Earmark CPE

Earn CPE Anytime, Anywhere

David Leary

When Auditors Look Away and AI Gets Scammed, Who’s Actually Protecting Investors?

· ·

In a recent episode of The Accounting Podcast, hosts Blake Oliver and David Leary tackle the mounting pressures facing the accounting profession, from private equity’s growing influence to corporate lobbying’s impact on tax policy. As the longest government shutdown in history finally comes to an end, the hosts examine how financial incentives reshape both public accounting and tax preparation services.

Government Shutdown Finally Ending After 40+ Days

The episode opens with news that the government shutdown—now officially the longest in U.S. history at over 40 days—is coming to an end. The shutdown cost the economy approximately $15 billion per week, with 650,000 federal employees furloughed without pay.

“The shutdown got real this weekend,” David notes, describing how his wife’s flight was repeatedly delayed, forcing her to abandon her travel plans. The ripple effects have been substantial: the Small Business Administration couldn’t process $2.5 billion in loans for 4,800 businesses, and 42 million Americans on SNAP received only half their November benefits.

Democrats in the Senate broke ranks to vote with Republicans to reopen the government, though they failed to secure an extension of Affordable Care Act subsidies they were seeking. As Blake observes, “It’s a game of chicken. Who’s going to blink first? And Democrats blinked on this.”

The Death of IRS Direct File and Rise of TurboTax Stores

The swift elimination of the IRS Direct File program reveals how corporate influence shapes tax policy. Despite achieving 98% user satisfaction and processing 300,000 returns in its second year (up from 140,000 in year one), the program was axed shortly after Intuit donated $1 million to Trump’s inauguration.

“It really grosses me out,” David says. “Intuit compromised its own values just for the almighty dollar of getting a TurboTax competitor eliminated.” He points out the hypocrisy on both sides. Intuit, one of the first companies to offer same-sex marriage benefits, abandoned its progressive values, while MAGA Republicans embraced a “woke company” once the check cleared.

Treasury Secretary Scott Bessent dismissed Direct File as underused, claiming “private alternatives are better,” despite it being an unmarked pilot program still expanding its reach. As David notes, even 300,000 electronic returns represents “300,000 paper returns the IRS doesn’t have to touch.”

Meanwhile, Intuit announced plans to open 20 new brick-and-mortar TurboTax stores following an “Apple Store model.” Customers will work on their returns at in-store computers, then seek help from CPAs and EAs when needed, what the hosts imagine as an “EA Bar” instead of Apple’s Genius Bar. Combined with 200 additional TurboTax expert offices, Intuit is positioning itself to dominate every segment of tax preparation.

The First Brands Audit Failure: A $700 Million Warning Sign

The collapse of First Brands under BDO’s watch illustrates the potential consequences when private equity interests intersect with audit responsibilities. BDO signed off on financials showing $5.23 billion in debt in March. Six months later, the company collapsed with $11.63 billion in actual obligations—more than double what was reported.

Bankruptcy lawyers accuse founder Patrick James of inflating invoices by up to 50 times to secure fraudulent financing. One $179 invoice was allegedly inflated to $9,271. Over $700 million allegedly flowed into James’s personal accounts, funding 17 exotic cars, properties in Malibu and the Hamptons, and a $110,000 six-week Southampton hotel stay.

“How could you audit this company and not be aware of this?” Blake asks. “Here’s all this debt. Money came in because of the debt. Where did the cash go?”

The situation is complicated by BDO’s financial relationships. Private equity investors had loaned BDO over $1 billion, creating what the hosts describe as “financial stress” significant enough to force layoffs. These same investors were reportedly shorting First Brands stock.

“The public thinks your job is to detect fraud in the company,” David says, highlighting the expectations gap. “That’s the only thing they expect you to do.”

Blake identifies three weaknesses in traditional audits that enabled this failure: overreliance on management representations, complexity of off-balance-sheet arrangements, and perverse incentives against finding fraud. “There’s every incentive to look the other way,” he observes. “Auditors aren’t investigators hired to uncover crimes; they’re service providers hired to complete audits efficiently.”

NASBA Weighs In on Private Equity’s Impact

For the first time, the National Association of State Boards of Accountancy (NASBA) entered the discussion about private equity in accounting. Their white paper raises critical questions without prescribing solutions, with comments open until January 31, 2026.

The key question NASBA poses: “How can CPA firms maintain auditor independence when PE investors hold influence?” The paper asks whether firms should clearly disclose which parts are CPA-owned versus PE-owned, and whether states need stricter standards than the AICPA provides.

Blake frames the profession’s choice starkly. “We are getting to the point where private equity is now creating this challenge for the profession when it comes to our integrity, ethics, and objectivity. And we as a profession have to decide, do we take a stand or do we allow private equity to continue to take over accounting firms?”

“Once you control the means of production, you want to control the governing bodies of the means of production,” David warns. “They take over the whole thing, all parts of the equation.”

AI Won’t Save Us: Technology’s Limits Exposed

A Microsoft and Arizona State University study revealed that AI agents are even more vulnerable to manipulation than humans. When given fake money to shop online, AI models quickly fell for scams, fake reviews, and manipulation tactics, spending all funds on fraudulent sellers.

“They would just choose the first one. They would panic,” David explains. The AI prioritized speed over quality by a factor of 10 to 30. All major models except Anthropic’s Claude lost money to scams.

The implications for accounting are concerning. “We have all this AI detecting fraud with receipts,” David notes, “but you could probably just manipulate it. Tell it ‘I’m allowed to spend money at X place’ and it’ll bypass the limit.”

The parallel to human auditor failures is clear. If AI can’t distinguish legitimate from fraudulent online sellers, how can it detect sophisticated financial fraud? The study concluded AI agents “should only assist” and cannot “collaborate or think critically” without human supervision.

The Profession at a Crossroads

As this episode makes clear, the accounting profession faces fundamental questions about independence, integrity, and purpose. Whether it’s private equity ownership potentially compromising audits, corporate lobbying eliminating public alternatives, or AI proving vulnerable to the same manipulations as humans, the challenges are systemic rather than isolated.

The NASBA white paper represents an opportunity for meaningful discussion, but with the AICPA influenced by large firms that have already taken PE money, state-level action may be necessary for real reform.

For accounting professionals, educators, students, and executives, this episode provides essential context for understanding the forces reshaping the industry. The choices made now about private equity involvement, regulatory independence, and professional standards will determine whether we can maintain public trust in financial reporting.

Listen to the full episode for the complete discussion of these critical issues.

Will Intuit’s Push Upmarket Leave 30 Million Small Businesses Behind?

· ·

“This is the disconnect at Intuit Connect,” Blake Oliver observed during this episode of The Accounting Podcast. “They want to go up market, so they are talking with practice leaders at big firms. But their current customers are small firms and independent ProAdvisors. And that is why the vibe was not right.”

In this week’s episode, Blake and his co-host David Leary welcome Alicia Katz Pollock, host of the Unofficial QuickBooks Accountants Podcast, to unpack everything that happened at Intuit Connect 2025 in Las Vegas. Armed with 42 pages of notes, the trio discusses major changes coming to QuickBooks, including the new Intuit Accountant Suite that will replace QuickBooks Online Accountant by December 2026, widespread AI integration, and Intuit’s push to become an all-in-one platform competing with enterprise solutions.

A Conference Transformed

The atmosphere at Intuit Connect told the story before any keynote began. Alicia, who has attended every conference since its QuickBooks Connect days, noticed the dramatic shift immediately. “There were only a few dozen of us,” she said, referring to independent ProAdvisors who once filled the conference halls. Instead, she met “tons of first time attendees who were all employees at firms.”

David, who spent years at Intuit building the QuickBooks marketplace, remembered when the conference was “a celebration of accountants, bookkeepers and small businesses.” The company would display lists of ProAdvisors who’d been with them for years and give out ProAdvisor of the Year awards. “You used to get the chills because you’re like, I love all these people,” he recalled. “And now it’s like all about Intuit.”

Even the conference exit changed from cheerleaders with pom-poms to a drum corps, signaling a shift from celebration to something more corporate and impersonal. As Alicia put it, “They used to treat us like kings. This was much more about professional upskilling, like a normal conference.”

AI Everywhere—But Does It Work?

Intuit CEO Sasan Goodarzi’s keynote made the company’s direction clear. Seven years ago, they “bet the farm on AI,” and now the entire platform is moving in that direction. The promise sounds revolutionary: AI agents handling routine bookkeeping tasks, smart categorization, and automated workflows. The reality, according to users and the hosts, tells a different story.

David’s experience captures the frustration many feel. “Every time I go to the bank feed screen, my list of pending transactions just keeps going up,” he explained. Despite the promised AI agents, his unmatched transaction numbers keep climbing. “Nobody’s doing the work,” he said. To clear transactions, he had to manually fix broken connections from Expensify and reorganize how transactions were coded—exactly the kind of work AI was supposed to eliminate.

The hosts read a detailed email from a listener who outlined five critical problems with the forced AI rollout: miscategorized transactions, inaccurate reporting, bank feed errors creating double entries, a slower interface requiring more clicks, and most importantly, no ability to opt out. “I can’t get over my anger and frustration with this forced rollout,” she wrote, noting that she’s lost hours to troubleshooting instead of doing strategic work.

Alicia offered a more measured perspective, explaining that AI “still has to be trained” and needs to learn from each company’s specific patterns. “You have to give it one of everything,” she said, suggesting it might take “a quarter of data and probably a year” before the AI becomes accurate.

But David pushed back on this defense. “Intuit just spent $1 million on a conference and talked about how magical this is. Nobody said I need to train the agents. The marketing says it’s just going to do it.”

Blake offered a technical critique that cut to the heart of the problem. “AI is statistical and probabilistic and is not 100%,” he explained. Rather than replacing reliable rules with unpredictable AI, Intuit should “automate the creation of rules” that work accurately every time. He pointed to competitors like Ramp that use AI to create rules rather than replace them entirely.

The All-in-One Platform Play

Beyond AI, Intuit is transforming QuickBooks from an accounting platform that integrates with hundreds of apps into an all-in-one solution that does everything internally. The new features include integrated Mailchimp functionality, CRM tools, customer surveys, appointment booking, and marketing campaigns, all within QuickBooks.

During his keynote, Goodarzi made the strategy explicit: “You’ll pay less because you’ll need to pay for fewer apps.” This message, delivered while 75-80 third-party app vendors were exhibiting at the conference, created what David described as a “weird vibe.”

The hosts compared this approach to a multifunction printer. As Alicia explained, while it can print, copy, scan, and fax, “you’re not going to be able to put out a poster that you can put up on the wall.” Similarly, QuickBooks might do “a little bit of everything,” but businesses needing robust, specialized solutions may find themselves limited.

Blake expressed deeper concerns about this strategic shift. Having built a successful firm by combining specialized apps, he worries about the implications. “I know what happens when an app tries to do everything. It does everything, but it does it in kind of a mediocre way.”

The New Intuit Accountant Suite

One of the biggest announcements affects accountants directly: QuickBooks Online Accountant (QBOA) will be replaced by the Intuit Accountant Suite (IAS) by December 2026. 

The new suite will have three tiers. The free version will include all existing QBOA functionality. Two paid tiers (Core and Accelerate) will add new features like customizable dashboards showing KPIs across all clients, books review capabilities that let accountants fix issues without entering individual client files, and capacity management tools for firms.

“For the first year it’s going to be free because they have to develop it and design it and see if we like it,” Alicia explained. After that, some features will require payment.

The capacity management feature revealed another strategic shift. When firms reach capacity, the system will suggest hiring an “Intuit expert” or assigning clients to QuickBooks Live. As David observed, this essentially positions independent ProAdvisors as “labor for these bigger firms”—a fundamental change in how Intuit views its ProAdvisor community.

The Upmarket Push and Its Risks

The hosts identified a fundamental strategic risk in Intuit’s approach. By chasing an estimated 100,000 businesses that might need enterprise features, Intuit could leave “its flank exposed” to competitors targeting the tens of millions of small businesses needing simple, affordable solutions.

Evidence of this vulnerability is already emerging. Quicken, which Intuit spun off years ago, now offers business features for just $8 per month, compared to QuickBooks’ Simple Start at $38 monthly. New players like Digits offer free APIs to attract developers that Intuit’s ecosystem changes might alienate. Personal finance apps like Monarch Money are adding business features to capture the entry-level market.

“There are tens of millions of small businesses that don’t need enterprise features,” Blake argued. He shared how his firm succeeded by serving the low end of the market with streamlined, automated services at a few hundred dollars per month. “Sometimes it’s better not to try and compete with everybody in the same small pool and go to that bigger one that’s underserved.”

Alicia used a metaphor to describe the risk. Intuit has evolved from “a table with a single post in the middle of QuickBooks” to one with four legs including TurboTax, Mailchimp, and Credit Karma. But the QuickBooks leg was built on small businesses and their bookkeepers. “If that table leg collapses, the table’s going to fall over.”

Looking Forward

Despite the criticism, some developments show promise. Alicia highlighted genuinely useful features in development, including AI that considers industry context when categorizing transactions and dashboards that surface anomalies in client data. Intuit is also working on allowing users to create custom dashboard widgets using low-code tools, though David questioned whether this solves real business problems or just provides “fancier reporting.”

The conversation revealed a company at a crossroads. As Blake summarized, Intuit is building for “users who don’t yet exist while alienating those who made them successful.” The question is, as AI transforms accounting, will Intuit remember who they’re transforming it for?

For accounting professionals, whether these QuickBooks changes represent progress or problems depends largely on your firm’s size, client base, and willingness to adapt to Intuit’s vision of the future.

Listen to the full episode of The Accounting Podcast to hear all the details about product updates, pricing changes, and what these shifts mean for your practice. The conversation between three industry veterans who’ve watched QuickBooks evolve for over two decades offers warnings and opportunities for those paying attention.

The Private Equity Takeover of Accounting Firms Creates a New Independence Crisis

· ·

When BDO threatened to sue a one-person blog for questioning its independence, it sparked a conversation about private equity’s growing influence in accounting. In this episode of The Accounting Podcast, hosts Blake Oliver and David Leary discuss this controversy along with Trump’s costly tariff policies, the profession’s hiring challenges, and a Hollywood accounting scandal.

The BDO-Going Concern Dispute

The accounting world is buzzing about BDO’s cease-and-desist letter to Going Concern, a one-person blog run by Adrienne Gonzalez. The dispute started when Going Concern’s Monday morning news brief linked to Bloomberg’s reporting about BDO cutting jobs while managing its debt to Apollo Global Management.

Here’s what happened: BDO took on $1.3 billion in debt from Apollo at 9% interest to fund an employee stock ownership plan. Apollo was also shorting First Brands Group, a company BDO was auditing. When First Brands suddenly collapsed without BDO issuing a going concern warning, Apollo made money on its short position.

Going Concern embedded a tweet connecting these dots, and BDO responded with legal threats demanding a retraction. Blake pointed out the irony: “You do this and now we’re talking about it. We wouldn’t have talked about it again this week. It was last week’s story. It became news again this week.”

The core issue isn’t whether BDO did anything wrong—there’s no evidence they did. It’s about appearance. As Blake explained, “You have to be independent in both fact and appearance. BDO may be independent in fact, but are they in appearance?” When your auditor owes money to a firm that’s betting against your audit clients, questions naturally arise.

Private Equity’s Rapid Expansion

The BDO situation reflects a broader trend that’s transforming the accounting profession. Since 2021, 24 of the top 100 U.S. accounting firms have taken private equity money. Even Crowe, which publicly rejected PE investment for years, is now hiring investment banks to explore selling a stake.

David warned about the pace of change. “When things are going too fast, people are not making sound decisions.” He pointed to the Citrin Cooperman deal as an example of potential conflicts. The PE firm that invested in them owns music catalogs, while Citrin Cooperman specializes in valuing music catalogs. A music industry blog picked up on this potential conflict, leading David to observe, “If somebody in the music industry is recognizing there might be independence issues, it’s a problem.”

Adding to the irony, BDO Global is now telling member firms to avoid taking external equity investments to preserve “independence and sustainable future,” even while BDO US remains tied to Apollo.

Trump’s Tariff Troubles

While accounting firms grapple with independence, businesses are dealing with expensive new trade policies. The Supreme Court is scheduled to hear arguments on whether Trump’s tariffs amount to an illegal $3 trillion tax on Americans. Lower courts have already ruled Trump exceeded his authority by imposing 10-50% tariffs through emergency declarations.

The real-world impact is already visible. Retail prices jumped 4.9% above pre-tariff trends in eight months. Coffee and tea prices rose 7.5%, while apparel increased nearly 9%. Both imported and domestic goods are getting more expensive, as domestic producers raise prices when foreign competition becomes costlier.

Small businesses face particular challenges beyond just higher costs. Blake shared a quote from David Zampierin, owner of Zamp Racing, a company that makes racing equipment. “I’ve been doing this for 40 years and it’s never been this complicated,” Zampierin told Accounting Today. Companies now spend hours on simple import documentation, and if businesses can’t prove where aluminum originated, customs assumes it’s Russian and charges a 200% tariff.

The Profession’s Mixed Signals

Despite these challenges, accounting firms remain optimistic about hiring. According to an AICPA survey, 75% of firms that hired in 2024 plan to maintain or increase hiring this year. However, they’re recruiting from a shrinking pool. Accounting graduates dropped 6.6% to just 55,000 students, with master’s programs declining 15%.

There’s a bright spot: accounting enrollment has surged 12% for two straight semesters, suggesting the pipeline might be recovering. But the profession’s image problem persists. U.S. News & World Report ranked accounting 90th out of 100 best jobs, with a median salary just under $80,000. The profession scored poorly on future prospects (4.3 out of 10) and work-life balance (5.1 out of 10).

The traditional career path is also changing. Only 38% of graduates now start in public accounting, down from 55% in 2014. Blake predicts this shift will continue. “Most accounting grads go into private industry, but we need experienced people in public accounting to do audits.”

Technology Updates

On the technology front, firms are embracing AI despite implementation challenges. AI adoption in audit jumped from 8% to 21% in one year, with early adopters reporting up to 40% productivity gains. However, most companies remain stuck in what researchers call the “middle maturity trap,” investing heavily but struggling with execution.

Several platforms announced updates. Keeper is rebranding to Double after settling a lawsuit over the name. BILL is partnering with NetSuite and Acumatica for embedded bill pay, though they’re also cutting 140 employees (6% of workforce). Canopy launched AI-powered client intake that predicts needed documents and auto-fills known information.

A Hollywood Fraud Scandal

In fraud news, a Los Angeles film production accountant was charged with embezzling nearly $2 million. Joshua Mandel, owner, CEO, and CFO of First J Productions, moved funds between productions to hide his theft, funneling money through an account he named “Fun Fun Fun.” He spent the money on Vegas trips and payments to adult film performers he met online. He faces up to 20 years per count if convicted.

Looking Ahead

Can firms maintain independence while taking private equity money? Will traditional safeguards survive this ownership transformation? As David warned, “We’re probably going to have another Enron here. We’re going to have an Arthur Anderson issue eventually.”

Blake emphasized what’s at stake: “The integrity of auditors is all that’s holding up our financial system.” With nearly a quarter of top firms now tied to private equity and more joining weekly, the profession must figure out how to preserve independence in this new reality.

The BDO/Going Concern dispute may seem like a small skirmish, but it represents a larger battle over accounting’s soul. When firms owe money to companies betting against their audit clients, when ownership structures become too complex to untangle, and when legal threats replace transparency, the profession’s core value—independence—comes into question.

Listen to the full episode to hear Blake and David’s analysis of these stories and more, recorded live from Intuit Connect in Las Vegas.

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

· ·

“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.

Deloitte’s $440,000 AI Fabrication Scandal Exposes the Accounting Profession’s Deepest Fears

· ·

A startup founder discovered $2.1 million in embezzlement by his co-founder in just 18 minutes using Claude AI. The company’s internal auditors, external auditors, and even the CFO had completely missed it. Meanwhile, Deloitte was forced to refund the Australian government hundreds of thousands of dollars after delivering a report filled with AI-generated fabrications.

In this episode of The Accounting Podcast, hosts Blake Oliver and David Leary dig into these stories. They explore how AI is both exposing massive frauds and creating embarrassing failures, examine the chaos from the government shutdown, and question whether traditional accounting services still matter when 86% of major companies use broken charts that nobody even notices.

When AI Catches What Humans Miss (And Creates What Shouldn’t Exist)

The accounting profession is experiencing an AI identity crisis. On one hand, artificial intelligence can spot complex fraud that teams of professionals completely miss. On the other hand, professionals are using it to generate work that looks legitimate but is actually riddled with fabrications.

Let’s start with Deloitte’s spectacular failure. The Big Four firm charged the Australian government $440,000 AUD (about $290,000 USD) for a 237-page report on welfare compliance systems. The problem? It contained over 20 AI-generated errors, including completely made-up quotes from federal court judgments and references to non-existent academic papers.

Chris Rudge, a Sydney University researcher, spotted the errors immediately. One fabrication attributed a non-existent book to constitutional law professor Lisa Burton Crawford on a topic completely outside her field. “I instantaneously knew it was either hallucinated by AI or the world’s best kept secret because I’d never heard of the book, and it sounded preposterous,” Rudge said.

Even after getting caught, Deloitte insisted its findings and recommendations were still valid. This prompted Australian Labor Senator Deborah O’Neill to observe that Deloitte has “a human intelligence problem.”

But here’s where it gets interesting. While Deloitte was using AI to create fake references, a startup founder used it to uncover real fraud. He exported his company’s QuickBooks data into Claude AI and asked one simple question: “What’s wrong with this picture?”

In just 18 minutes, the AI found what everyone else had missed: 17 fake companies routing $2.1 million to his co-founder’s personal accounts through shell companies. The AI spotted patterns humans overlooked, including fake vendors paid on 23-day cycles while real vendors were paid on 28-day cycles, and payment amounts that followed Fibonacci sequences, which humans subconsciously create when making up numbers.

The founder has since turned this into a business, selling AI-powered fraud detection prompts for $10,000 each to 47 clients. He’s probably making more money from his fraud-detection business than from his original startup.

As Leary points out, this creates both an opportunity and a threat for accounting firms. “The real risk of AI taking accounting jobs isn’t that AI will take the job away. Clients are just going to say, ‘I can do that myself. I don’t need to pay somebody $400,000 to do a half-assed ChatGPT thing.’”

Government Shutdown: When Critical Systems Break Down

The conversation then turned to the government shutdown’s impact on air travel and tax services. The situation has become genuinely dangerous, with cascading failures that reveal how fragile our systems really are.

Air traffic controller-related delays jumped from a typical 5% to 53% as workers called in sick rather than work without pay. Oliver experienced this firsthand when his flight was delayed for hours with no official explanation, though flight attendants privately blamed air traffic control shortages.

The scariest incident happened at Burbank Airport in Los Angeles, where the tower went completely unmanned. “When that happens, there is a backup procedure, which is that the pilots have to do their own air traffic control,” Oliver explains. “They get on a shared frequency and have to communicate with each other. There’s no intermediary. So that not only slows things down. It also creates risk. There’s a huge risk of these planes crashing into each other because they miscommunicate.”

The economic impact is staggering. The US Travel Association estimates $1 billion in weekly losses to the travel economy. Over 750,000 federal workers have been furloughed, while more than a million work without pay. For TSA screeners earning an average of $51,000, the situation is untenable. “If they don’t get paid, they are not paying their bills,” Oliver notes. “They’re going to go drive for Uber to pay the bills.”

The IRS shutdown creates serious problems for accountants. Nearly half of IRS staff have been furloughed. While electronic returns continue processing and automated refunds still flow, human support has collapsed. Phone support is essentially gone, paper returns sit unprocessed, and audits have stopped. Yet interest and penalties continue to accrue, and all deadlines remain in effect.

Adding to the chaos, Trump fired over 4,100 federal workers instead of furloughing them. The Treasury alone lost 1,446 employees, including about 1,300 IRS workers. “It’s the first time in modern history that mass firings have happened during a funding lapse,” Oliver observes.

The administration also created a new “CEO of the IRS” position to bypass Senate confirmation, appointing Frank Bisignano, former CEO of Fiserv, who still owns about $300 million in company stock. This creates obvious conflicts of interest, especially since Fiserv is involved in launching digital stablecoin initiatives. “This is why you have to have hearings. You can’t just appoint somebody to a position,” Leary emphasizes.

When Independence Becomes a Joke

Next, Oliver and Leary discussed how financial entanglements are destroying audit independence while regulators focus on trivial violations.

Take BDO’s current crisis as an example. The firm took a $1.3 billion loan at approximately 9% interest from Apollo Global Management to finance its employee stock ownership plan. The debt forced the company to lay off employees, freeze travel, and conduct emergency cost reviews across all divisions.

But while BDO was giving First Brands a clean audit opinion, Apollo was actively shorting the company. First Brands collapsed months after BDO’s clean audit. “If I’m BDO and I audit a company that is being shorted by a company I took a $1 billion loan from, where’s the independence?” Leary asks. “What is the fraud triangle? Opportunity, rationalization, and financial pressure. All the parts of the fraud triangle are here.”

Meanwhile, EY is celebrating a “dramatic audit quality turnaround,” with its deficiency rate dropping from 46% in 2022 to below 10% in 2025. They achieved this miracle by firing 132 public company audit clients. In other words, the problematic audits didn’t disappear. They just moved to Deloitte and KPMG. “Have we actually achieved anything here? Or have we just shifted the bad audits somewhere else?” Oliver wonders.

The hosts also discussed a new scheme where crypto promoters target CPA firm clients. The Truevestment Bitcoin Legacy Fund wants CPAs to help raise $150 million from their clients, which institutional investors will then match before merging into a Nasdaq entity—essentially a SPAC wrapped in Bitcoin speculation.

The marketing compares buying Bitcoin today to “buying the Dow at 900.” But as Leary points out, when the Dow was at 900 in the mid-1960s, it consisted of companies like AT&T and General Electric—”companies that made things” and created real value, not speculation.

Why Nobody Cares About Financial Reports Anymore

Perhaps the most damning revelation from the podcast’s recent news roundup is that 86% of major companies are using broken charts in their financial reports. A CPA Journal study found bar charts with misleading axes, pie slices that don’t match percentages, and deliberate distortions to exaggerate performance. Of 1,584 charts reviewed, 12% had fatal flaws that completely misrepresented the data.

“The fact that so many of them have errors and nobody’s pointing them out indicates to me that nobody’s reading them,” Oliver observes. Indeed, 10-K filings get downloaded an average of just a few dozen times.

The hosts even shared a bizarre example where social media bots criticizing Cracker Barrel’s new logo caused the stock price to tank. According to Wall Street Journal data, 44.5% of posts about the logo change were from bots. “Maybe nobody cares about your charts because nobody even cares about the financial statements,” Leary suggests.

What This Means for Your Firm

The key insight from Hector Garcia stuck with David: “AI is never going to do perfect accounting, but it’s going to do it good enough.” For most clients, “good enough” financials that they can generate themselves might be perfectly adequate.

Accounting professionals can embrace AI for meaningful fraud detection and insights, or watch clients realize they can generate “good enough” work themselves. As this episode of The Accounting Podcast makes clear, the traditional value proposition of professional accounting services is crumbling. The firms that survive will be those that identify and deliver human value that transcends what AI can do: strategic insight, ethical judgment, and genuine expertise that no algorithm can replicate.

Listen to this episode to understand not just the challenges facing accounting, but what you need to do differently starting today.