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Everyone’s a Builder Now, and That’s Exactly What Should Worry the Accounting Profession

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“One day, the board is going to ask the CEO, ‘I see you spent all that on tokens. What was the result?’ And they’re not gonna be able to answer it.” That’s David Leary on Episode 496 of The Accounting Podcast, and in one line he captures the tension running under nearly every story he and co-host Blake Oliver covered this week.

Here’s the big idea that ties all of this episode’s stories together is that, as AI lowers the barrier to building software, automating audits, and streamlining everything from month-end close to CPE reporting, the accounting profession’s real value shifts away from doing the work and toward overseeing it. That’s because every advance comes bundled with a hidden cost or risk. The real professionals know exactly where the practical controls, real costs, and actual risks live.

Xero Arms the “Builder Class,” but It’s Still Very Early Days

Xero turned 20 this year, and at Xerocon London the company used that milestone to lean into what CEO Sukhinder Cassidy calls a “builder class” movement. The builder class includes accountants, bookkeepers, and business users who can create automations and software-like tools without being traditional developers. As David noted, this connects directly to Xero’s recent developer-channel push, and its Is Everyone a Developer Now? YouTube channel that once seemed puzzling but now reads as strategy.

The centerpiece is XeroForce, an invite-only, alpha-stage, no-code AI agent builder. David compared it to Zapier because you connect your apps, describe a workflow in plain language (“every time an email like this comes in, pull the PDF attachment and post it as a bill”), and it builds the automation for you. It’s part of Xero’s broader play, alongside the new mid-market Xero Ultra product, to keep customers on its full stack as they grow rather than losing them to a Sage Intacct or Oracle NetSuite.

Since Xero started connecting Claude and other agents in January 2026, its API usage jumped 400%, and 2,000 customers connected Xero to Claude in the first 60 days after the announcement. That sounds impressive until you do the math. Against roughly 5 million Xero businesses, 2,000 is about 0.04%. “We’re so early still,” Blake said. 

David’s advice was blunt: “Don’t get FOMO, because the number of people actually doing it is so, so teeny, teeny, teeny.” He also flagged the missing “database layer.” Accountants can vibe-code an app, but there’s often nowhere for it to live and no easy way to host and maintain it. That’s the practical control problem hiding behind the promise.

Vibe Coding: Real Six-Figure Savings, Real Key-Person Risk

If Xero arms accountants to build, some firms aren’t waiting for a vendor at all. As one listener put it, “Small firms can now develop their own software for less than the cost of buying software.” For example, at HoganTaylor, Randy Nail’s team needed a financial reporting tool for a new audit method. A vendor quote came in around $200,000 a year. Instead, they built it themselves in Excel with AI. Blake says that’s the smart way to do it: build in a familiar tool you already own, not a standalone app “living somewhere on a server” you don’t fully understand. Mike DeKock of MJD Advisors went further, replacing $300,000-a-year audit software with a build in Claude and Retool for under $30,000 annually. Even Starbucks is chasing the same impulse at enterprise scale, trying to trim its roughly $400 million software spend by building more in-house.

The catch in DeKock’s case is that he’s the only one who knows how it works. That’s key-person risk. Blake and David have lived it. Earmark’s AI course generator runs on about 75 Zapier steps Blake built years ago, and when it broke recently, only Blake could fix it. It’s the same problem as the notoriously complex financial model that only one person understands, where everyone else is afraid to click the wrong cell.

David pushed back, and fairly. AI coding tools document their own work well. It includes comments in the code and plain-English summaries, so it may be less of a problem than it first appears. And vendors aren’t a guaranteed safety net either. He recounted a Streamyard support headache: “If I have to use an AI bot to get support for your product, I might as well just chat with a different AI bot and have it build me a replacement.” Still, Blake summarizes, “You’re saving money now, but you’re creating risk potentially in the future.” Build where you’re comfortable, and keep a backup.

Checkbox Compliance vs. Real Protection

That same tradeoff between what looks safe on paper and what actually holds up runs straight through this episode’s audit and security stories. MindBridge submitted formal comments urging the PCAOB to clarify how auditors should document, assess, and defend AI-assisted work, especially now that software can test an entire population of transactions instead of a sample. The existing standards were built around sampling. They simply don’t address risk scores, investigation thresholds, or what counts as “sufficient evidence” in full-population testing. Firms run the new AI-assisted procedures alongside the old manual tests because, as David put it, they “need the check box” to pass inspection.

Meanwhile, the PCAOB voted unanimously to seek comment on easing parts of QC 1000, the 2024 quality-control standard. The changes could remove the external quality-control function for firms that audit more than 100 issuers, and relieve registered firms that don’t actually perform PCAOB engagements. The hosts recognize the need to modernize but question whether simply rolling back standards is the answer. Blake framed the core issue as an inputs-based approach to regulation, not an outcomes-based one. “Having a system doesn’t necessarily mean that your audit is going to be quality.”

David’s parallel nailed it. A cybersecurity audit of 275 Australian accounting firms found 76% had no protection against email spoofing, yet nearly all almost certainly have a required written information security plan (WISP). “You don’t have to be secure,” David said. “You just have to have a plan.” Or, more pointedly, “You must spend time building this document about your security plan instead of investing that time and resources into actually being secure.”

The Token Problem: Usage-Based Pricing and a New Kind of Cost Accounting

If compliance is about knowing where the real controls live, the next challenge is knowing where the real costs live. AI is rewriting software economics, from predictable, per-user subscriptions to variable, usage-based token spend. Tools like Claude Cowork can do far more now, but they cost more too. You ask an agent to do one thing, and it chugs away in the background, burning tokens and blowing past your allotment fast.

A KPMG survey of over 2,000 senior leaders across 20 countries put numbers to the pain. Only 29% feel they understand operating costs as they scale enterprise AI. Roughly a third cite limited understanding of AI economics as a barrier to deploying agents. And nearly half of organizations have re-phased AI deployments when costs exceeded expected value. Blake noted this could be “the next great area of cost accounting,” measuring where tokens get burned and proving where they deliver results.

Part of the answer is matching the model to the task. Lower-cost, high-fidelity models were the fastest-growing influence on AI strategy, up seven points from the prior quarter. Think Claude Opus versus Sonnet versus Haiku. Pick the right one not just per workflow, but per step within a workflow. Emerging “routers” now automatically direct each task to the most cost-effective model because, as David said, “you don’t need to blow $100 for a $0.02 answer.”

The Accountability Layer

Pull the threads together, and the pattern is unmistakable. Xero’s builder class and XeroForce, vibe-coded software, AI-assisted audits, token economics. Every advance in this episode came paired with a counterweight. Adoption is still a rounding error. Custom builds create key-person risk. Modernized standards risk hollowing out real oversight. And usage-based pricing makes costs genuinely hard to forecast.

Even the episode’s feel-good story carries a caution. One listener used Claude Cowork to handle Florida’s tedious CPE reporting, consolidating roughly 80 certificates into an Excel list, entering them in the state portal, and even catching and fixing its own duplicate entries and combining PDFs into a single upload. It was a “relatively low-risk” win, done with his own data while he caught up on Severance. But David’s cautioned listeners to check the portal’s terms of service, since older, pre-AI site terms may prohibit bots. 

The need for judgment is the through-line. As AI collapses the barrier to building and automating, doing the work stops being where accountants create their edge. The durable value moves to oversight. You need to know where the practical controls, real costs, and actual risks live. The tension is always between innovation and accountability, and accountants are uniquely positioned as the accountability layer. So start experimenting, but build where you’re comfortable (Excel is fine), keep a backup for anyone building custom tools, and start measuring your AI spend now.

There’s plenty more in episode 496, including Lionel Messi’s roughly $28 million potential U.S. tax bill and FIFA’s tax-exempt status, the activist-investor fight over CBIZ’s acquisition strategy, and the full World Cup betting-tax breakdown. Listen to the whole back-and-forth on The Accounting Podcast, and don’t forget you can earn free NASBA CPE for the episode through Earmark.

AICPA Puts a Deadline on the Work Most Accountants Do Today

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The accounting profession’s own leadership just put a timeline on when most of what accountants do today will be done by machines, and it’s sooner than you might think.

In this week’s episode of The Accounting Podcast, hosts Blake Oliver and David Leary returned from AICPA Engage in Las Vegas with some eye-opening news. The AICPA released a major report declaring that by 2040, routine compliance work like tax returns, audits, and bookkeeping (which make up about 80% of what accounting firms do) will be largely automated. Some industry leaders think it’ll happen even faster, maybe by 2030.

But that’s just one of the big changes coming. Private equity firms are pouring billions into accounting firms, and David has a theory about why that should worry everyone. Plus, Blake scored an exclusive interview with Shelly Weir from the Florida Institute of CPAs, who spent two years fighting legislation that would have eliminated their Board of Accountancy. She hadn’t talked to any media about it until now.

 

The Clock Is Ticking on Compliance Work

The AICPA report, Rise 2040: Shaping the Future of Finance and Accounting, surveyed thousands of accountants worldwide and concluded the bread-and-butter work of the profession has maybe 15 years left in its current form.

“Some timelines are even more aggressive,” Blake noted during the episode. “Allan Koltin recently said it’s by 2030.”

So what happens when machines take over compliance? According to Tom Hood from AICPA and CIMA, accountants will shift to four main roles: strategic guidance, AI oversight, data translation, and human-centered advisory. Basically, we’ll supervise the robots instead of doing the work ourselves.

David pushed back on the human advisory part. “I completely disagree,” he said. “I think the clients themselves would rather just chat it out with a bot. They don’t want to talk to the human.”

But Blake raised an important point. “If you don’t have the knowledge about what that AI is talking to you about, how do you know when it’s right and when it’s wrong?”

He’s got a point. Tax professionals are already finding major errors in AI-prepared returns. The analysis looks perfect, but the AI uses the wrong tax brackets or dates. It’s convincingly wrong, which might be worse than obviously wrong.

AI in Accounting Just Crossed a Major Threshold

David met up with three AI accounting founders at Engage: Jeff Seibert from Digits, Sasha Orloff from Puzzle, and Agree Ahmed from Flowglad. They’re all doing something David calls “hidden vibe coding.”

“You chat with these tools, and on the back end, they’re basically building code that’s custom to you and your workflows,” David explained. “Even though you’re not ‘vibe coding,’ you’re vibe coding an app under the covers and don’t even know it.”

The key difference is these tools run the same way every time, unlike chatbots that give different answers to the same question. Blake called this shift from probabilistic to deterministic outputs a game-changer for a profession built on accuracy.

The proof is already out there. OpenAI’s finance team runs with just 200 people. For a company that size, that’s tiny. Sarah Friar, OpenAI’s CFO, called it “really lean.” Industry benchmarks suggest they’d normally need 500 to 1,000 people. Zapier is even more extreme, with seven humans managing nearly 200 AI agents for internal accounting.

So why isn’t everyone jumping on board? The Rise 2040 report is brutally honest: 93% of participants said the biggest barrier to progress is the profession itself. We’re resistant to change. Yet 80% are optimistic about the future, which suggests accountants know change needs to happen even if they’re dragging their feet.

David offered a helpful reframe. “Everybody just got a silent promotion. You’re now being promoted to be a mid-level accounting manager, and you’re going to manage some AI employees.”

Private Equity’s Real Game

While AI is changing what accountants do, private equity is changing who owns the firms, and David has an interesting theory about it.

Take Crowe’s new $3 billion investment from KKR. That’s huge money, but what caught David’s attention is KKR owns companies in ERP systems, IT automation, cybersecurity, healthcare payments (WebMD), and healthcare staffing. And Crowe’s strongest vertical is healthcare.

“They’re not buying accounting firms because they think the accounting firms will make them money,” David argued. “They’re making money because the accounting firms are going to move their other product offerings.”

He compared it to Red Lobster’s bankruptcy. The PE firm that owned Red Lobster also owned shrimp boats and forced the restaurant to buy overpriced shrimp from those boats. The PE firm made money on shrimp; Red Lobster went under. Now, Red Lobster’s new owners, through a complex chain that traces back to Abu Dhabi’s sovereign wealth fund, which has made massive AI investments, want to make it “the most AI-forward restaurant that exists.”

The pattern shows up elsewhere. Sikich got PE funding from Madison Dearborn Partners, which has big investments in construction and real estate. Those are exactly the niches where Sikich is strong. David envisions accounting firms doing CFO work encountering a client problem and “just happening” to have a sister portfolio company that provides the exact solution needed.

CPAs aren’t blind to this. A recent survey found 57% think PE threatens the CPA brand. And yet many would still take the money if offered.

Florida’s Two-Year Battle to Save the CPA License

Perhaps the biggest threat is deregulation. For two years, Florida fought legislation that would have eliminated its Board of Accountancy, wiped out CPE requirements, and paved the way for the dismantling of CPA licensure.

Shelly Weir, who led the fight, gave Blake her first media interview about it. The bill was massive, with 550 pages targeting CPAs, architects, engineers, veterinarians, realtors, and several other professions. It flew through the House in just 18 days.

“We were literally physically pulling senators off the floor,” Shelly recalled about the final day of the 2025 session, which went until midnight. “I’m like, if there’s one lifeboat, I’m getting on it. Good luck to you people.”

Florida deployed serious resources, including nine lobbyists, public affairs firms, and polling projects. But their smartest move was personal. They found CPAs who knew legislators personally, like college roommates, church friends, and siblings, and had them make the case directly.

Their winning arguments were clever. First, they showed how eliminating the Board would actually create more red tape by breaking the interstate mobility system CPAs have built. Second, instead of just saying no, they developed their own modernization proposals.

“We were the only profession in this particular bill that had taken a moment to self-reflect,” Shelly said.

They beat the bill twice, but Shelly doesn’t think it’s over. “I do not think the issue of deregulation is going away,” she warned.

What Keeps Firms Up at Night

The AICPA also surveyed firms about their top concerns for 2026, and the results show a clear divide by firm size.

Small firms (solos and 2-10-person shops) worry most about keeping up with tax law changes but aren’t concerned about technology adoption or staff workload. Bigger firms have the opposite problem. They can handle tax changes but struggle to retain staff and implement technology.

“I’m wondering if the smaller firms, because they’re capable of adopting technology better, have less workload on their staff,” David observed.

Mid-size firms (11-100 people) are most worried about finding staff. They’re stuck in the middle: too big to be nimble, too small to have big-firm resources.

Only the largest firms (500+) worry about retaining staff, likely because they have many people nearing retirement.

Signs of Hope Amid the Chaos

Despite all these challenges, there are positive signals. Accounting enrollment jumped 8.9% this spring, way above the 1.3% growth for all majors. That’s impressive given the “accounting is dying because of AI” headlines.

The AICPA launched its “Trusted CPA” campaign at Engage, complete with a national TV commercial. David wondered whether this was a legal hack, since some states restrict how CPAs may use the designation. “You can’t put CPA on your LinkedIn page, but you can use the hashtag #TrustedCPA?”

More importantly, 43 states have now passed alternative pathway legislation, and Vermont, Missouri, and Louisiana just joined them. After years of tension between state societies and the AICPA over the 150-hour rule, there’s finally alignment.

“It feels like maybe they’re marching in an aligned point of view,” David observed. “Elevate the CPA brand, don’t let it get deregulated by states.”

Oh, and Someone Stole $7,000 Cash from a Brooklyn Accounting Firm

In lighter news, David shared a bizarre story that had him scratching his head. Police are looking for someone who walked into an accounting firm in Bay Ridge, Brooklyn, and stole $7,000 in cash right off an employee’s desk.

“First off, what accounting firm has $7,000 just sitting on a desk?” David asked. “What does this accounting firm do that they have this cash lying around? Something doesn’t add up.”

Blake’s take is, “It’s an indication of how much of the profession is still operating 20 years in the past.”

The accounting profession faces three simultaneous pressures from the automation of core work, private equity ownership with potential conflicts, and deregulation threats to the license itself. But the profession is responding. Enrollment is up. States are modernizing pathways. AI tools are getting good enough to actually trust.

Treat this moment as a chance to redefine your value. Don’t wait for someone else to dictate the changes, or you might find there’s nothing left to save.

Want to hear the full discussion, including more details about AI developments and Shelly’s complete interview? Listen to Episode 492 of The Accounting Podcast.

Trevor Milton Built a Fake Truck Empire and Then Got a Presidential Pardon for It

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In January 2018, a video exploded across social media. It showed a massive, futuristic semi-truck silently gliding down a desert highway. The caption read, “Behold the 1,000-horsepower, zero-emission Nikola One semi truck in motion.”

People lost their minds. The truck looked like something out of a sci-fi movie. Nikola Corporation was going to revolutionize trucking with hydrogen fuel and zero emissions. The future had arrived.

There was just one problem. The truck had no motor, no fuel cell, and no gears. It wasn’t driving. It was rolling.

In a recent Oh My Fraud episode, host Caleb Newquist traces Trevor Milton’s journey from a college dropout with a string of failed ventures to the founder of a $30 billion public company built on claims that were, in the most literal sense, rolling downhill.

 

The Making of a Serial Entrepreneur

Trevor Robert Milton was born in 1982 in Layton, Utah. He grew up in Kanab, a small town in southern Utah with a population of a few thousand and more red rock than anything else. His dad worked for Union Pacific Railroad. His mom was a realtor. She died of cancer when Trevor was 15. 

By any normal resume standard, Trevor wasn’t the obvious candidate to become a billionaire truck company founder. He dropped out of Utah Valley University after one semester. He had no engineering background, no finance background. But he could walk into a room, start talking, and make people feel like whatever he was selling was the future.

He later described his learning style this way: “I gained all my knowledge in the real world. I like to learn by touching things.” As Caleb observes, this was “a charming way of saying ‘I figured it out as I went.’”

For a surprisingly long while, that worked.

A Pattern of Failure and Forward Motion

Trevor’s first company was St. George Security and Alarms, a home security installation business. He sold it to a Nevada businessman named Glen Pilz, who drained his 401(k) and savings account to buy it. Glen later told CNN the books weren’t what they appeared to be. He described the experience as a section of his life that “sucked.”

Then came uPillar, an online classified site for used cars. Trevor later said, without apparent irony, the company “would have ended up being Amazon, but they grew too fast.” As Caleb notes, “uPillar was not Amazon. It was a used car website in Utah.”

Around this time, while investors were waiting for revolutionary technology, uPillar sponsored what it hoped would be the world’s largest silly string fight. Thousands of people, strobe lights, 8,000 cans of silly string, and money cannons blasting cash into the crowd. What did this have to do with selling used cars online? Nothing. Nothing at all.

Next was dHybrid, a company that converted diesel truck engines to run on compressed natural gas. This venture landed a deal with Swift Transportation, one of the largest trucking companies in the United States. Swift gave Trevor $2 million up front and a $322,000 loan to get conversions rolling. By the time the money was gone, dHybrid had completed exactly five test conversions. Swift and another investor sued. The company failed.

These early investors weren’t all sophisticated funders. One man put in $40,000, which was basically everything he had. Another scraped together about $3,000, partly with credit card cash advances. All of it was gone, but Trevor kept moving forward.

The Birth of Nikola and a Very Expensive Prop

In 2015, Trevor founded Nikola Motor Company in Salt Lake City. The name wasn’t subtle. Nikola Tesla’s last name was already on Elon Musk’s electric car company, so Trevor took the first name.

Trevor talked about Elon constantly, sometimes admiringly, sometimes competitively, often both at once. When Elon announced it was time to go all out on the Tesla Semi, Trevor responded publicly, saying, “He doesn’t like us, and that’s okay.” He told journalists with complete sincerity, “There are very few people who can out-Elon in this world, and I’m one of them.”

The pitch for Nikola was ambitious. He wanted hydrogen-electric semi-trucks to replace diesel across the American trucking industry. And not just the trucks. Nikola would build hundreds of hydrogen fueling stations across the U.S. and Canada, bundling the trucks and the fuel together. Nikola was going to be the next Tesla AND the next ExxonMobil, too.

On December 1, 2016, Trevor walked onto a stage in Salt Lake City. Behind him, hidden under a large white sheet, sat the Nikola One. Trevor built to the reveal, addressing his doubters. “For every person out there that said, ‘There’s no way this can be true. How can that be possible?’ We’ve done it.”

When the sheet dropped, the crowd went wild. The truck was enormous and futuristic, with swooping lines and aggressive angles. It looked like someone asked a Hollywood designer to imagine trucking in 2050.

Trevor told the crowd, “This thing fully functions and works.” He joked about putting up a chain to keep people from driving off. He explicitly stated the truck was “not just a pusher,” which is industry slang for a vehicle that looks real but has to be pushed around.

The crowd didn’t know that a few weeks earlier, Nikola’s chief engineer had told Trevor the truck wouldn’t be functional for the unveiling. He recommended postponing, but Trevor proceeded anyway. According to Bloomberg, gears and motors were missing, and there was no fuel cell on board. The Nikola One was, in the most literal sense possible, a very expensive prop.

The Video That Changed Everything

More than a year later, in January 2018, Nikola posted a video called “Nikola One in Motion.” It showed the truck cruising down what appeared to be a flat desert highway. The company framed it as proof the technology worked.

But remember, the truck had no motor, fuel cell, or gears. So how was it moving?

Hindenburg Research, the short-selling firm that eventually exposed everything, sent an investigator to find the filming location. They found it on a remote stretch of road on the old Mormon Trail south of Grantsville, Utah. Straight, lightly traveled, and sloped downhill just enough to get a 21,000-pound truck rolling at what looked like highway speed.

Nikola had towed the truck to the top of the hill, positioned cameras so the road looked flat (even slightly uphill in some shots), and filmed it rolling down. When challenged, Nikola’s official response was that it “never stated its truck was driving under its own propulsion in the video.” 

An Ocean of Lies

The false claims cascaded across nearly every aspect of Nikola’s business. Trevor claimed Nikola was producing hydrogen at costs that undercut competitors. If true, Nikola would have the trucks, the fuel, and the stations. But Nikola wasn’t producing hydrogen.

The Nikola Badger pickup truck, announced in 2020, was described as “built from the ground up” using Nikola’s own technology. The actual plan was to rely on General Motors technology through a partnership the company hadn’t yet finalized.

Trevor talked constantly about billions in reservations, a backlog proving the market wanted what Nikola was building. He didn’t emphasize that most were non-binding, there were no deposits, and customers could cancel their orders anytime for free.

Then there was Trevor’s brother, Travis, appointed director of hydrogen production and infrastructure. This job required deep technical expertise in engineering and manufacturing. According to Hindenburg Research, Travis’s prior experience “appeared to consist largely of construction and remodeling work in Hawaii.”

The Perfect Storm for Fraud

Nikola went public on June 4, 2020, by merging with a special purpose acquisition company (SPAC) rather than going the traditional initial public offering (IPO) route. This gave Trevor far more room to promote future projections than he would have had in a traditional IPO process. And Trevor, as Caleb says, “exploited that room with everything he had.”

The timing was perfect. The pandemic had shut down the economy and trapped millions at home with stimulus checks they weren’t sure what to do with. Commission-free trading apps like Robinhood made buying stocks feel as easy as ordering takeout. A new generation of retail investors piled into the market, many for the first time.

These people hadn’t spent years looking at balance sheets. They’d watched the market recover from 2008 and missed it. They’d seen early Tesla investors become millionaires and were looking for the next Tesla. People who were home, online, scrolling, and susceptible to a great story told with confidence.

Trevor went straight for this audience. He posted on Twitter “like a man who had nothing to hide, which was a very effective thing to do when you had everything to hide.” He answered questions from random retail investors like they were old friends. When skeptics pushed back, he made doubt look like jealousy. They were haters, paid attack accounts, Tesla fans trying to tear down a competitor.

Within five days of going public, Nikola’s stock had more than doubled. On June 9, it peaked near $80 a share. The market cap briefly touched $30 billion, surpassing Ford, a company that had been manufacturing vehicles for 117 years. Nikola had zero revenue and hadn’t delivered a single truck. Trevor’s personal stake was worth around $12 billion. He bought a $6 million Gulfstream jet with Nikola stock from a Nikola board member.

The Two-Day Partnership

On September 8, 2020, Nikola announced a partnership with General Motors. GM would receive an 11% stake, valued at roughly $2 billion, in exchange for supplying technology and manufacturing the Badger. Trevor called it “a partnership made in heaven.”

General Motors had just legitimized Nikola. Trevor had parlayed what Hindenburg called “an ocean of lies into a partnership with the largest auto OEM in America.”

It lasted two days.

On September 10, Hindenburg Research published its report. It included text messages from former employees, recorded phone calls, private emails, and behind-the-scenes photographs. It detailed everything, including the hill, the hydrogen claims, and the Badger.

Trevor’s response was to call it a hit job on Twitter. “It will take the rest of the day to address the one-sided false claims,” he wrote. “In the meantime, troll on.” He never addressed them. Ten days later, he resigned as executive chairman and deleted his social media accounts.

Trial, Conviction, and a Presidential Phone Call

The Securities and Exchange Committee (SEC) and the Department of Justice (DOJ) launched investigations. The GM deal fell apart. In July 2021, a federal grand jury indicted Trevor on securities and wire fraud charges.

The trial testimony was devastating. CEO Mark Russell testified he learned only after joining that the Nikola One never had a working turbine or fuel cell when Trevor unveiled it. He, CFO Kim Brady, and chief counsel had staged what he called “an intervention” with Trevor over his public statements. Mark threatened to quit but didn’t, worried it would destabilize the company.

Kim offered perhaps the most revealing detail. When Nikola’s stock fell by $5 on its first day of trading, Trevor called Kim to ask if something was wrong with the Nasdaq. Kim explained it was simply supply and demand. Trevor insisted Kim contact the exchange. Kim didn’t because, as Caleb puts it, “that would be insane and humiliating.”

The jury convicted Trevor on three of four counts. Judge Edgardo Ramos sentenced him to four years in prison, a $1 million fine, and sought $660 million in restitution for investors.

Then, on March 27, 2024, while Trevor was still free on bail, President Trump called him personally to offer a full and unconditional pardon. Trevor posted a celebratory video, calling it a “pardon of innocence.” That’s not what a pardon is. As Judge Emmet Sullivan noted in the Michael Flynn case, “The Supreme Court has recognized that the acceptance of a pardon implies a confession of guilt.”

Trump’s explanation was straightforward. Trevor “was one of the first people who supported a gentleman named Donald Trump for president.” Trevor had donated almost $2 million to Trump’s efforts. The pardon wiped away the prison sentence and the $660 million in restitution. Nikola had already filed for bankruptcy. The investors got nothing.

By October 2025, Trevor was CEO of SyberJet Aircraft, staffed with former Nikola employees. He told the Wall Street Journal, “I love to find products that are unreal and need someone with vision or guts to be able to bring it to market.” Unreal is right.

Lessons for Accounting Professionals

Caleb distills several crucial lessons from the Nikola fraud:

  • “Fake it till you make it” isn’t a legal defense. There’s a difference between selling a vision and stating things as fact when you know they’re false. Founders are allowed to be optimistic. They’re allowed to sell the vision. They’re not allowed to tell investors they’re producing hydrogen when they’re producing no hydrogen at all.
  • SPACs deserve extra scrutiny. The SPAC structure gave Trevor far more room to promote future projections than a traditional IPO would have, and he used it like a personal marketing budget. The SEC has since tightened disclosure rules around SPACs, but the lesson stands. If a company goes public via a SPAC, consider whether what the founder has said publicly is actually verifiable.
  • Watch the people around the founder, not just the founder. If a company promises to build a national hydrogen infrastructure network, and the person running that effort has a background in home remodeling, that’s a red flag.
  • Retail investors can be a target. Trevor went looking for people who were emotionally invested, unlikely to do professional due diligence, and hungry for the next Tesla. Green tech companies that promise to save the world still have to deliver the goods. 

The Truck That Couldn’t Drive, But Almost Got Away With It

Trevor built a $30 billion company on a truck that rolled downhill. He was convicted on three counts of fraud, sentenced to four years in prison, and then pardoned before he served a single day by a president he’d donated nearly $2 million to support. The retail investors who lost everything got nothing.

What makes the Nikola story worth studying is how long the lies worked, and who bore the cost when they didn’t. The engineers and executives knew. The CFO testified that Trevor’s statements “could be inaccurate or exaggerated.” And yet the company kept going, the stock kept climbing, and ordinary people kept buying in.

That’s the part that should keep accounting professionals up at night.

For the full story, including Caleb’s breakdown of the infamous downhill video, the GM partnership that lasted 48 hours, and the pardon that wiped away $660 million in restitution, listen to the full Oh My Fraud episode. 

Forty Percent of Workers Admit Faking Receipts With Company-Paid AI Tools

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Forty percent of U.S. workers admit to using AI to generate fake receipts for expense reports. Even more troubling is that 40% of those workers use AI tools their own companies paid for.

Blake Oliver and David Leary opened Episode 494 of The Accounting Podcast with these startling statistics from new surveys by AppZen and Emburse. David introduced a new term that’s emerged from this trend: “revenge spending,” in which employees who fear AI will replace their jobs turn the company’s own AI tools against it by submitting fraudulent expense reports.

“It’s similar to spam,” David explained. “AI and technology make it easier than ever for people to send you millions of spam messages. But then on your side, you’re using all these AI tools to detect the spam messages and move them to your trash.”

The numbers tell an interesting story. In just 14 months, AI-generated fake receipts went from virtually nonexistent to representing 70% of fraud flags in expense systems. These fake receipts average about $100 each, with a median of $32. Those deliberately small amounts are designed to slip under auto-approval thresholds.

NASBA Backs Down

The theme of shifting power dynamics became personal for Blake when he shared the resolution of Earmark’s standoff with the National Association of State Boards of Accountancy (NASBA).

Back in April, NASBA sent Blake a demand letter over comments he made at an AICPA conference. While demonstrating how to use AI to create CPE courses, Blake criticized NASBA’s methods as “backward” and called out the problems with current CPE practices, including webinar polling questions that serve as mere check-the-box exercises, attendees doing email during sessions, and people sleeping through in-person presentations.

NASBA’s letter directed Blake to “cease making any unfavorable, unprofessional, or inappropriate comments” about the organization, citing a sponsor agreement requiring programs to “reflect favorably on NASBA.”

Blake pushed back hard. “I felt that it was wrong, even unconstitutional, for an organization like the National Association of State Boards of Accountancy to tell a sponsor of CPE, a CPA, a professional educator, what they may and may not say about NASBA,” he explained to David.

In his response letter, Blake argued his comments were meant to improve CPE, not attack NASBA. He also asked for clarification on what exactly would constitute a violation, since terms like “unfavorable” weren’t defined in the agreement.

The resolution came in June when Amy Tongate, NASBA’s Director of Compliance Services, essentially backed down, writing, “NASBA welcomes constructive professional dialogue regarding continuing professional education. Based on your response and subsequent discussions, NASBA considers this matter resolved. No further action is required.”

Blake sees a deeper issue here. NASBA isn’t actually a regulator; the state boards are. NASBA was created as an administrator to handle licensure efficiently across all states. But it often acts like a regulator, which Blake argues oversteps its bounds.

“If a state board of accountancy tried to do what NASBA tried to do with that demand letter, that would be unconstitutional,” Blake said. “The question is whether or not the state boards can set up a private company, a nonprofit that then acts on their behalf and suppresses the speech of CPAs. And I would be willing to bet that they can’t.”

Big Firms Can’t Command Loyalty Anymore

While regulators discover the limits of their authority, big accounting firms are finding they can’t control their workforce as they once did.

A new academic study published in Contemporary Accounting Research with the dramatic title Losing Control: The Erosion of Disciplinary and Pastoral Power in Accounting Firms, reveals just how much has changed. Based on 31 interviews with Canadian auditors from 2021 to 2023, the research shows firms are struggling to shape employees into the traditional model of the committed, overworking auditor.

The numbers are striking. What the study calls “default auditors,” defined as people who enter under weaker selection standards and treat the job transactionally, are replacing the highly socialized, career-committed auditors of the past.

“The Big Four is becoming less of a cult,” David summarized bluntly.

The breakdown is happening on multiple fronts. Remote work disrupted the in-person observation that once normalized 80-hour weeks. When young auditors don’t see everyone else burning the midnight oil, logging off at a reasonable hour becomes much easier. The “we’re all in this together” busy-season rituals, like late-night pizza parties, matter less and less.

But employees aren’t just passively benefiting from remote work. They’re actively pushing back. According to the study, they’re setting firmer personal boundaries, prioritizing family and mental health, rejecting unpaid symbolic rewards, and openly comparing their compensation to that of partners and managers.

The partners and managers feel trapped. They’re taking on more work themselves, reviewing more because of lower work quality, and offering higher pay and more flexibility, but it’s not working. As Blake noted, “They are feeling more exhausted, underappreciated, unable to enforce the old standards and unable to design convincing new ones.”

This cultural breakdown makes the recent wave of private equity investments in accounting firms particularly puzzling. Eide Bailly just became the latest to take PE money: a majority stake from Reverence Capital valuing the firm at $1.8 billion, about 2.1 times revenue.

Looking at a chart of the top 30 U.S. firms, Blake and David counted that a majority now carry outside capital. Yet the hosts are skeptical these investments will pay off.

“I have not heard of a PE success story where PE came in and the company became this rah-rah great thing,” David said. “It gets worse from PE, right?”

“Are they really going to be able to turn it around and sell it for more?” Blake asked, pointing at the math problem.

David’s verdict was characteristically direct: “Put lipstick on that pig and sell it to somebody else.”

The AI Revolution Gives Power to Individuals

While institutions struggle to maintain control, individual practitioners gain capabilities that once required entire companies or expensive software.

The adoption numbers are explosive. According to Blue J and CPA.com’s latest survey, 60% of tax professionals now use AI for tax research at least weekly, up from just 33% a year ago. They use it for advisory projects (44%), tax planning (40%), and compliance research (39%).

“Where are the other 40% getting answers?” David wondered about those who are not using AI, noting that even Google searches now show AI answers first.

This surge in AI use prompted the IRS Advisory Council to issue its first-ever guidance on AI in tax practice. The guidelines don’t create new rules but clarify how existing standards apply. Most notably, practitioners can’t bill for time not actually spent, can’t charge manual rates for AI-assisted work, or double-bill for work done by both staff and software.

“This is the nail in the coffin of hourly billing,” Blake declared. If you use AI to cut your work time in half, you’re ethically obligated to pass those savings to the client.

The democratization goes even further. David highlighted Xero Developer’s new YouTube series, Is Everyone a Developer Now?, where the development team “vibe codes” working applications in real-time. In one episode, they built a functional month-end close tool in just an hour and fifteen minutes.

“Instead of chasing a small pool of developers to build apps, they basically have now opened up millions of accountants that could actually create apps,” David explained.

Blake shared his own example. He’d been procrastinating about converting Earmark’s books from a cash to an accrual basis because building the revenue recognition workpapers seemed overwhelming. Then he tried Claude.

“I just asked it what I needed,” Blake said. The AI walked him through methodology choices, downloaded sales reports from Apple and Google, and built a complete waterfall table that spread revenue across 12 months, plus reconciliation tabs and journal entries.

“This is the right template. This is the right format for me to have done this manually,” Blake marveled. “I don’t even know how many days it would have taken me to put this together.”

This shift in capabilities has venture-backed companies worried. Pilot, valued at $1.6 billion, just spun off its internal AI close platform as a standalone product. Another startup raised millions for similar technology. But as David pointed out, if you can “vibe code” these solutions in an afternoon, “is the app ecosystem the way it’s traditionally been just going away now?”

The Power Shift Is Just Beginning

These aren’t isolated stories; they’re all symptoms of the same fundamental change. Power is flowing away from institutions and into the hands of individuals.

Regulators like NASBA are discovering they can’t dictate what professionals say. Big firms can’t enforce the overwork culture that once defined public accounting. Private equity investors are betting billions on firms whose fundamental model is breaking down. And the same AI that helps Blake build sophisticated workpapers helps employees create fake receipts.

“It’s rules-driven innovation instead of customer-driven innovation,” David said about the institutional mindset that’s failing across the profession.

This shift brings opportunity and responsibility for accounting professionals. The tools that can build a revenue recognition system before lunch can just as easily fabricate an expense report. The capability is neutral; how the profession uses it isn’t.

Want to hear Blake’s complete walkthrough of building his rev rec workpaper, more details on the NASBA correspondence, and the hosts’ full analysis of these industry shifts? Listen to the complete Episode 494 of The Accounting Podcast. You can even earn free CPE credit through Earmark.

As Blake and David make clear, the redistribution of power in accounting is just getting started, and every practitioner needs to understand what it means for their future.

The Four Words Congress Never Defined That Could Cost Your Clients Thousands in Self-Employment Tax

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Congress once wrote four words into the tax code: “limited partner as such.” But then it never explained what those words meant. Even worse, they wrote these words before limited liability companies existed. Today, those four words are at the center of a legal battle moving through multiple appellate courts, and the outcome will determine whether your partnership clients owe self-employment tax on their share of income.

In Episode 32 of the Tax in Action podcast, host Jeremy Wells, EA, CPA, picks up where his previous episode on partnerships left off. He tackles two critical questions: What actually makes someone a partner under federal tax law? And which partners must pay self-employment tax on their distributive share?

The answers turn on substance rather than paperwork, and that’s where things get complicated. Since Congress never defined “limited partner as such,” and since the phrase predates LLCs entirely, the courts have split into openly conflicting camps. One camp reads it as a test of whether someone is truly a passive investor. Another looks at state-law definitions and dual-role partners. This is a genuine circuit split that could land at the Supreme Court.

Until it’s resolved, Jeremy makes clear you can’t rely on the “limited partner” label in a K-1 or operating agreement. You have to evaluate what each partner actually does. Let’s walk through how courts define who counts as a partner, why the “limited partner as such” exception is so unclear, and how this circuit split affects your clients right now.

Who Actually Counts as a Partner?

Before we can figure out who owes self-employment tax, we need to answer a more basic question: who counts as a partner in the first place? The answer has always been rooted in substance over form, and that principle causes today’s self-employment tax disputes.

Jeremy opens with a scenario you’ve likely seen. Two individuals register an LLC, each listed as a member. Under the check-the-box regulations, that’s a partnership for federal tax purposes. One member works full time in the business, keeping it running. The other contributed startup capital, works elsewhere, and rarely touches the business. They’re a classic silent partner. With equal 50% interests, the Form 1065 and K-1s report a 50/50 income split.

But are these two partners truly equal under federal tax law? One earns income through labor, while the other just wrote a check. Should the tax code treat them the same?

When the Code Said Nothing

Before 1951, the Internal Revenue Code had no definition of “partner.” This silence created disputes that reached the Supreme Court. With no statute to guide them, the courts had to define it themselves and made a decision that still shapes practice today. They largely ignored state-law labels.

“Partner” can mean one thing under state law and something different under federal tax law. The courts focused on the parties’ stated and implied intent, examining partnership agreements, contributions of capital or services, and how they actually behaved once the business was running.

Tower Sets the Standard

The first landmark case was Tower v. Commissioner (1946). The Court asked whether the individuals truly intended to join together to carry on a business and share in profits and losses. The answer, they said, depends on multiple factors, none of them individually decisive. There’s no simple checklist that automatically makes someone a partner.

The Court said an individual may be a partner if she “either invests capital originating with her or substantially contributes to the control and management of the business, or otherwise performs vital additional services, or does all of these things.”

The backstory drives the point home. Mr. Tower, following tax advice, converted his corporation to a partnership and made his wife a partner purely to shift income to her lower tax bracket. But Mrs. Tower contributed no capital, provided no services, and exercised no control. The Court saw through it and taxed the income to Mr. Tower, who actually earned it.

Culbertson Clarifies the Mess

Three years later was Culbertson v. Commissioner (1949). The Tax Court had misread Tower, treating its list of factors as rigid requirements and denying partnership status left and right. The Supreme Court pushed back, saying the Tax Court “ignores what we said is the ultimate question for decision and makes decisive what we described as circumstances to be taken into consideration.”

The real test is subjective intent: whether the parties, in good faith and with a business purpose, intended to join together in the present conduct of the enterprise.

Congress Steps In for Family Partnerships

In 1951, Congress finally added a statutory definition, now in Section 761(b). A person is recognized as a partner if they own a capital interest in a partnership where capital is a material income-producing factor, whether acquired by purchase or gift.

Congress targeted family partnerships, in which high-earning patriarchs would gift interests to lower-earning relatives to spread income into lower tax brackets while retaining control. According to the Joint Committee’s Blue Book, Congress wasn’t overriding Tower and Culbertson; it was carving out a legitimate transaction, making clear the IRS couldn’t deny partner status just because an interest came from a family member.

The Capital Interest Test

Everything circles back to the concept of capital interest, or an interest in partnership assets that would be distributable upon withdrawal or liquidation. It’s different from a mere profits interest because just sharing in earnings doesn’t cut it.

Courts apply a hypothetical liquidation test. If the partnership shut down tomorrow and sold everything, would this person get a slice of the assets? If not, are they really a partner?

The pattern of economic reality, not paperwork, determines who is a partner. And this same substance-over-form logic becomes far more contentious when we turn to self-employment tax.

The Four Words Nobody Can Define

Now we reach the phrase causing all the trouble, where ambiguity stops being academic and starts costing real money.

First, Jeremy lays down the foundational rules. Partners are treated as self-employed for tax purposes, regardless of their role. This means partners cannot be employees of their own partnership. “You should never have a partner getting both a W-2 and a K-1 from the same partnership,” Jeremy emphasizes. While there are “exceedingly rare” exceptions, the rule holds: partners don’t go on payroll. If a partner wants a fixed income for services, it flows through as guaranteed payments, not wages.

The general partner rule is unforgiving. A general partner’s distributive share is subject to self-employment tax. It doesn’t matter if the interest is passive under Section 469. It doesn’t even matter if the partnership elected out of Subchapter K under Section 761(a). As Jeremy notes, that election only affects Subchapter K. It does nothing to shield general partners from self-employment tax.

The Exception and Its Giant Hole

IRC Section 1402(a)(13) creates an escape hatch by excluding “limited partners, as such” from self-employment tax on their distributive share. But even for limited partners, guaranteed payments for services are subject to self-employment tax.

The problem is Congress never defined “limited partner as such” anywhere.

In 1997, the Treasury proposed regulations to define the term for Section 1402 purposes. The controversy was so intense that Congress imposed a moratorium on any such regulation, and that moratorium was originally set to expire on July 1, 1998. “It’s now 28 years later, and neither Congress nor the Treasury has provided any sort of update on this question,” Jeremy says.

The LLC Problem

Making everything worse, Section 1402(a)(13) was written before LLCs existed. LLC members aren’t personally liable for entity debts. That’s the whole point of limited liability, making them look like limited partners. Yet those same members often actively manage the business and provide services, making them look like general partners.

So which are they for self-employment tax purposes? The statute offers no answer. Congress wrote a rule for a world of general and limited partnerships and never updated it for the entity that now dominates small business.

Courts Split on What “Limited Partner” Means

With no definition and no regulation, the courts filled the vacuum, and they didn’t all fill it the same way.

The Tax Court’s Passive Investor Test

The first approach comes from Renkemeyer, Campbell & Weaver v. Commissioner (2011), involving a law firm. The Tax Court examined the legislative history and concluded Congress intended to “ensure mere passive investors would not receive credits toward Social Security coverage.”

On this reading, “limited partner as such” means “passive investor.” The phrase “as such” signals the exemption applies to those who operate as limited partners. Once a partner participates in operations, they’re no longer a limited partner for federal tax purposes.

The Tax Court expanded this in Soroban Capital Partners (2023), applying its “functional analysis” test. The inquiry is, does the partner functionally participate or stay out? Notably, Soroban involved a state-law limited partnership, yet the court still held that a partner labeled “limited” who acts like a general partner owes self-employment tax. Soroban is currently on appeal in the Second Circuit.

The Fifth Circuit’s State-Law Approach

The competing view comes from Sirius Solutions LLP v. Commissioner. The Fifth Circuit, which Jeremy notes “tends to be different from a lot of the other appellate courts,” rejected the passive-investor approach entirely.

Instead, the court looked at how “limited partner” was defined in legal dictionaries and by the IRS and Social Security Administration when Section 1402 was written. The court’s logic ran three ways.

First, the guaranteed-payments carve-out shows Congress expected limited partners to provide services. As the court said, “the text of the exception itself contemplates that limited partners would provide actual services to the partnership.”

Second, Congress used “passive” terminology elsewhere in the code but not in Section 1402. It used “rendered no services” in Section 1402(a)(10) just a few paragraphs above, yet chose different language in (a)(13). Why different wording for the same concept?

Third, “as such” refers to dual-status partners, or people who act as general partners sometimes and as limited partners at others, clarifying that only their limited-partner income escapes tax.

A Geographic Lottery

These approaches directly conflict. When appellate courts interpret the same federal statute in opposite ways, the natural endpoint is the Supreme Court.

Meanwhile, Jeremy flags a practical complication from the Golsen rule. The Tax Court must follow the precedent of whichever appellate circuit would hear a given case. So a partnership in the Fifth Circuit gets one result while an identical partnership elsewhere gets another. The outcomes are driven purely by geography.

The Jurisdiction Question

Jeremy also discusses Denham Capital Management, on which the First Circuit heard oral arguments in early 2024. Rather than debate what “limited partner” means, the partners argue the Tax Court lacks jurisdiction to decide this in a partnership-level audit. Under TEFRA, net earnings from self-employment are a partner-level item, since individual partners calculate their own self-employment tax.

The wrinkle is partnerships must report self-employment earnings in Box 14 of the K-1. The IRS argues that the “characterization” of income makes it a partnership item. This could add another layer to an already complex issue.

What This Means for Your Practice

Let’s return to Jeremy’s opening scenario. The member working full time is almost certainly a partner whose income is subject to self-employment tax. The capital-only member likely holds a valid partnership interest too. But under the Tax Court’s current precedent, their income probably escapes self-employment tax if they genuinely stay out of the business.

That last part is crucial. Jeremy cites Howell v. Commissioner (2012), where a married couple treated the wife’s LLC earnings as exempt from self-employment tax. But her testimony revealed she occasionally provided managerial and marketing advice to her husband. That occasional participation was enough. The Tax Court held she wasn’t a “limited partner as such,” and her earnings were subject to self-employment tax.

Key Takeaways for Tax Professionals

Jeremy leaves us with clear lessons from this uncertainty:

  • Federal tax law determines partner status based on economic reality, not state-law labels. That’s the through-line from Tower and Culbertson.
  • The IRS and Tax Court currently apply a functional analysis to determine if a partner is “limited” for self-employment tax purposes. But recent developments cast doubt on this approach.
  • Look beyond the paperwork. The words “limited partner” on a K-1 or operating agreement won’t protect a client who functions like a general partner.
  • Never combine a W-2 and a K-1 from the same partnership. Partners are self-employed; fixed compensation comes through guaranteed payments.
  • Remember what’s always taxable. General partners’ distributive shares are subject to self-employment tax even if passive or if the partnership elected out of Subchapter K. Guaranteed payments to any partner for services remain subject to SE tax.
  • Document everything. Track each partner’s participation, services, and management role. As Howell shows, even occasional input can trigger self-employment tax.

Until the Supreme Court resolves this circuit split, you’re advising clients under real uncertainty. The prudent response isn’t to guess which approach will win. Build positions based on what every court agrees matters, which is what each partner actually does.

For Jeremy’s complete analysis of the cases, statutory history, and practical implications, plus previews of upcoming episodes on capital accounts and special allocations, listen to episode 32 of Tax in Action.