those skills because Has traditionally. How do you learn the critical thinking required to be an audit partner? It's on the job training from the partners, directors, managers, seniors that you learn from. It's it's apprenticeship essentially. And I don't know, a ton of like educational programs that are teaching that like true critical thinking that you do on the job. Like everyone I talk to says the on the job experience is way more valuable than anything you learn in the classroom, assuming you know the fundamentals. I think we have to like caveat that, right?

Speaker4: [01:00:10] Sure.

Blake Oliver: [01:00:11] So what does an audit team look like in the world of these AI agents that you're writing about? And I I've got this one up right now. The PwC tax team using Agentic AI. You wrote you wrote about that. You were talking about how was it KPMG was using it in audit. Now currently in public accounting, it's about a one to 15 to 20 partner to staff ratio. Right. So 1 to 12 maybe at the low end 1 to 20 at the high end. Partner to staff. Well what does that look like in a world of AI. It could be 1 to 5. So what happens to all those staff? You don't need them anymore, right? So where do they go? Do they go into industry? This could actually be really good for industry. Because if public accounting isn't sucking up, all these grads CFOs could get them on their team.

Speaker4: [01:01:09] Yeah, I highlighted that.

Adam Zaki: [01:01:10] I wrote a I wrote a story just yesterday or no the day before yesterday about small, medium sized businesses off off. A survey by Bill.com want to be paperless by 2030, right? And I made the point to say that, you know, if you want to do this, you need good accountants. And if you want good accountants, you may have to take a chance at a younger accountant who may have not have gotten the opportunity to go work in public accounting Counting or go work in industry because a lot of even when you look at industry jobs, a lot of CFOs are outsourcing some of the basic levels of like accounts payable, accounts receivable, they're outsourcing that stuff. They're not.

Speaker4: [01:01:44] Hiring a 21.

Adam Zaki: [01:01:45] Year old kid to do that, or a team of 20 year olds to do that anymore, even at a big companies.

Blake Oliver: [01:01:50] And so that's the issue then is like and that, hey, the major sponsor of this episode is Cloud accountant Staffing. What do they do? They provide you with offshore staff. So if I'm a controller or a CFO, who am I going to hire? Am I going to hire somebody right out of school who has taken a theoretical accounting degree and knows accounting in theory, but has never applied it? And I'm going to have to train them on the ERP system and all this real world stuff that they didn't learn in school. Or am I just going to go hire somebody offshore who's way more experienced and costs the same? Basically, I get more experience from my money that way. I'm I'm kind of leaning toward the offshoring.

Speaker4: [01:02:32] Yeah.

Blake Oliver: [01:02:32] So then what happens to our pipeline? Our accounting pipeline?

Speaker4: [01:02:37] And what?

Blake Oliver: [01:02:37] I don't have an answer.

Adam Zaki: [01:02:39] But it's the checks and balances of the future with this technology. If public accounting and companies alike are going to go full fledged into incorporating different types of agentic AI or what name the type of technology that you choose into their finance function if the checks and balances aren't in place ten, 15, 20 years ago, or 20 years from now, and we have no PCAOB or anything like that, you could just see the cauldron bubbling of what could happen. Right. And then whose fault is it? If there's something wrong in an audit that's done by Agentic AI. Right. Where does that responsibility come? And so these are questions that need to be answered.

Speaker4: [01:03:20] Yeah.

Blake Oliver: [01:03:22] Let me give you a counter to that. Right. Because I've been using these AI tools a lot. And you know, I'm seriously impressed by OpenAI's O3 three model. Every time I use it on my own data or to do research, I am just so impressed. And the new Claude Force opus. It's just it's wild how good these models are at analysis. And I think you could make an argument that in not that long, it will be possible to plug an AI into a company's ERP system, and it will just be able to do an audit like of the data it has access to in the ERP. And it will have to go ask people to go retrieve information that it can't get itself. But these systems, they are so superior when it comes to review versus the way we do it now as humans. Because how do we do audits now? We we we summarize and summarize and summarize and distill and distill and distill, right. All these transactions, these thousands, tens of thousands, hundreds of thousands, millions of transactions are summarized into account balances. And we're looking at these these numbers that are really just summaries of all the stuff that's going on. And we're trying to figure out is this reliable? Is this like within the margin of error, essentially. But an AI can just look at every transaction. And so it fundamentally changes how audits could be done. So I mean, I don't even know if in a few years we will need traditional auditors. I mean, somebody's going to have to like sign off on this stuff and understand how it works, right? But like that whole team that goes in and does the audit could be way smaller, and the whole audit program could basically be run by an AI that partners up with the firm. The partner. Right. The partner uses the AI to manage the audit.

Adam Zaki: [01:05:23] So then what becomes the value of the CPA. Then just the person who could check the box of the AI done audit? Is that it?

Blake Oliver: [01:05:30] Well, it's it's really what the what is the value of the auditor CPA. It's it's I take on the liability.

Speaker4: [01:05:38] Sure. I.

Blake Oliver: [01:05:39] I am I'm theoretically right. I'm putting my license at risk by certifying these financials. And so is the CFO and the CEO these days of a public company because they have to do it to the CPA.

Adam Zaki: [01:05:51] You are only as good as the technology your company gives you.

Blake Oliver: [01:05:54] Which is true today. If my company's on paper accounting ledgers, I'm not going to do a very good job as a CPA.

Speaker4: [01:06:02] So that's a great point.

Blake Oliver: [01:06:04] You know, I don't know what this means. Um, I mean, we have these dilemmas, these these worries. Every time there's a new technology, we think, okay, what are people going to do when that job is gone and we invent new jobs for people? And so I'm sure that'll happen again. It seems likely we'll figure out new things for people to do. You know, maybe it'll be like that guy in the movie her, where his job is like writing love letters on behalf of couples to each other.

Speaker4: [01:06:34] That's Joaquin Phoenix, right? I know that movie.

Blake Oliver: [01:06:36] Although that job could be done just as well or better by the AI. Now, that movie's already out of date.

Speaker4: [01:06:42] Oh, yeah.

Blake Oliver: [01:06:43] Um, yeah. Joaquin Phoenix, that's a great movie if you. I say this a lot, but if you haven't seen the movie her and you're listening to this.

Speaker4: [01:06:51] It's a must watch.

Blake Oliver: [01:06:52] Go watch it because it's like it's perfect for the AI era. Um, but, you know, maybe I don't know. I mean, we might, you know, I'm I'm kind of going off on, like, a sci fi tangent here, but, like, I grew up reading sci fi, and it's like, it feels like a lot of the stuff that I read about as a kid is coming true. And we may be entering an era of plenty to the extent where, like, the cost of living goes to zero. And I know that doesn't feel realistic right now, given how expensive housing is and how expensive healthcare is. But as soon as we have like robotic manufacturing facilities here in the United States, and we have robots that can assemble robots and repair robots, I mean, manufacturing becomes free and we can do it here locally, provided we have the raw materials, which we have a lot of in the United States. So basically everything gets, you know, the cost of everything you buy at like a Walmart can go to zero or close to it, right? It feels like zero. So then the question of like, what do you do for a job becomes really less relevant.

Speaker4: [01:08:00] That's my.

Adam Zaki: [01:08:01] Question though. But what does everybody do if there's.

Speaker4: [01:08:03] So much technology.

Adam Zaki: [01:08:04] Where everything's automated?

Blake Oliver: [01:08:05] Yeah.

Adam Zaki: [01:08:06] If costs go to zero, what does it matter if nobody has any money?

Blake Oliver: [01:08:09] Or exactly. Maybe we all just work a lot less, right. And and and because costs go down, we enjoy a higher standard of living even though we're making less money. But we can also increase our productivity.

Speaker4: [01:08:23] Sure. Like.

Blake Oliver: [01:08:24] My productivity has gone way up with AI now, so I don't know. It's interesting. It's like, I mean, my hope is that we enter like the economy of the like Star Trek universe, which is kind of a I don't know, a lot of people are aware of this, but like, it's a, it's a, it's a fun experiment because like, it's Roddenberry envisioned a world in which everything is so cheap because of replication technology that essentially everyone can just live a normal standard of living for free. You don't have to work unless you want to, which I think is kind of the ideal world to live in, right? A world in which you get to do what you want to do, not because you have to. And I would actually probably still I'd probably still do accounting. I think maybe I wouldn't do it eight hours a day. But.

Speaker4: [01:09:17] You know, I enjoy it.

Adam Zaki: [01:09:18] You know, a lot of who we are as people. I mean, people hate to say that their job doesn't define them. Right. But I mean, even today, if I met you and you asked me, you know, what do you what's your story? I would tell you what I did for a living first. Right? And that's just that's part of our culture. And if we don't have anything to replace that with, many people don't have hobbies, right? You and I, I'm sure you know a lot of older people. I think one of the hardest stages in life is to go from, and I've written about it at CFO is to go from retirement to whatever comes after. Right? And if you don't develop hobbies over the course of your life and you focus on work and then we take work away, which is what most people do. If we take work away, we take the essence of what people define their humanity as away from them. Like if you meet a firefighter or a police officer, they're a firefighter, they're a police officer, they're a teacher. That's their personality. And so people and I'm just using those as an example, like my me as a reporter, you know, like I talk to some of the smartest people on the planet working for CFO. It's a great part of my job, but I don't wear it as a badge like some professions come with. Right. And so I think it's going to be very. And CPAs as well. People work very hard to to get a CPA.

Speaker4: [01:10:30] Well.

Adam Zaki: [01:10:31] And get that nomenclature right.

Speaker4: [01:10:32] What you do.

Blake Oliver: [01:10:34] What you do is a profession, right. And I think that's the the beauty of a profession is, is that it's a calling. It's something that you do not just for the money. In an ideal situation. Right. You you are a journalist and you do it because you you love the search for knowledge.

Speaker4: [01:10:55] And.

Blake Oliver: [01:10:55] Sharing that with people, right? And I think in the best world, accounting is like that where it's, you know, we we do accounting because. We love to create that assurance that the world needs that the economy needs to function like we are the the referees of the global economy. And somebody has to be the referee, which I know you enjoyed doing, Adam. Right?

Adam Zaki: [01:11:24] That's my well that's my. Well I know.

Speaker4: [01:11:26] We talked about.

Adam Zaki: [01:11:27] That's we talked about like auditing salaries. Right. Compensation I'm nowhere near that. So I have to have a little bit of a side hustle so that that is my side hustle. I referee high school lacrosse and football. But it's great, right? And it's like even it just allows me to practice stress. And I think even for CPAs out there, please, if you're physically fit, go out and try to join your local high school sports association for whatever sport you have experience in, go become an official. You think the accounting shortage is bad? Go Google referee shortage. There are no referees. Youth sports are like in danger of disappearing because there are no officials and the money's great. I mean, it's great extra cash for young people like I'm getting married in a few weeks. It pretty much paid for my wedding.

Speaker4: [01:12:04] Congratulations.

Adam Zaki: [01:12:05] Thank you. And so. But it's like it's these types of things where in the future, if you have a little hobby that can bring an income, like refereeing, it just gives you purpose and it gives you a sense of humanity and well-being and focus and future, which if we take away people's livelihoods and professions. Many people are going to be left with who am I and what do I do? I think that's and there's a lot of people, right? There's 400 million people in this country. If half of the people feel like that, that's a big problem. It's a huge problem.

Blake Oliver: [01:12:31] Well, I think that based on our discussion in this episode, I'm optimistic for accounting, even though, you know, we haven't solved this issue of like, what happens with students when they go out into the workforce when we've automated those entry level jobs? Like that's an issue, right? But, you know, you look at what's going on with tariffs with the big beautiful bill, with everything in the economy. It's just getting more and more complicated. And so there's going to be a need for professionals to help businesses and individuals get through that compliance requirement. Like figure it out like figure out how to survive, how I can run my business. Um, you know, get through the tax stuff, get through the tariff. Stuff like that's that's going to be they're not going away. It's if anything, it's getting more complicated. But the good news is we have the tools now that make that job less painful than ever. Right. Like and that's the thing is, you can figure out all of this stuff now with the use of these AI tools, like the research has just gotten so much faster, ten times, 100 times faster. So that's good news. Yeah. And then, yeah, if you're in assurance I think like the and you're in audit, the really exciting part is just being able to do it without all that grunt work.

Speaker4: [01:13:48] So it's exciting a little bit.

Adam Zaki: [01:13:50] We need a little bit of the grunt work Blake. Just a little bit to learn the fundamentals. And then we can pass it off to technology.

Speaker4: [01:13:55] But yeah 19.

Adam Zaki: [01:13:56] Year old 20 year old kid. They got to be doing credits and debits.

Blake Oliver: [01:13:59] It's like I say I worked at a Starbucks.

Speaker4: [01:14:02] Me too.

Blake Oliver: [01:14:03] Right, right out of college. You did okay. So, yeah, I feel like, uh, everyone I meet who has worked a service job, like food service or, I don't know, some sort of, like, manufacturing job. Like. Like a blue collar kind of job. Makes a much better white collar professional.

Speaker4: [01:14:21] Absolutely.

Blake Oliver: [01:14:23] And so I feel like it's the same when it comes to, like, you know, every accountant would be better if they did a little bit of bookkeeping. Yep.

Speaker4: [01:14:30] You know. Yes.

Blake Oliver: [01:14:31] Every every reporter. Well, I guess actually the reason that writers, the best writers are reporters is because there's a lot of grunt work.

Speaker4: [01:14:40] Yeah.

Blake Oliver: [01:14:41] There's a lot of like. Yeah. So.

Speaker4: [01:14:43] But I helps.

Adam Zaki: [01:14:44] Us to I mean, transcribing audio. I mean, listen, it's very tempting to let ChatGPT write a whole story, right? It's it's like an ethical dilemma for a lot of journalists now. But, I mean, my type of stories, it's really. I just get great insight. I'm not really coming to too many conclusions on my own where I need ChatGPT insight to build them, but I think it's an interesting space all around when we're talking about AI's use in accounting or journalism.

Speaker4: [01:15:07] Yeah, it's a big deal.

Blake Oliver: [01:15:09] Doing your research, like like you said, right? You can record an interview, summarize the transcript. It gives you, like a much. It jumps you ahead to the point where you can actually start writing that story.

Adam Zaki: [01:15:21] And I laugh and your listeners can can do this. Next time you're reading a story of any type in any media with links in the story, click the links and look at the the URL. A lot of the times at the end it says, it says source ChatGPT. And you could tell which writers are using ChatGPT to develop their.

Speaker4: [01:15:40] Oh that's funny.

Adam Zaki: [01:15:41] It doesn't mean they're prompting it to write the whole thing, but they're getting their their resources and links from ChatGPT, which is not a bad thing. You know, I don't think that's necessarily a bad.

Speaker4: [01:15:49] Thing, but as as.

Blake Oliver: [01:15:52] Long as long as the writer has used their judgment to really think about those words on the page and take ownership of them. And that's the thing that's too easy to do, is it's easy just to pass off the job to the AI and not check the work, and that's when you get a disaster.

Adam Zaki: [01:16:10] So that's how you can tell a good writer from a bad one. Is their, uh, their parameter links on their stories.

Blake Oliver: [01:16:15] That's great. Thank you for that tip, Adam. Appreciate it. Thank you for joining me today.

Speaker4: [01:16:20] On having me.

Blake Oliver: [01:16:21] This has been a great episode of the Accounting Podcast. Thanks everyone who tuned in live. If you have not caught us live, join us next time. Find the accounting podcast on YouTube. Just search Accounting podcast where the first that comes up. Subscribe. Hit the notification icon and you will get a notification. If you got that YouTube app on your phone, you'll get a little notification that we're live. You can join us, you can chat with us. Thank you everyone who chatted with us here today. Matt and Sarah and Nightlight and Giles and Rafi Saeed, Stephanie chess HK great to see you, Firelands. Boring accountant. Uh, let us know what you think. You can do that in the chat when we are live. Or you can email us The Accounting Podcast at me. That's The Accounting Podcast at me. I read all your emails. And don't forget you can earn free continuing professional education credit for listening to this episode. You can earn one CPE credit. I know we went over the hour, so I apologize for making you listen beyond an hour. But hey, it's free, so don't give me too much blowback for that. Get the earmark app earmark app in your web browser, or get it for free on iOS or Android. And if you want to support our work, you can subscribe for the low, low price of $150 per year for unlimited CPE and that is Nasba approved Cp2 so you can use it for your license renewal. Get active again if you went inactive. Now CPE is so easy. All right. I think that's everything for me this week. Adam, great to see you.

Speaker4: [01:18:00] Thank you.

Blake Oliver: [01:18:00] To catch up with you again soon.

Adam Zaki: [01:18:02] Yes. Take care. Thank you everybody. Bye bye.