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Stop Fighting the Same Audit Battles Year After Year

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Those recurring review comments that keep popping up across your team? Sam Mansour, CPA, did the math and it should make every audit firm leader pay attention. When you multiply these small inefficiencies across your entire practice, they balloon into 1,000 hours of wasted time annually. That’s half a full-time position lost to preventable mistakes, year after year.

In this episode of Audit Smarter, hosts Sam and Abdullah Mansour explore how firms can transform their most frustrating pain points into powerful improvements. Rather than treating each mistake as an isolated problem, Sam shares a systematic approach that turns recurring challenges into opportunities for growth.

The Hidden Cost of Repeated Mistakes

Sam starts with a simple example: a staff member who keeps forgetting to include references from cash testing leads back to supporting check registers. It seems minor until you realize this same mistake is happening across multiple team members, multiple engagements, and multiple years.

“Without reflection, mistakes repeat,” Sam emphasizes. “Without capturing what we’ve learned, we’re almost guaranteed that they’re going to repeat themselves.”

The math becomes staggering when you look across an entire firm. Sam breaks it down. “Let’s say they’re 15-minute issues. If you multiply that by 1,000, now it’s starting to take a lot of time. Because it’s not just one person, but multiple people doing it across multiple engagements.” With an average person working 2,080 hours per year, those 1,000 hours of wasted time equal half a position.

What’s particularly frustrating is that these aren’t random, one-off errors. “Very rarely is it just this one person making this one mistake and you’re never going to see that mistake ever again from different team members,” Sam explains. “People tend to make similar mistakes.”

From Personal Notes to Firm-Wide Knowledge

Sam’s solution is simply to create a lessons-learned log. At the most basic level, this might be a Word document where a preparer titles a section “Cash” and documents specific review comments they receive.

“When you go and test that section again, you need to review your own work,” Sam explains. “You complete this testing in that cash section. Next, you need to realize, okay, I commonly forget to make the reference back from what I see in this lead schedule.”

But personal documentation is just the beginning. Abdullah suggests using OneNote for better organization. “OneNote helps organize it so that you can have one folder for one client,” he explains. “And then you can have several different pages essentially underneath that. So just organizes it a lot better. It’s like a file structure on a network.”

The real power comes when firms turn these individual insights into searchable, firm-wide resources. Sam shares his own recurring challenge with farm audits. “Every year I get into those work papers, I’ll be like, oh shoot, how did those journal entries work? What was that again? Because I only tested like one or two of these a year.”

The solution is to create what Sam calls “a trail of breadcrumbs,” detailed guidance that lives outside the formal audit documentation. This might include written instructions, screenshots of calculations, or even “record video of yourself talking about it.”

By organizing these resources into categories like planning, fieldwork, and wrap-up, firms create an institutional memory that helps everyone, but especially new team members who can access years of accumulated wisdom before their first engagement.

Post-Engagement Debriefs Can’t Be Optional

Sam acknowledges the common perception of post-engagement debriefs as just administrative work. Teams finish one audit and want to jump straight into the next, treating reflection as a luxury they can’t afford.

But Sam insists these debriefs are critical. Structure these meetings by asking three essential questions: What worked? What didn’t work? Where did we get stuck?

Timing matters enormously. “If you wait six months to ask what worked and what didn’t work during busy season, it’s difficult to recall all those little instances,” Sam explains.

The solution is to make debriefs mandatory. “Don’t make it an optional thing,” Sam insists. “We need to sit down, discuss, and reflect.”

These insights then translate into concrete improvements. Sam provides specific examples of how to use what you learn:

  • Update templates. Add conditional formatting that turns cells green when correct values are entered, creating visual confirmation that eliminates data entry errors.
  • Improve checklists. Sam says people like to complain about adding more things to the checklist. His response is practical: “We should continue to add things to the checklist until we stop missing them.”
  • Document compensating controls. In smaller environments where proper segregation of duties isn’t possible, teams often miss compensating controls. Sam’s solution is to put a header in the template that says Compensating Controls. Highlight that section in yellow, and force auditors to fill it out when they’re in the field.

Getting Your Team to Actually Buy In

“They’re filling out more paperwork. Their checklists are becoming longer, their templates are becoming longer. They’re asked to do more work. People get frustrated,” Sam says, acknowledging the pushback firms encounter.

The key to overcoming resistance is to explain the “why” behind every change. Using the compensating controls example, Sam shows how to frame it. Explain why smaller clients need these controls, how missing this documentation puts the firm at risk, and why this has emerged as a firm-wide trend.

Most importantly, show the math. “Yes, it takes an extra 15 minutes to fill out this work paper,” Sam quantifies, “but on the back end it costs us, on average, an hour. So we’re saving 45 minutes and we’ve improved our audit quality.”

Recognition matters too. “Recognize people who help us improve as a firm,” Sam emphasizes. When you publicly acknowledge team members who contribute ideas, it shows everyone that the firm values continuous improvement.

The payoff is clear when teams understand the bigger picture. “Improvement is easier to embrace when it’s linked to wins, not just extra tasks,” Sam explains. The wins include reduced hours, better documentation, less stress during peer reviews, and becoming better auditors overall.

Building a Culture Where Every Audit Makes You Stronger

The ultimate transformation happens when learning becomes part of your firm’s DNA. “We do work and then we reflect on that. What did we do good? What did we do bad? What needs to improve? What needs to change?” Sam describes. “We take those lessons learned and then we implement change in the firm. Now it’s an upgrade.”

This creates a powerful shift in how teams approach their work. “Eventually it becomes so ingrained in people that they go out into the field with that mentality from the very beginning,” Sam observes. “If you know you’re going to have that conversation, the next audit you go out on, you don’t want come to the next meeting and say, oh shoot, we missed this.”

The benefits extend beyond efficiency. Sam notes that when professionals evaluate career moves, they ask themselves if working at a firm will enhance their resume. “It’s really important to have a culture of learning, to have a culture of enhancing and moving forward,” he emphasizes.

Perhaps most remarkably, this approach transforms the audit environment itself. “I have found audit environments like that are much less stressful to be in because everyone’s just so ahead of the game and so proactive,” Sam reflects.

Some might think this vision sounds unrealistic, but Sam addresses this directly. “For a lot of audit firms listening to this, they’re thinking this is an unrealistic dream. But it’s very realistic if the people in the firm buy into this idea.”

Over time, Sam promises, “your audit methodology becomes smarter, more efficient and more resilient because now you’re not just digging holes and going home. You’re you’re thinking it through.”

Turn Your Next Review Comment Into Progress

The difference between firms that fight the same battles year after year and those that continuously improve isn’t talent or resources. It’s the discipline to capture, analyze, and act on lessons learned.

Sam’s framework shows every review comment, debrief insight, and team suggestion can strengthen your entire firm. When you transform individual experiences into institutional knowledge, optional debriefs into mandatory investments, and isolated improvements into a learning culture, each audit makes your firm stronger.

Ready to stop losing productivity to preventable mistakes? Listen to the full episode for detailed frameworks and additional examples.

Your CPA Exam Scores Might Be Lost and Your AI Bookkeeper Is 57% Accurate

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“No kings means no paychecks, no paychecks, no government.” When Treasury Secretary nominee Scott Bessent dropped this line in a Fox News interview, Blake Oliver and David Leary weren’t sure if they should laugh or be terrified. As David put it: “That’s the most un-American thing anybody could say.”

In episode 458 of The Accounting Podcast, Blake and David dig into a series of accountability failures that would be funny if they weren’t so serious. From the Trump administration creating a brand new IRS “CEO” position to dodge Senate confirmation, to NASBA somehow losing track of CPA exam scores, the organizations supposed to maintain standards can’t even maintain their own data.

The IRS Gets a CEO (Because Who Needs the Constitution?)

The Trump administration’s latest move isn’t subtle. It created a new “CEO” position for the IRS that doesn’t require Senate confirmation. As Blake explains, “If the president just creates a new role that has the same responsibilities but doesn’t get checked by the Senate, then that’s just a run around the rules.”

The plan goes deeper than personnel changes. Gary Shapley, an advisor to Treasury Secretary nominee Scott Bessent, wants to weaken IRS lawyers’ involvement in criminal investigations and eliminate extra procedural steps for sensitive cases involving elected officials and tax-exempt groups. These aren’t reforms—they’re removing the safety rails.

“Where’s the AICPA on this?” David asks. The AICPA wrote a letter about the government shutdown’s impact on taxpayers but stayed silent on bypassing Congress to appoint IRS leadership. Blake doesn’t mince words: “They don’t. They are not willing to take a stand on something that matters because they’re afraid of political blowback.”

According to Wall Street Journal reporting that Blake and David discuss, Shapely has already compiled a hit list. The targets? George Soros and affiliated organizations, major Democratic donors, and left-leaning nonprofit groups.

The hosts make an important point that transcends politics. “The Obama administration targeted right wing groups,” Blake notes, agreeing with a viewer comment. “This is why you don’t want to give the government too much power. The other side gets the gun eventually, then points it at the other side.”

When Accounting Organizations Can’t Do Accounting

If you think government accountability is bad, wait until you hear about the profession’s own organizations.

Professor Joseph Ugrin, who creates the CPA Success Index published by Accounting Today, discovered NASBA’s 2024 data is essentially garbage. Between 25% and 40% of candidate scores are simply missing. Plus, Iowa community colleges appear in the data despite state law requiring bachelor’s degrees to sit for the exam.

“NASBA has access to all the transcripts submitted by the candidates,” Blake points out. “So there’s no reason why they couldn’t correctly classify what schools they went to.”

David speculates, “This smells like somebody at NASBA tried to use AI to summarize some stuff and screwed it up.” Whether it’s AI or old-fashioned incompetence, Ugrin can’t publish the Success Index this year because the data is unusable.

Meanwhile, the Chicago Teachers Union hasn’t released required financial audits for over five years, despite paying $80,000 for audit services in 2025 alone. When members finally got federal filings, they showed only 18% of spending goes to representing teachers. The other 82%? Overhead, politics, and “leadership priorities.”

As David asks incredulously: “How did it go past one year?”

The issue isn’t confined to Chicago. Forty-three Arkansas cities can’t get state funds because they can’t find CPAs to do required audits. “The auditors are retiring. They’re not being replaced,” Blake explains. Small-town America is literally running out of accountants.

AI to the Rescue! (Just Kidding, It’s 57% Accurate)

While real problems go unsolved, the profession is being sold AI magic beans.

One marketing CEO’s experience with QuickBooks’ new AI features reads like a horror story. “Although trained on transactions, QuickBooks frequently miscategorized payments based solely on dollar value,” he wrote. If a vendor sent one $1,000 invoice, the AI recorded all future invoices as $1,000. Contractor payments were recorded under “QuickBooks payments” instead of the contractor’s name. The company spent thousands on accountants trying to fix problems that couldn’t be fixed.

“QuickBooks sits at the heart of our business,” the CEO explained. “When AI upgrades destabilize that core, the consequences ripple across the organization.”

The hosts shared another headline that calls AI’s accuracy into question. Microsoft’s AI agent in Excel achieves 57.2% accuracy on spreadsheet benchmarks. As Blake says: “57.2% accuracy is not going to cut it. Not even 98% accuracy is going to cut it.”

Yet companies like Docyt claim AI will let one accountant manage 300 clients. The hosts’ response? “I’ve talked to firm owners that are super efficient,” David says. “Their best bookkeepers maybe handle 45 clients a month.”

Blake’s experience backs this up: “A typical bookkeeper could do 20 to 30 on average. And my all star could do 40 to 60.” The idea of 300 clients per person? “You would have too many questions coming in emails,” Blake explains. “I don’t think there’s an AI tool that can do that.”

Blake’s ideal practice would have ten outsourced controller clients, meeting weekly with each. “Once I got the ten clients, I could probably do it in four hours a day.” That’s realistic. Managing 300 clients with AI? That’s fantasy.

The hosts haven’t seen AI actually eliminating jobs. “I have yet to talk to an accountant that says, oh, we implemented this thing and now we got rid of two of my staff,” David states. Even at their own company, which uses AI extensively: “We’re not getting rid of anybody. We just hired more engineers.”

The $300 Trillion Oops

Just when you thought it couldn’t get wilder, David shares the stablecoin story that should terrify everyone.

Paxos, which provides stablecoin infrastructure for PayPal, accidentally minted $300 trillion in stablecoins. Not million. Not billion. Trillion. For context, the US deficit is $2 trillion.

“You understand how a stablecoin works in theory.” David says. “A dollar goes in, you get a stablecoin worth a dollar back. What if I told you none of that is true?”

The company claimed it was a “technical error that briefly appeared for 20 minutes,” then they “burned” the excess tokens. But as David points out, if companies can just create and destroy them at will, this proves stablecoins aren’t actually backed by dollars.

This matters because Ripple just bought a treasury management firm for $1 billion, putting cryptocurrency at the center of corporate cash management. “Accountants are going to be touching this stuff,” David warns. “It’s going to be here next year.”

Time to Pay Attention

This episode of The Accounting Podcast is a reality check for a profession facing multiple crises simultaneously. The IRS is being restructured to avoid constitutional oversight. Professional organizations can’t maintain basic data integrity. AI is being forced on businesses with disastrous results. And small towns can’t find CPAs to do basic audits.

“We don’t need a king,” David emphasizes about Bessent’s comments. But between government overreach, organizational incompetence, and technological snake oil, the profession is being pulled in all the wrong directions.

The hosts’ frustration is justified. When Blake asks why the AICPA won’t stand up for constitutional principles, when David wonders how organizations go years without audits, when they both laugh at the idea of one person managing 300 clients, they’re asking the questions the profession should be asking itself.

Listen to the full episode to hear Blake and David’s complete breakdown of these interconnected failures. In a profession built on trust and verification, their willingness to be brutally honest is exactly what’s needed.

When Good S Elections Go Bad and How to End Them Properly

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When businesses elect S corporation status, they often focus on the self-employment tax savings. But what happens when that election no longer makes sense—or worse, when it accidentally terminates? In episode 14 of Tax in Action, tax expert Jeremy Wells, EA, CPA, explores the complex process of ending S corporation elections, based on his firm’s recent experience with businesses struggling in the post-pandemic economy.

“A lot of small businesses that started up during the COVID-19 pandemic have seen business taper off quite a bit in the last year or two,” Wells explains. “Businesses that a few years ago actually made sense to be S corporations, nowadays not so much. And the owners want to stay in business, they want to keep operating, but it can be pretty burdensome to run an S corporation when profit margins aren’t what they were.”

Three Ways Your S Election Can End

Under IRC Section 1362, an S election remains in effect until termination, which can occur in three ways. Wells breaks down each path and the triggers that set them off.

1. Revocation by Choice

The most straightforward way to end an S election is to revoke it voluntarily. “An S corporation can revoke the S election for any taxable year,” Wells notes, “including the first year.”

The process requires shareholders owning at least half of the corporation’s shares (including non-voting shares) to consent in writing. Each consenting shareholder must provide their name, address, tax ID, number of shares owned, the date they acquired the stock, the date their tax year ends, and the corporation’s name and tax ID.

Timing matters. As Wells explains, “The corporation files that revocation statement by the 15th day of the third month of the taxable year. In general, if you’re working with a calendar year S corporation, that’s March 15th.” File after that date, and the revocation takes effect the following tax year.

This creates planning opportunities. “We’ll usually plan to go ahead and close out that calendar year as an S corporation,” Wells says when dealing with mid-year decisions. “But we’ll go ahead and get the paperwork ready and send in that revocation statement and make it effective as of the beginning of the following year.”

Corporations can also file prospective revocations for future dates and even rescind them if circumstances change. However, there’s a catch: if new shareholders join after the revocation is filed, they must also consent to any rescission.

2. Failing to Qualify

The second termination path occurs automatically when a corporation ceases to meet S corporation requirements. Wells emphasizes that “those qualifications have to be met continuously. It’s not just meeting those qualifications, electing S, and then not worrying about it anymore.”

Common disqualifying events include:

  • Exceeding 100 shareholders
  • Adding a nonresident alien shareholder
  • Having a shareholder that isn’t an individual (with limited exceptions for estates, trusts, and tax-exempt organizations)
  • Creating multiple classes of stock

The stock class issue causes particular confusion. “Voting versus non-voting stock does not create a second class,” Wells clarifies. “You can have voting and non-voting stock in an S corporation.” The problem arises when shares have different rights to distributions or liquidation proceeds.

“In an S corporation, every share of the corporation stock has to confer identical rights to distributions and liquidation proceeds to every other share of stock,” Wells explains. “So if I own 10% of the stock, I get 10% of the distribution. If somebody else owns 20% of the stock, they get 20% of the distributions.”

This is especially important for LLCs electing S status. “If you’re working with an LLC that’s considering electing S, it’s incredibly important to get a copy of the operating agreement, review it, and make sure there are no preferential rights, no waterfall distribution schedules,” Wells warns.

3. Excessive Passive Investment Income

The third termination trigger only affects S corporations with C corporation history. If a corporation has C corporation earnings and profits and generates passive investment income exceeding 25% of gross receipts for three consecutive years, the election terminates.

“Congress intended to make S Corporation provisions available only for businesses that are engaged in active operations of businesses, not those that are mainly involved in passive investment activities,” Wells explains.

The rules here get complex. Passive income includes dividends, interest, rents, royalties, and annuities not earned in the ordinary course of business. However, Wells notes important exceptions. For example, rent from a business actively managing properties doesn’t count as passive if the corporation “performs significant services or incurs substantial costs in the rental business.”

Since many modern S corporations started as LLCs and never operated as C corporations, this rule often doesn’t apply. Wells shares a close call from his practice: “The individual thought he needed to put his individual stock holdings into an LLC and then, for some reason, thought he needed to elect S for that LLC.” The only thing that saved this client was that the LLC had no C corporation earnings and profits.

The Hidden Withdrawal Option

Perhaps the most valuable tool Wells reveals is the withdrawal provision, found in Internal Revenue Manual 3.13.2.27.10.

“If the IRS accepts the withdrawal request, then the entity is treated as if the classification had never been elected,” Wells explains. This option is available only before filing the first S corporation tax return—March 15th for calendar-year corporations.

The withdrawal can be requested through correspondence or by filing Form 8832. Wells has used this for clients who received bad online advice. “We’ve done this before with small businesses that hadn’t even really gotten started yet. The taxpayer got some bad advice online and thought an S corporation starting off was the way to go.”

The advantage is that, unlike revocation, withdrawal doesn’t trigger the five-year waiting period before re-electing S status. “That corporation could elect S, withdraw its election, and then the next year decide to elect S again. And there’s no problem with that,” Wells notes.

When State and Federal Rules Diverge

State administrative dissolutions can come as a surprise to business owners. Many panic when they forget to renew their state LLC registration, but Wells offers reassurance based on multiple IRS Private Letter Rulings.

“The IRS still considers the S corporation in existence. So a state law administrative dissolution of an LLC does not translate into a termination of the S election,” he explains. “As long as the business continues operating and continues fulfilling its tax filing requirements, the IRS doesn’t appear to really care about what happens at the state level.”

There’s no need for a new S election when the entity gets reinstated at the state level. “Just keep operating as if everything is fine, at least at the federal level, and try to get that corporation or LLC reinstated at the state level,” Wells advises.

Critical Documentation and Next Steps

Wells emphasizes the importance of maintaining proper records. Keep the original Form 2553 and the IRS acceptance letter, as you’ll need to know which service center processed the election if you later want to revoke it.

Processing delays have become a challenge. “I’ve seen it take anywhere from six to 18 months for that S election to get processed,” Wells notes, partly because Form 2553 still requires wet-ink signatures and must be paper filed.

This episode is part one of a two-part series. Wells promises to cover the implications of termination, including the five-year rule and handling split years when termination occurs mid-year, in the next episode.

For tax professionals dealing with struggling businesses or succession planning complications, understanding these termination options preserves flexibility for clients whose circumstances change. As Wells demonstrates through his firm’s experience, what made perfect sense during the pandemic boom might need reconsideration today.

Ready to dive deeper into S corporation terminations and their implications? Listen to the full episode of Tax in Action for Wells’ complete analysis and practical guidance for navigating these complex scenarios.

Stock Options Weren’t Lucky Timing—They Were Backdated Fraud

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In 2005, a Norwegian professor at the University of Iowa discovered something that would shake corporate America: CEOs weren’t getting lucky with their stock option timing; they were cheating. By looking backward and cherry-picking dates when their company’s stock hit rock bottom, executives at more than 130 major corporations were guaranteeing themselves millions in profits.

That professor, Erik Lie, shared his story with Caleb Newquist in a recent episode of the Oh My Fraud podcast.

The Accidental Fraud Fighter

Erik never set out to expose corporate fraud. Growing up in Norway, spending time skiing in the mountains and playing by the water, he was just a kid who was good at math. His path to becoming one of TIME magazine’s 100 Most Influential People in 2007 started with simple curiosity.

Erik’s work at the University of Iowa’s Tippie College of Business didn’t involve trying to catch cheaters. He was studying how stock options affected executive behavior. But what he found in the data was too strange to ignore.

Stock options give executives the right to buy company stock at a fixed price in the future, usually set at the market price on the grant date. Thanks to a 1993 tax law, they’d become hugely popular as “performance-based” compensation that companies could still deduct from their taxes. By the early 2000s, tech companies were handing them out like candy.

When Lucky Timing Becomes Mathematically Impossible

Erik was looking at what happened to stock prices around option grant dates, following up on earlier work by NYU professor David Yermack. But where Yermack found a modest pattern in early 1990s data, Erik discovered something explosive in more recent numbers.

“You see the stock price during the month beforehand, on average, go down by about 4%. And then right on the grant date, it turns and it goes up 4% afterward,” Erik explained. “This is crazy to find something like this.”

The pattern wasn’t just in individual stocks; it showed up in the entire market. As Erik put it, “The whole market is moving in that same direction. And you ask yourself, how could these guys predict the market? And how come they’re not working for a hedge fund in that case, instead of for a company out there in the Midwest?”

Some companies hit stock price lows for their option grants five years in a row. The odds of this happening by chance were astronomical. While defense lawyers would later claim their clients just “got lucky,” the concentration of perfect timing across hundreds of companies told a different story.

Breaking Academic Boundaries

When Erik read a Wall Street Journal article about the SEC investigating companies for “spring loading”—granting options before releasing good news—he did something unusual for an academic: he reached out to regulators.

“I contacted SEC, and this is not normal for me either,” Erik recalled. “Usually I stay in my bubble. But something compelled me to contact SEC and say, ‘Hey, I think you’re on the wrong path here.'”

His theory was simple. Companies didn’t have to disclose option grants until months later in their proxy statements. This meant executives could look backward and pick the most favorable dates. “They can essentially stand in March of a year and say, ‘Hey, we’ve got some grants last year, didn’t we? Let’s just pick a date to make that official date. And look at that—June 7th had a very low price.'”

Unlike Harry Markopolos, who was desperately trying to get the SEC to investigate Bernie Madoff during the same period, Erik found a receptive audience. One SEC staff member called him, asked for data, and appeared to take his findings seriously.

The Story Goes Public

To strengthen his case, Erik teamed up with colleague Randall Heron to study what happened after Sarbanes-Oxley required option grants to be reported within two days. Their findings were damning: companies that complied with the new rule showed no suspicious timing patterns. The magical ability to pick perfect grant dates vanished the moment executives had to report in real-time.

But academic papers rarely make waves. “People will not read these academic journals for the most part,” Erik admitted. “No one cares about these things.”

Enter Mark Maremont, a senior Wall Street Journal reporter who immediately grasped the story’s explosive potential. His team spent months analyzing data and contacting companies. The resulting March 2006 article, “The Perfect Payday,” featured colorful graphics showing company after company somehow granting options at exact stock price bottoms.

“One executive fled the country very quickly,” Erik noted about the aftermath. “I think it’s pretty clear that something is going on.”

The Journal won a Pulitzer Prize for its coverage. More than 130 companies faced investigations. Seventy executives lost their jobs.

Why Proving Fraud Is Harder Than Finding It

Despite overwhelming statistical evidence, criminal prosecutions produced mixed results. The challenge was, while Erik’s data showed undeniable patterns across hundreds of companies, prosecutors had to prove criminal intent for specific individuals.

“With enough data, you can see these patterns, but if you narrow it down to one data point, you can’t see what’s happening in that context,” Erik explained.

Smart executives had even built in deniability. “Some of them would intentionally not pick the lowest because it would seem so obvious,” Erik revealed. By choosing the second or third-lowest price, they created enough ambiguity to defeat prosecution while still enriching themselves.

The harm was real. Shareholders were deceived about compensation costs. Companies illegally claimed tax deductions. And as Erik pointed out: “If this is all harmless, then why not just do it out in the open?”

Lessons for Today’s Fraud Fighters

Erik’s story demonstrates what Caleb calls the “privatization of enforcement,” where academics, journalists, and others help catch fraud that overwhelmed government agencies might miss. But unlike traditional whistleblowers who face retaliation, Erik experienced little pushback.

“I wasn’t scared at all. I just thought it was a whole lot of fun,” he said, attributing his lack of fear partly to Norwegian culture where “any celebrity can go around in the street or take the bus.”

His new book, “Catching Cheats: Everyday Forensics to Unmask Business Fraud,” shares these and other stories about using data to spot deception. For accounting professionals dealing with an era of sophisticated financial manipulation, his work offers an important lesson: patterns in aggregate data can reveal frauds invisible at the individual level.

The backdating scandal largely ended once transparency was required. When executives could no longer manipulate timing in secret, the practice stopped. As Caleb observes in the episode, “These are rich and powerful people, executives at public companies. And we should want those people to be accountable for their actions.”

Sometimes catching cheats doesn’t require being a traditional whistleblower risking everything. Sometimes it just takes curiosity, rigorous analysis, and the courage to tell regulators when they’re looking in the wrong direction. In a world drowning in data, the ability to spot patterns others miss might be our best tool for keeping the powerful honest.

Listen to the full episode to hear Erik’s complete story, from his Norwegian childhood to becoming one of TIME’s most influential people, and learn how academic curiosity exposed one of the most widespread corporate frauds of our time.

After 50 Years in Internal Audit, Richard Chambers Sees the Profession’s Greatest Risk Yet

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“Who’s going to provide the skepticism, the intellectual curiosity, and the institutional knowledge to our audit teams in ten years? Because the rest of us are going to be gone.”

Richard Chambers drops this stark warning after 50 years in internal audit. His concern isn’t about losing jobs to technology. It’s about the growing gap between how we’ve always trained auditors and what the profession now demands.

On this episode of the Earmark Podcast, host Blake Oliver sat down with Richard, Senior Advisor for Risk and Audit at AuditBoard. He brings a unique view of internal audit’s transformation. When he started in 1974, fresh out of college and working in a bank’s internal audit department, the job was all about checking financial records and looking backward. Today? Financial risks make up only 25% of audit plans. The rest involves cyber threats, AI governance, supply chain chaos, and what Richard calls “perma-crisis”—our new normal where tariff rates can change three times in a single day.

Most companies use AI, but only a quarter have set up proper governance over it, according to AuditBoard research. That gap presents massive risk and opportunity for internal auditors who can bridge it.

From Bean Counting to Risk Navigation

Internal audit has changed dramatically since Richard joined that bank in 1974. Back then, it was all ledgers and reconciliations—purely financial work focused on last year’s numbers. Today, financial risks are just a quarter of what internal auditors examine.

“The profession has matured,” Richard explains. “While we still do some work in the financial space, that’s really a small percentage of internal audit’s focus.”

The real game-changer has been what Richard calls “perma-crisis.” It started with the COVID-19 pandemic and hasn’t stopped. “We’ve been lurching from one risk-induced disruption to another,” he says, listing the cascade: pandemic, forty-year-high inflation, supply chain breakdowns, wars in Europe and the Middle East. “We’re in our sixth year of it, and I would submit this is the new normal.”

This constant chaos makes traditional planning almost useless. Richard found that nearly 60% of internal audit departments had already changed their 2025 plans by May. When tariff rates can swing wildly in a single day—Richard recalls hearing three different numbers from Washington in one day—annual planning is dangerous.

“You can no longer have any confidence that one scenario is the only one you have to worry about,” Richard emphasizes. Organizations need what he calls “scenario risk management,” or planning for multiple possible futures at once.

This need for flexibility shifts how internal audit works with other departments. The old model was called “three lines of defense”: management controlled risks (first line), oversight functions monitored them (second line), and internal audit was the last barrier before disaster (third line).

But pure defense isn’t enough anymore. In 2019, the Institute of Internal Auditors dropped “defense” from the name. The new message? “Independence does not mean isolation.”

Richard uses a ship analogy that really hits home. Organizations are like vessels at sea that need lookouts watching in all directions and talking to each other. “If your internal auditors are looking in one direction and your risk managers are looking in another,” he warns, “but they aren’t sharing what they’re seeing, then you don’t know whether there are gaps.”

AI: The Top Risk and Best Opportunity

Three years ago, AI wasn’t even on internal audit’s risk list. Today, it’s number one, pushing even the talent crisis to second place.

“Pre-2022, before ChatGPT came out, we weren’t asking about it,” Richard admits. Once he started surveying the profession, AI rocketed up the list: middle of the pack the first year, third place the next, then straight to number one.

This isn’t just another tech disruption. After watching five decades of change, Richard doesn’t mince words: “In the five decades I’ve been in internal audit, there’s never been a greater risk to this profession in terms of becoming irrelevant.”

The scariest part? When Richard asks why audit teams aren’t using AI more, the top answer is, “We don’t really understand it enough.” That hesitation could be fatal.

Yet Richard himself uses AI daily as his “research assistant.” He asks it to identify industry risks, outline articles, analyze data. “It takes me longer to write the prompts than it takes to give me the answer,” he notes.

The use cases are obvious and powerful. Risk assessments that used to happen annually can now be continuous. AI can scan for threats humans would never spot. Data analysis that took weeks happens in minutes. Even audit reports can be AI-generated.

But the trap is that AI excels at exactly the work that trains new auditors. Entry-level graduates traditionally learned by doing routine tasks. Now AI does those tasks better and faster.

“College graduates have traditionally been able to ease into professions by doing some of the more rudimentary tasks,” Richard explains. “But AI is prime for rudimentary tasks.”

This creates a vicious cycle. Companies hire fewer entry-level auditors. Without that pipeline, who develops the judgment for complex work? Richard’ solution: “We shouldn’t refrain from hiring them. We should be willing to bring them in and help them leap the learning curve.”

“AI won’t replace internal auditors,” Richard predicts, “but it will replace internal auditors who don’t use it.”

The Human Superpowers AI Can’t Touch

“To assess culture, you also have to be able to rely on your sense of smell.”

A chairman of the board of a large Indian company shared this wisdom with Richard years ago, and it perfectly captures what separates humans from AI. Technology can analyze documents and data. But it takes human instinct to sense what happens when nobody’s watching.

Richard identifies three “human superpowers” that AI cannot replicate: professional skepticism, intellectual curiosity, and relationship skills. These aren’t soft skills; they’re the core value of internal audit.

Take culture assessment. Richard has done two major research projects showing how toxic culture can destroy organizations. But judging culture requires reading between lines, sensing unspoken tensions, and understanding human motivations. As Blake pointed out during the conversation, “The body language, the way people talk to each other, all of that is context that AI just cannot have access to.”

The audit committee relationship shows this even more clearly. Richard chairs an audit committee and knows these relationships need more than data transfer. They require courage to “grab them by the face” and focus them on hidden risks.

“If we’re content to just answer the questions they ask,” Richard warns, “then we’re not really serving our organizations well. We have to help them understand the questions they need to be asking.”

This shift, from giving answers to finding the right questions, represents a huge evolution. While AI can list potential questions, there’s something fundamentally human about knowing which questions matter.

Most critically, Richard identifies one role that must stay human: assessing AI’s own governance. “I shudder to think that there may be a day where we ask AI to assess its own governance,” he says. “We would never do that with anyone else.”

The challenge is developing these human skills when the traditional path is disappearing. Without routine work to learn on, how do new auditors develop judgment?

We need to help new auditors develop skepticism, intellectual curiosity, and institutional knowledge from day one. Teach them to ask “why” before teaching them “how.”

As Richard reflects after 50 years, “What a difference from the bean counter view of internal audit. You get to be so curious as an internal auditor these days.”

The Next 50 Years Start Now

Richard’s journey from a bank to internal audit’s leading voice shows a profession that has transformed before and must do so again.

The collision of perma-crisis and AI doesn’t doom internal audit. It clarifies its purpose. When tariffs change three times daily, cyber threats evolve by the hour, and AI makes decisions we don’t fully understand, organizations desperately need professionals who ask the hard questions.

Not “What does the data say?” but “What isn’t the data telling us?” Not “How do we implement AI?” but “How do we govern what we can’t fully understand?”

The saying “independence does not mean isolation” applies to both organizational relationships and the human-AI partnership. Tomorrow’s successful auditors won’t resist AI or surrender to it. They’ll orchestrate a sophisticated dance between computational power and human intuition.

The fact that entry-level work is vanishing while judgment becomes more critical demands new thinking about professional development. Organizations can’t wait for fully-formed auditors. They must cultivate intellectual curiosity from day one.

For accounting and tax professionals watching internal audit’s future, Richard warns those who avoid or fear AI will become irrelevant. But he also extends an invitation: those who combine technology with human capabilities will find themselves at the center of organizational decision-making.

Listen to the complete conversation to understand why this moment represents internal audit’s greatest challenge and its most exciting opportunity. After five decades in the profession, Richard reminds us the question isn’t whether internal audit will survive the age of AI. It’s whether individual auditors will choose to evolve with it.