The Accounting Podcast

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Blake Oliver: [00:00:04] In a twist. An ironic twist KPMG international apparently has pushed its own auditor, Grant Thornton UK, to lower its audit fee, arguing that AI driven efficiencies could reduce the cost of work. The negotiations reportedly included pressure tactics, where KPMG threatened to switch auditors if Grant Thornton did not agree to a significant reduction.

David Leary: [00:00:28] Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: [00:00:35] Hello and welcome back to The Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver.

David Leary: [00:00:41] And I'm David Leary Blake. I saw you, uh, out, uh, not lollygagging. Uh, what's the gallivanting, uh, with up at the big golf tournament in Scottsdale in your backyard this weekend?

Blake Oliver: [00:00:52] That's right. Uh, it was my first year. First time at the Waste Management Open.

David Leary: [00:00:57] Waste management, waste management wasted?

Blake Oliver: [00:01:00] Depends. Yeah. It depends on your perspective. Right? Yeah. I mean, I'm not a golfer, so I hadn't been yet. I've been here in Scottsdale for like five years and I'd never gone. I finally went, um, and it was, it is, it is a it is a scene. Yes. It is a lot of fun. I mean, it's crazy. They, like, build a city around this golf course, TPC Scottsdale and you know, it's it's the Phoenix Open. So it's like the best golfers in the world are there. Everybody's having fun. As I understand it, it's the only golf tournament where you can boo the golfers. And that's okay. Um, and you know, whenever, whenever anyone sinks a long putt or a hole in one, like, people just go wild. It's crazy. It's a big party. Uh, and thank you to the accounting and legal firm, uh, for inviting me there, Mike Payne and Toby Comber. That was really special. Thank you. Um, but golf is not what I'm here to talk about today. It's not really what we talk about here on the show. We are a show about accounting. And, uh, a fun surprise for me was getting to here, getting to see the most famous accountant in the world.

David Leary: [00:02:12] Did he have a talk? Was he golfing? Who is this? Who is the most famous besides you? Who is the most famous accountant in the world? Blake. Who could this be?

Blake Oliver: [00:02:21] His name is John Summit, and he's a DJ. And so if you're into electronic music, then you know what I'm talking about. John summit. Uh, he had that song where you are that just rocketed to the top of the Billboard charts, and, uh, he has 11.8 million monthly listeners on Spotify, putting him in the upper limit of globally streamed DJs and producers. He has had over 2 billion total streams across his catalog of major platforms, over 651,000 followers on Spotify, multiple top ten tracks on Billboard's Hot Dance Electronic Songs charts. He's had dance radio number ones. His debut album, Comfort in Chaos, hit number two on the Billboard Top Dance Electronic Albums list and was number 39 on the Billboard 200, which is huge. He sells out arenas and plays stadiums like Madison Square Garden. Major outdoor venues. He has appeared at Coachella, EDC Las Vegas, Tomorrowland, Lollapalooza Brazil and more, and he has his own festival called Experts Only that draws 50,000 attendees. And he was an accountant. He was an auditor before he became one of the most famous DJ's in the world.

David Leary: [00:03:40] As a side gig, like he gave up his accounting for his accounting profession.

Blake Oliver: [00:03:44] He did. He did like most accountants, you know, he spent his time in Big Four. He was born John Walter Schuster in Naperville, Illinois, in the Chicago suburbs in 1994, and he attended the University of Illinois, Urbana-Champaign and got, uh, a accounting degree and a master's in accounting there. And while studying accounting, he was deejaying locally in the in the scene there. And from about 2018 to 2019 or thereabouts, he worked as an auditor at Ernst and Young while he was deejaying and touring on the weekends. And his starting salary was $65,000. And you know, what's really amazing about John Summit is that he has really leaned in to his background as an accountant. He's talked about it a lot. He calls himself a former accountant. Uh, and his album that is coming out is called Control Escape, and it is releasing on April 15th, Tax Day and its themed accounting. So if you're watching us on YouTube here, you can see that, uh, the, uh, cover for Control Escape is John Summit sitting what looks like on the top of a what do you call those tiled.

David Leary: [00:05:11] The ceiling panels.

Blake Oliver: [00:05:12] Ceiling panels. Right. That you see in like a typical like, office cubicle office. He's like sitting on top. But above him is like the sky with clouds.

David Leary: [00:05:21] He's escaping.

Blake Oliver: [00:05:22] He's escaping. Right. Control escape is the new album, out April 15th. He's dropping one track from the album every Wednesday. And, uh, you know, he said that the reason he's doing it on Wednesday is because he remembers, you know, Hump day being the toughest day in the office. And I want to play for you a little bit of his single, the latest single that he released, the first one from this album, uh, that is like I mean, you'll see what I mean. David. All right.

David Leary: [00:05:54] His own marketing strategy is about being an accountant. Oh, you're playing the video. Okay.

Blake Oliver: [00:05:58] Yeah, I'm gonna play the. I'm gonna play a little bit of this video for you. And, uh, a word of caution for our listeners. There's some explicit language in this video. So, you know, if you're listening to this in the car with the kids or whatever, you may want to pause this and listen later. Yeah, we're we're a clean show. But you know this. I can't really censor this, uh, this song. So.

David Leary: [00:06:19] And this is him here in this video.

Blake Oliver: [00:06:21] Yeah, that's John Summit, right?

David Leary: [00:06:22] He's wearing a boring oversize tan suit with a tan tie. He has his name badge. He's got his computer monitor.

Blake Oliver: [00:06:29] That's right.

David Leary: [00:06:29] Okay.

Blake Oliver: [00:06:31] And, yeah, like you said, David, you know, in this opener here, you can see him sitting in a cubicle and he's, you know, this accountants here working the keys. And the firm that they are working at is called summit CPAs. And you see John there, John summit there working at his computer. Old green screen kind of situation.

Speaker3: [00:06:54] Where do we go when the lights go up? When the lights go out. Where do we go when the lights go out. When the lights go out. Do we go when the lights go out at night. When the lights go out. Good night.

David Leary: [00:07:24] So is he going to lead a rebellion here?

Blake Oliver: [00:07:26] Yep. Looks like it.

David Leary: [00:07:30] All right. Everybody's leaving their desks now. They're all escaping.

Blake Oliver: [00:07:32] It's basically like an accounting firm. Turning into a rave is what's happening here.

Speaker3: [00:07:38] When the lights go out, where do we go when the lights go out?

Blake Oliver: [00:07:45] And of course, all the accountants get up and start dancing. They're wearing their ties, their suits. All right, I'm gonna. I'm gonna call it there so that we don't get, like, uh, taken down here for playing this song. Uh, so that is, uh, lights go out. You can find the official video on YouTube. Go check it out if you like that music. Um, his his career has just been spectacular. Uh, he has just rocketed basically in, like, a handful of years to being one of the most famous musical artists in the world. And I want to show you the merch page for this album that is coming out soon. So this is the merchandise you can buy, right? You can get the vinyl album, you can get a t shirt, and you can also get swag.

David Leary: [00:08:33] Crappy accounting firm swag. This is great. It's a backpack that says summit CPA's, a pen that says summit CPAs. This is so great. Ah that's amazing. He's leaning into it like that.

Blake Oliver: [00:08:45] Isn't that isn't that great? And I think part of what like, drives his popularity is just sort of his, you know, everyman like corporate, you know, uh, I a worker background, right. Which he escaped.

David Leary: [00:09:00] From Dilbert of DJ's, basically.

Blake Oliver: [00:09:03] And he was a CPA, in fact, you know, I wanted to check this out and make sure. So I went to the Illinois Department of Financial and Professional Regulation, and I looked up, uh, I looked him up by his original name. Right. His, uh, his his legal name, John Schuster. And I found his license number. Uh, I think it's him that there aren't any other John Schuster's that are licensed or were, uh, he did not renew his license. However, it was effective in 2018 and it expired in 2022. So maybe we can get John Summit to renew his license. If he had earmarked CPE, perhaps he could, uh, you know, more easily maintain his license there. Um, and by the way, if you are looking for an easy way to get your CPE so you can get your 40 hours a year, check out earmark CPE, go to earmark app and your web browser, or download the free app on the App Store or the Google Play Store. And, uh, earn CPE for listening to accounting and tax podcasts while you're on the go. Maybe on the weekend when you're driving to that, uh, club where you're going to perform as a as a DJ.

David Leary: [00:10:08] And if I was summit CPAs. Com, which is a real accounting firm, I'd be figuring out how to monopolize on people going to the wrong website, clicking through, doing these types of things and lean into this marketing opportunity you have. You're probably just going to get a lot of random traffic, so you might try to capitalize on it.

Blake Oliver: [00:10:24] Thanks everyone who joined us live today. We've got Heather Smith here. Uh, great to have you with us, Alistair Ashley. Thank you. Ashley says this may be my favorite content on this show thus far. Awesome. Ashley says I gave a box of accounting conference swag as a white elephant gift this year. It was hilarious. All right, David, let's thank our sponsors for this episode.

David Leary: [00:10:47] Our sponsors this week we have UNC Kenan-flagler Business School. We have on pay and cloud account and staffing. Let's face it, the job market is tough right now. But every industry needs accountants and accountants are always in demand. In fact, employment for accountants is projected to grow 10% through 2026 faster than most other professions. That's where Uncw's Kenan-flagler Master of Accounting program comes in. It's one of the top ranked programs in the country, with 98% of students accepting a job offer within three months of graduation and earning more than those with just a bachelor's degree. If you're currently working full time, raising children, serving in the armed forces, or living halfway around the world, they're highly flexible. Macc program can also fit your lifestyle. You can choose their 12 month on campus program or their online option, where you can have up to 36 months to complete your degree. Plus, you'll join the powerful 46,000 strong UNC Kenan-flagler alumni network connections that will serve you throughout your career. If you want to set yourself up for a lifelong career, pick the Macc program with the proven ROI. To see why you should get your Master's in Accounting at the UNC Kenan-flagler Business School. Head over to The Accounting Podcast. That is Accounting Today promo for you and your DJ. He should have went there and then he probably could still be a DJ right now if he would have went to graduate school, got his.

Blake Oliver: [00:12:07] He got his Mac.

David Leary: [00:12:08] Oh, he got his Mac.

Blake Oliver: [00:12:09] Yeah, he did a one year Mac.

David Leary: [00:12:11] He didn't do it at UNC though. That's his mistake.

Blake Oliver: [00:12:14] Well, you know, he had to deal with the 150 hour rule. So he went straight from his four year into his one year Mac and got his CPA that way. Like most of us, most most CPAs did before we had the alternative pathways. But, you know, now maybe he would be able to skip that and have an extra year of, uh, you know, getting his career going. All right, David, we got lots to get to in this episode. We've got a follow up To a story we covered ten years ago when they launched Bot Keeper, Bot Keeper. The original AI accounting and bookkeeping startup is shutting down. And we've got news from pilot, another accounting bookkeeping service. That's the opposite. They are launching an AI accountant. We've also got a tax prep and review review platform accrual raising $75 million. You've got a story about Trump suing the IRS. I've got a story about KPMG pressing its own auditor to lower fees due to AI.

David Leary: [00:13:20] That article I was going to bring it. I don't know how it didn't get in my stack. Yes.

Blake Oliver: [00:13:23] So we'll talk about that. And plenty of news about apps. New features, new AI stuff that's happening. It's crazy how quickly AI is starting to develop that is actually useful. I talked last week about this new feature in the cloud desktop app that allows you to work with files on your local computer. And I tested it out, and I was able to give it access to a folder of scanned documents. I have a I have a scan snap scanner, and when I scan something, it puts it into a folder in my Google drive called Scansnap, and it tries to do its best to like name the file. But it's horrible. It's it's garbled, it's not organized. And I gave Claude Co-work access to that folder, and I told it to go and intelligently organize and rename all the files. And it created a whole folder structure that was logical. Different types of files, receipts, legal documents, statements, all that sort of thing. And then it went put all the documents into those folders and it renamed all the documents based on the content of the PDFs. And it did this in minutes and it did it really, really well. Like that is something that we were talking about being possible just a few years ago, and now it's here.

David Leary: [00:14:45] Like a dream. It's happening. Yeah, yeah, it's like a dream a few years ago.

Blake Oliver: [00:14:47] And you can get that if you're a pro subscriber for like 20 bucks a month. It's incredible. So, David, um, let's talk about Bot Keeper. What's going on with them?

David Leary: [00:14:56] Yeah. Before we jump right in. So the story is bot Keeper has shut down. But before we jump into that, let's rewind a little bit because I think it helps explain why a company like keeper possibly shut down. So last Tuesday, I don't know if you saw this. All the SaaS companies and the data and the fintech stocks took a $300 million market cap hit on a Tuesday.

Blake Oliver: [00:15:15] A big drop. Yeah.

David Leary: [00:15:16] Big drop. And this was because anthropic unveiled their new AI legal agent tools inside of the cloud assistant. And basically the bell went off to everybody that oh my goodness AI can now replace your software subscriptions. So it's basically blown up SaaS. And the reason the opinion is what you get for a fraction of the cost is good enough. You don't need to pay $700 a month for a SaaS app, or 70 bucks a month, or $99 a month, or whatever it might be cost. And so this and it's just beyond legal tech. It went to all of SaaS software across the board. Um, the way to think about it is the AI is no longer a feature. It's a structural threat. And part of this is and it also killed like Monday.com. They got hit hard. It's because the bet is you can just build this stuff yourself, right? So let's tie it back to bookkeeper. So bookkeeper shut down. Uh, I don't know if this email came out Friday or Saturday, their blog post, but they they announced they're shutting down operations. So bookkeeper was founded in 2015. They had 11 years, raised money. They started. It's one of those early days, like when we talked about them in the show October of 2018. Going back to those episodes, they did the typical AI or not typical. The typical tech company. Fake it til you make it right. So they were. We discovered that barkeeper might have been human powered. Right? And they chugged along.

David Leary: [00:16:43] And then they finally started. They started building some AI, right? Like, I remember they, uh, even six months a year ago, we're like, oh, they're finally building what they were going to build, right? They started doing announcements, but the reason they went under is that they could not raise any money. There's no investors wanting to buy this. So it makes me wonder, did they have AI tech that was worth buying, or is it because the new opinion of everybody who has money now is like, oh, I can just build it myself because of these AI tools are off the shelf. I don't have to buy it from somebody else. I don't have to acquire a company. So this happened with barkeeper. But over in the UK, another AI bookkeeping agent called Genesis, they're for sale. Their investors pulled out. So AI bookkeeping startup Genesis has entered a formal sales process after a key investor collapsed, triggering the withdrawal of other UK institutions. Other UK institutional backers and leaving the company without enough capital to continue. Founded in 2023, Genesis aimed to automate core accounting workflows using proprietary AI, and at its peak served more than 100 firms across the UK, US and Canada. So it's still running. It's still online during this sale, but they have a skeleton team, they have skeleton support team. It's just barely working. Basically, it's still alive. But here's two AI bookkeeping startups that can't get. There's no more money. Nobody's giving them money. It's all gone well.

Blake Oliver: [00:18:08] But go ahead, David.

David Leary: [00:18:10] Oh, and then but it's confusing week because in the same week, a tax AI startup got 75 million bucks and audit AI startup got 75 million bucks. And pilot, I'll let you cover this story. They launched their own AI accountant. Like, like I don't know what's going on. What's happening? Are we seeing the collapse of bookkeeping, AI, or is the bubble popping or is it just still going? I don't know.

Blake Oliver: [00:18:33] I think this is a lesson in fake it till you make it being a bad strategy in general for tech companies, and that's what Bot Keeper is doing. They launched called it AI bookkeeping. It was actually offshore accountants, I think, in the Philippines that were doing this work, and they were pretending that it was AI, and the plan was that they were eventually going to build these actual AI agents. But the technology didn't exist yet. We didn't have open AI, we didn't have anthropic llms didn't exist. This entire tech didn't exist. And so they couldn't actually do it. And they were ostensibly trying to do it themselves, but they never got there. I think so.

David Leary: [00:19:14] The bet they made, or not even that they made, they missed. Everybody missed. The fact that this will just be every user has access to it. I have it on my phone. You have it on your phone, you have it on your computer. Like everybody just has access to it. It's not this proprietary special thing that only they would have. And I think that it's not that they they just didn't see that coming. I don't think anybody saw this democratization of AI tools.

Blake Oliver: [00:19:40] They were able to get a lot of customers. And so you would think that they would then be able to take the new tech, the LMS, and plug it in to the clients they're serving, but they weren't able to raise money. And I'm guessing it's because they had already raised so much and spent so much acquiring customers and serving them at a very high cost, that investors weren't willing to basically fund all that expense that they had had, essentially to cover that cost, when they could just invest in new AI startups that are actually doing it from scratch with real AI technology, not faking it at first. And so all of these companies that tried to do the fake it til you make it thing, they're going to have a really hard time raising money, because why would investors want to fund basically all that past those past losses? They could just invest in a new company. Or as you said, David, maybe we won't even need specialized companies that do AI bookkeeping, because you'll just be able to use a tool like clockwork that accesses your web browser and files on your computer and does the bookkeeping for you, or.

David Leary: [00:20:53] You just write the app that does it. That's that's the other piece is you're just going to write the app that does what you need it to do.

Blake Oliver: [00:20:59] That's right. So these general purpose tools might be able to eventually just do something simple like categorize transactions or reconcile bank statements, that sort of thing. I mean, this work is it's not easy, but it's also very routine. And so as the llms get better, they're going to increasingly be able to handle these tasks. And we're seeing their ability to handle complex tasks double every seven months, and we're now to the point where Llms can reliably do tasks with near 100% accuracy that take a few minutes. And that's going to go to ten minutes, 20 minutes, 40 minutes, 80 minutes. Every seven months. We're going to get a doubling of their ability to do a task. So doing a bank rec for a complex account right now, that may take an hour or two. Well, the Llms are going to get there. It's just a matter of time. So what was it we wanted to talk about? We want to talk about the pilot AI.

David Leary: [00:22:00] Example that I want to keep score keep here. So basically a bench this whole like we're an accounting firm, we're going to add engineers. And because that will be able to automate everything scale factor they went under. They're gone. Bot bench.

Blake Oliver: [00:22:13] Went bench went underwrite.

David Leary: [00:22:15] Bench went under I think it started with bench. Yeah. Bench you have scale factor was it didn't Indinero also go away. They were kind of.

Blake Oliver: [00:22:22] Pretty.

David Leary: [00:22:22] Much all of them from that first generation are all kind of going away. But I don't think it's because they're going to be replaced by a new company doing the same thing. I think it's just being replaced because if you're an accounting firm, you could just implement your own AI. I think that's the march wrong. Hmm.

Blake Oliver: [00:22:40] We have a question here from one of our YouTube livestream viewers. Max. Max says Blake, based on your cloud file organizing example, is there any concern with those file details and contents getting read by Claude and potentially creating a data privacy concern? And the answer is sure, yes.

David Leary: [00:23:00] How much?

Blake Oliver: [00:23:01] There's a concern there. It's how much do you trust anthropic the company that makes Claude. But I would say it's the same concern that you should have with any cloud provider that's storing your data. So if you are storing data in the cloud, Microsoft, Google Box, Dropbox, whatever, you've decided that they can have those files. And yes, theoretically, somebody at that company could read those files and it could create a data or privacy concern. And it's the same thing for these AI companies. And so really to me it's a, it's a it's just a terms of service and a trust issue and, and and an insurance issue. Right. Are you able to get insurance for your firm to cover these risks? If so my feeling is that and if you're comfortable, you know, with the company and the terms of service, then my feeling personally is that I'm willing to take some additional risk in order to get these massive productivity benefits the same as when we went to cloud.

David Leary: [00:24:03] There's that new one where it's all local, right? Is it called they first? It's called Cloud Bot. But then cloud got mad. They said they couldn't use that name so they changed it to a is it bolt bot. Bolt bot.

Blake Oliver: [00:24:15] I'm not sure. But that could also be another option is firms. Companies can install LMS locally on their devices and control it completely. If you don't want to use something like a cloud provider, basically like like cloud is um, and that that might be something that becomes more and more popular. We'll probably see AI companies in the accounting and finance space, pop up healthcare, etc. in highly regulated spaces that will allow us to do that with no privacy concerns or less privacy concerns. So, David, you mentioned the pilot announcement that they've got new AI agents. Actually, beyond that, they called.

David Leary: [00:24:57] It a pilot AI accountant specifically. Right. They called it literally an accountant.

Blake Oliver: [00:25:01] Yes. It is described as in this announcement, a fully autonomous AI virtual worker that can run end to end bookkeeping and financial reporting with, quote, zero need for human intervention, unquote. In typical cases, pilot CEO and co-founder Jessica McKellar said the system covers full accrual basis accounting, including transaction import, reconciliation and categorization, revenue recognition, payroll, asset capitalization and depreciation supporting schedules that tie balance sheet. Proof of work and core financial statements, plus extended reporting such as recurring vendor reporting. She said the product generally runs without humans, but it will escalate to a human when a judgment call could have a material impact. And she also claimed that it can onboard new businesses and configure accounting systems, describing an agent workflow that can complete onboarding and even a monthly close on its own. She cited an example where a customer needed 2.5 years of bookkeeping completed within a month for a grant deadline, and after connecting the agent to the financial data and institutions, she said the agent completed the work within hours and that it was everything was right.

David Leary: [00:26:21] So what wasn't clear about this announcement? Is this something they're going to offer for third parties to buy and use, or is this just, hey, we have this internal tool. Look how cool we are.

Blake Oliver: [00:26:34] I am not totally sure about that. It sounds like this is part of their pilot accounting service that they offer. I don't know if they have a program for accountants to plug into this or what.

David Leary: [00:26:47] Well, they have that their new, um, what are they calling it? The neighborhood know. What are they calling their where they're partnering with accounting firms. Where are they. Okay.

Blake Oliver: [00:26:56] So so you know, if you're a, let's say you're a CFO and you've got a client that needs bookkeeping, accounting work, maybe you could work with pilot, have them or their AI do the accounting and bookkeeping and then you oversee the work because that's important. Like a human still needs to be in the loop.

David Leary: [00:27:12] Yeah, I think their play is is it's not a franchise model, right? Where you're, you know, if you if you're part of a franchise, they give you all the tools to run your firm. So imagine you're basically you partner with a pilot, they give you all the tools you need. And one of them is going to be this AI accountant to help you provide bookkeeping services to your clients. I forgot what they called that, like their partner program. Um, it had a funny name.

Blake Oliver: [00:27:37] If you find it, let me know right now. Um, while you do that, David, I'm going to go ahead and thank our next sponsor, and that is on pay. Are you tired of payroll headaches getting in the way of client experience that you want to deliver? Manual workflows, creating bottlenecks, compliance, nightmares and endless support calls that go nowhere. There's a better way for your team and your clients on pay is the payroll partner that accountants and bookkeepers actually love. Why? Because it's easy to use, packed with value and backed by support that actually supports you. Their team gets rave reviews for being fast, expert, and actually reachable when you need them on pay Onp handles the heavy lifting. You get a dedicated onboarding coordinator who sets up worker profiles and transfers year to date data from previous providers, all at no extra cost. Their seamless QuickBooks and Xero integrations and eliminate manual journal entries, and they support any type of business you serve farms, restaurants, nonprofits, you name it. Onp can handle unique requirements without adding complexity. Onp keeps pricing simple to everything your clients expect from multi-state filing to off cycle pay runs is included. No hidden fees, no surprises for a limited time, earn up to $10,000 when you switch clients to Onp, add three clients and run payroll by January 31st, 2026 and you'll get $1,000. Then earn $200 for each additional client. To book a demo, head over to The Accounting Podcast. That's The Accounting Podcast. A. And I just realized as we record it's February. David.

David Leary: [00:29:11] So all we got is that offer still good? Oh, I'm gonna have to swap that out. All right. I just realized they installed that in the ad.

Blake Oliver: [00:29:18] All right, well, you know.

David Leary: [00:29:19] Go.

Blake Oliver: [00:29:19] Check out go check out amp anyway. Yes. And, uh, and maybe they'll give you, uh, some sort of perk for, for signing up. But, you know, David, we use on pay for our businesses. And I have to say it is the easiest in terms of reconciliation that I've found, like the the payroll journals that sync over into the accounting system match up 1 to 1 with the bank transfer.

David Leary: [00:29:40] Every time, every time.

Blake Oliver: [00:29:41] Every time. And it's just click, click, click reconcile.

David Leary: [00:29:43] And they have a UI where you can easily map your payroll expenses to accounts on your GL, you can map it. It's not like this guessing game, like some apps like just put everything in one account and then you got to go remap it out. Once it gets to your your GL, it gets. Yeah they have a great sync for sure. I did find the pilot page. They call them local partners. And basically the gist of it is is you can it's not really like I said, a franchise model. But basically if you have an accounting firm or bookkeeping firm, and you don't want to have to go by your separate tech stack, you basically partner with pilot and that's your whole tech stack in your firm. Your client can stay on QuickBooks, but then you're going to use pilot, all the extra pilot agents and account AI accountant in your firm.

Blake Oliver: [00:30:28] I have a story about auditors being pressed to lower their fees before.

David Leary: [00:30:33] You jump off of that. Before you jump that, like the two other stories that are related to this, is we saw a huge raise for accrual, which is a tax automation AI product. They raised 75 million. And Field Guide, who is an audit app raised 75 million as well. So is this just because there's hope there with AI's going to work? Or is it just because they they've just trailed? Like historically speaking, bookkeeping went to the cloud way before audit and tax did, right? And now AI and bookkeeping kind of was tried way before. It's being tried in tax and audit now. Is. Are they still in the race phase of their journey? Are they going to pop to the way bookkeeping has just popped?

Blake Oliver: [00:31:16] I don't understand what you mean by that. Tell me more.

David Leary: [00:31:18] Okay, so I could argue based on what's going on with Bot Keeper and that other bookkeeping company, AI and bookkeeping, the model that we've seen in the last decade is just popped.

Blake Oliver: [00:31:30] Well, there wasn't AI. It was fake.

David Leary: [00:31:32] Okay.

Blake Oliver: [00:31:33] It wasn't real.

David Leary: [00:31:33] Okay. Got it.

Blake Oliver: [00:31:34] You know what I mean? All right. It was just people behind the scenes doing the work, calling it AI. Right? Yeah, that doesn't work.

David Leary: [00:31:41] Okay.

Blake Oliver: [00:31:42] That's the lesson.

David Leary: [00:31:43] So, so so maybe it's good that the tax and the audit apps were behind. Like they lagged in cloud. They've always been lagging the tech game compared to the bookkeeping companies. And so now they're still able to raise these AI tax and audit AI plays.

Blake Oliver: [00:31:58] Well I think it's no it's because when we move to cloud, when it came to bookkeeping and accounting, we were able to set up rules based systems and connect all these different information systems together and automate the flow of data. And it wasn't easy because you had to create all these rules. But it worked. And it still works. You can still automate 80% of bookkeeping work today with just the old tech. Just rules, creating rules. This vendor yeah this vendor do this right. Allocate by these percentages. The AI helps a lot but it doesn't make this ten x improvement. The reason everyone wants to invest in tax and audit AI is because it does give you a ten x improvement or more because those areas of accounting were not automatable with rules based tech, because it's there's too many gray areas, there's too much complexity. But AI is starting to handle it really, really, really well. Just like renaming files based on the content of a PDF, that's something you couldn't make rules for Because it requires synthesizing data and summarizing it in a way that only llms can do, not a rules based OCR kind of technology, where it's just scanning the page and trying to figure out keywords and whatnot. So there's going to be huge cost savings thanks to AI in audit and tax, and it's going to have massive impacts on the industry. And there's a lot of fear out there about jobs going away.

Blake Oliver: [00:33:36] And we have seen that at the entry level, jobs are disappearing very, very fast because the kind of work we used to hand to staff accountants like John Summit when he worked at Ernst and Young in Chicago, are getting automated by AI, requesting documents from clients, receiving them, organizing them, rolling forward prior year, workpapers, ticking and tying all of that stuff the AI's are starting to do And so we're seeing reductions in entry level jobs, not reductions in mid-career or later stage career positions. Those are actually in greater demand than ever. It's really, really hard to find a tax manager. Nobody can find a tax manager for their public accounting firm. Like that's a great place to be in. But it's really hard to get a job as a staff accountant because nobody wants to train you and they don't have work to give you to justify that cost of training you for several years. So the whole model is going to have to shift the pyramid model of accounting is is going away. And that's going to fundamentally change our profession, because that's been the way everyone got into accounting for a hundred years. And here's a story about how it's also lowering fees. And this is super ironic because it's one of the big four pressuring their own auditor to lower their audit fee because of AI.

David Leary: [00:35:07] Because I think we had a story a couple months ago where clients were pressuring whoever it was, their accounting firm, to lower the price because of AI.

Blake Oliver: [00:35:15] That's right. Yeah. One somebody from one of the big four, one of the tech people, was talking about how there's pressure from their clients. Well, in a in a twist, an ironic twist, KPMG international apparently has pushed its own auditor, Grant Thornton UK, to lower its audit fee, arguing that AI driven efficiencies could reduce the cost of work. This leaked, I'm assuming, from somebody at Grant Thornton who's really pissed off that their client, which is also an audit firm, is is requesting this. The negotiations this was reported in Financial Times and it cites anonymous sources, you know, people familiar with the matter. The negotiations reportedly included pressure tactics, where KPMG threatened to switch auditors if Grant Thornton did not agree to a significant reduction. And the reduction they actually did get a reduction in their audit fee went from $357,000 to 416. Wait, this. Oh yeah, they're 2025. Audit fee was $357,000. In 2024, it was $416,000. That's a 14% reduction. So I think KPMG ought to watch out, because now clients are going to be saying, hey, I want the same fee reduction that you got.

David Leary: [00:36:43] Yeah, they're all like, this is one of those, um, if the big four is doing to each other, it means it's okay for all of us to do it to to the big four now. Yeah. Ultimately. So or top, you know, big, big ten whatever.

Blake Oliver: [00:36:56] This pressure on fees is also going to affect the staffing levels at firms because if fees have to go down, there's less money to spend on staff. So we're going to have fewer auditors doing more work. But there's a potential positive outcome for the people that are left, which is that same thing, the same thing that we saw when cloud came to certain areas of accounting. You can do the work with, say, half as many people. And yes, fees go down, but they do not go down proportionally. So you actually, if you embrace the new tech can make more money per person. Yeah. And that's why we we saw bookkeepers who embraced tech like me able to go from an effective hourly rate of, you know, it was $20 an hour when I started as a freelancer to 100 an hour. Like, I saw A5X increase in my revenue just as a freelancer. My workload also decreased.

David Leary: [00:38:01] What is the average margin for accounting firm?

Blake Oliver: [00:38:05] Oh well, you aim for 20% profit at the end of the day, which is really excellent, right?

David Leary: [00:38:10] I feel like I remember surveys from zero in QuickBooks back in the day that were if you had all your clients on the cloud, you were growing at 12% a year and you were running a 40% margin.

Blake Oliver: [00:38:22] It's possible. Yeah, you could double your net profit margin with the tech, but really hard to do if you've got old workflows, old systems, hourly billing, timesheets. So the firms that are able to pivot and make a mindset shift, where it's not based on people and hours, are the ones that are able to really benefit from this. And this is going to put a ton of pressure on the old model, and I think it'll finally kill timesheets. I think it will finally kill the time based model.

David Leary: [00:38:54] Time based.

Blake Oliver: [00:38:54] Public accounting. Yep. And I think we will see that in the next I mean, five, ten years. It's going to go away.

David Leary: [00:39:03] A long time.

Blake Oliver: [00:39:05] Well, you.

David Leary: [00:39:06] Know, people are stubborn, I guess, right? Wow, that's a long time.

Blake Oliver: [00:39:09] But it's a short time in the history of this model. That's true that we've had. All right, David, I think we should probably go ahead and thank our last sponsor this episode.

David Leary: [00:39:20] I'll grab that.

Blake Oliver: [00:39:21] And that is cloud accountant staffing.

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Blake Oliver: [00:40:27] David, I want to talk about Trump suing the IRS.

David Leary: [00:40:30] Oh yeah, let me jump on those stories. I know every story is like eight stories. Okay.

Blake Oliver: [00:40:35] So what is it, ten? $10 billion or something like that?

David Leary: [00:40:40] Yeah. So, um, on January 29th, in the federal court in Florida, um, Donald Trump, along with Donald Trump Jr, Eric Trump and the Trump Organization, they filed a $10 billion lawsuit against the IRS and the Treasury Department, accusing them of failing to protect his confidential tax records. Do you remember when ProPublica leaked a bunch of billionaire's tax records, and it was all tied to that IRS contractor, Charles Littlejohn?

Blake Oliver: [00:41:06] Yeah, he.

David Leary: [00:41:07] Leaked all that.

Blake Oliver: [00:41:08] He pulled the data onto, like, a USB drive or something and walked out with it and sent it to the press.

David Leary: [00:41:13] And he pled guilty already in 2023. He's serving five years in prison right now. Um, so my initial thought on this, because more articles about this have came out since, is accounting firms themselves have to pay fines. Correct. If you if you have a breach. I forgot what that code number is. Anybody in the chat room? If you know what this code is, if you expose your client tax data, you break, you have a breach.

Blake Oliver: [00:41:40] Penalties.

David Leary: [00:41:41] Yeah there's penalties and they have a dollar amount. Right. And so I think there's precedent here for him to possibly win. Right. But I think it also might open the door to a huge, much bigger civil lawsuit. Because remember, the IRS has now shared taxpayer data with Ice. So if you if you if this sets a precedent of, hey, tax data is worth $10 billion on a breach, some some class action attorney is going to do some math really quickly and figure out 100,000 taxpayer records, 200,000 taxpayer records that were given to Ice. That's a breach. And they're you're going to see a class action suit against the IRS, which could happen. You know, that's that's there. But the bad part of this is the IRS commissioner, um, Treasury Secretary and acting IRS Commissioner Scott Bessent acknowledged that any payout would come from the Treasury's general account, which basically is you and me, but taxpayers are going to have to pay this money to Trump.

Blake Oliver: [00:42:39] If he wins.

David Leary: [00:42:40] If he wins this lawsuit, which I think he might, because there's precedent here, right? So now Trump came out and said that he's going to donate the $10 billion if he wins. So instead of just saying, I'm let's just let me win and I won't take the money, which would actually be the actual donation to the taxpayers. He's going to get the money and then donate, you know, probably to his Bitcoin fund or something like that. I don't know. That is.

Blake Oliver: [00:43:06] That's speculation. David.

David Leary: [00:43:08] Speculation. Yes. And the other, uh, trickle effect of this, the Treasury Department has now canceled all remaining Booz Allen Hamilton contracts through the IRS data breach. So it's it's all tied to this same thing now, Booz Allen. They basically say he was just a contractor. It wasn't really our fault. Blah blah blah, blah blah. But do you know who Booz that Hamilton is?

Blake Oliver: [00:43:28] Well, they're a big consulting firm.

David Leary: [00:43:30] Yeah, a big consulting firm. They're kind of like the, uh, the cousin of the big four accounting arms. Right? They're they're like the cousin of that. But what's interesting is Booz Allen always started out consulting, and they went and specialized into the government stuff. But like Deloitte, PwC, KPMG started as accounting firms and they've gotten into the consulting game, so they're kind of very similar. The consulting arms and Booz Allen Hamilton. Um, and it's actually interesting bruising Company, which is one of their consulting groups, split and now became strategy and PwC. So they a piece of their consulting firm kind of got involved with PwC. I'm not a fan from consulting firm. Right. So now that that that that sub boozing company company is now part of PwC's consulting arm. But yeah. So there's ripple effects of these tax datas being exposed. But why why just sue the Treasury Department and why not sue the person who did it. Well, the person who doesn't have any money. Why not sue us? Booz Allen Hamilton? Like, why sue the Treasury? Because they're the ones that have no money, right?

Blake Oliver: [00:44:39] I guess so. Uh, well, David, since we're talking about the IRS, let's talk about tax pro accounts the IRS has upgraded expanded capabilities in its online Tax Pro account.

David Leary: [00:44:52] Adding controller called the Trump Tax Pro account yet?

Blake Oliver: [00:44:55] No, not yet marketing. Now tax professional firms can manage who on staff are authorized to act using the firm's centralized authorization file or CAF access. The update is aimed at making it easier for firms to administer and govern CAF based access digitally, which can reduce reliance on paper processes and help the firm serve clients more efficiently. So now what you can do is you can specify which employees are authorized to act under the business caf, and you can link the business CAF number to the firm's Ein within the Tax Pro account. You can view taxpayer information associated with the business CAF limited to the scope of active authorizations. You can view and withdraw active authorizations on behalf of the tax professional business.

David Leary: [00:45:44] So is this like a team's plan for IRS transcripts. Is that in my brain? I'm trying to understand what this is.

Blake Oliver: [00:45:52] Yeah, I think that's a that might be a good way to describe it. Yeah. It's just it's like. I mean, in the past you had to do all this stuff by like faxing in forms and stuff. So we're making progress here at the IRS. Uh, more IRS news. The IRS has issued an FAQ about the Trump executive order on electronic payments. This is the first tax season where you're not going to be able to mail a check these days. Basically, the executive order, which we've covered on the show before, it is requiring the federal government to move refunds and payments to fully electronic rails, which is designed to reduce fraud, improve security and lower processing costs. The shift impacts money sent by the government, which includes tax refunds and money paid to the government, including balances, due fees, penalties, any other payments from individuals and organizations. Paper refund checks largely stopped after September 30th of last year, and the FAQs say that the Treasury has to stop issuing paper checks effective, uh, effective immediately, to the extent permitted by law. Um, the IRS generally already has done that. The tax return filing process isn't changing yet. It's just how refunds are delivered and payments are made, not how returns are prepared or submitted. Taxpayers without bank accounts can still get refunds you can use if you don't have a bank account. An alternative electronic method prepaid debit cards. Certain mobile apps are going to be available.

David Leary: [00:47:28] There are the date you can't get a check.

Blake Oliver: [00:47:30] Uh, well, the IRS has already stopped largely after September 30th, and I'm not. I'm not really sure exactly what the date is on the, uh, when they have to actually stop, but it seems like it's it's trickling down.

David Leary: [00:47:44] Treasury checks were kind of nice. It'd be nice to have, like. I wish I would have kept one of them from the past now. Like, it could be like a collectible look. Collectible. One of the last paper checks from the government.

Blake Oliver: [00:47:55] The IRS has also issued guidance on the overtime deduction ahead of tax season. Uh, it's complicated this overtime deduction. Why are you laughing, David?

David Leary: [00:48:07] I think there's all kinds of social media things. And people are what they thought they were going to get from overtime is not what is really happening. It's there's a lot of confusion over this.

Blake Oliver: [00:48:16] Right. Well, it's complicated because this is for tax years 2025 to 2028. And individuals who receive qualified overtime compensation can deduct the portion of overtime pay that exceeds their regular rate. So in other words, the half portion of the time and a half and the deductible amount must be reported on a form W-2 or form 1099. The challenge is that the IRS didn't require the forms to be updated. So you're going to have to figure it out yourself. And another challenge is that many employers pay over time using policies that are more generous or just different than the FLSA. So now you have to, like reconcile that.

David Leary: [00:49:04] It has to be on the W-2, right? Like if you got unreported tips, cash tips, like there's no record of this happening, right?

Blake Oliver: [00:49:11] So it's the it's the overtime that's on the it's on a form that you got right W-2 for instance. But you can only deduct the portion that's like the half of the time and a half. So you're going to have to figure that out because that's not actually on the W-2. So more work for tax professionals. David where do we go next from here? I have a fun story about how US airlines could save half $1 billion a year. It really has nothing to do with accounting, but I just think it's, well, it's got something to do.

David Leary: [00:49:44] A math story, right? It's math.

Blake Oliver: [00:49:46] It's a math story.

David Leary: [00:49:47] Let's make sure. Are there anything else that I have to catch? No I've checked. Check check check check check check. Oh, I want to touch really quick. Kpmg is buying an enterprise AI company. Um, KPMG has acquired the team behind private block, private block and AI development platform. And this ties back to these other things we're talking about, right. Like like you want to be able to build AI and that's that's their player KPMG's play. They want to bring them in so they can embed multi-agent AI systems directly into its existing platforms. So there's really a talent grab that they pulled up. But I found what's interesting with them is if you go to the website Private Block AI, when you think about all these AI companies we've seen over the last five, ten years, it's an AI to check your email, scan receipts, match bank statements. This company went out and built AI that builds workflows for venture capital, private equity consulting firms, private credit, family offices, wealth management, investment banks, angel investors. So they focused on something that of course, KPMG would want. It's a really smart AI startup, so they focused on building AI for these use cases or the clients KPMG would want to have as clients. And that's why they probably got acquired, because it's not it's not your typical AI play at all. But they didn't say how much they paid for them. It's undisclosed because obviously KPMG is not a public company, so they don't have to disclose it.

Blake Oliver: [00:51:11] All right. Here's my last story to take us out.

David Leary: [00:51:13] Airplanes.

Blake Oliver: [00:51:14] Uh, you know, I do a fair amount of travel. And so this caught my attention. Airlines stand to save a potential $580 million as travelers slim down thanks to the effects of weight loss drugs, according to a new study. An equity analyst at Jefferies and an author of the study named Sheila Kahyaoglu, says that the top four US airlines American Airlines, Delta Air Lines, Southwest Airlines and United Airlines will save money each year because Americans are going to lose so much weight from GLP one drugs that it's going to lower their fuel costs by over half $1 billion.

David Leary: [00:52:00] That makes sense. I mean, if everybody on a flight eats loses 5 pounds and they're doing 5000 flights a day, that really add up.

Blake Oliver: [00:52:07] And it's far more than that, right? Like, these drugs are are very effective. Uh, and so, I mean, it's just, I just I had to bring this up because it's just one of those stories where two things that you would not think are connected are connected, and how one, advancement in technology can have a massive impact on a totally different industry. Maybe we'll finally get back free baggage. Thanks to this, we're gonna have to stop paying, like, 35 bucks for a checked bag, right? Yeah, because we have more weight capacity on the plane. Uh, and, uh, hopefully, though, they don't start shrinking the seats even further as a result. That would be unfortunate as well.

David Leary: [00:52:53] Then Americans are getting smaller. Make all the rows three inches smaller. That's right. Well, that's a good story.

Blake Oliver: [00:53:00] That's all I got for this week. Thanks everyone who tuned in live. Follow us on YouTube. Search for The Accounting Podcast. Subscribe. Hit that notification bell icon and you can join us and chat with us as we do the show. Urn CPE for listening to this program and many other fine accounting and tax podcasts. Go to earmark app in your web browser, or get the free earmark app on the App Store or Google Play Store. You can create an account for free, and you can earn a free CPE or IRS CE credit every week. So it's February as we record this. Get ahead of your CPE requirement. Don't wait until the end of the year if you want to support our work and get access to premium content and unlimited CPE every week, you can subscribe for the low price of $170 a year.

David Leary: [00:53:52] And tell a friend about it, like for Valentine's Day. It's a nice gesture to tell your Valentine, hey, you know, you could get free CPE go to earmark app.

Blake Oliver: [00:54:02] And maybe you won't have a Valentine anymore. You know, if you give, if you give that instead of flowers or chocolates, uh, you know, don't make that mistake. It's flowers and an earmark subscription.

David Leary: [00:54:17] Subscription. That's the way to go.

Blake Oliver: [00:54:19] All right, everyone, thanks for another great week here on the pod. David. Great chatting with you as always. We'll see you around here another time. Bye.