Every day, another AI agent promises to revolutionize accounting. But there’s a fundamental problem most tech companies don’t understand: AI accounting will hit what FloQast CEO Mike Whitmire calls “the auditability wall.”
While Silicon Valley churns out press releases about AI agents that can handle complex accounting tasks, a reality check awaits. In this episode of the Earmark Podcast, host Blake Oliver sits down with Mike Whitmire, founder and CEO of FloQast, to explore why accounting AI is fundamentally different from AI in other business functions. Rather than getting swept up in the AI marketing frenzy, FloQast stepped back to solve the core problem: how to harness AI’s power while maintaining complete audit trails and human oversight.
As Whitmire warns, “A series of companies will come out with AI agents that can do a lot of this work fairly accurately. Then they hit this auditability wall, and it creates a big problem for companies trying to scale.”
The Auditability Problem That’s Breaking Accounting AI
Unlike other business functions where AI mistakes can be shrugged off, accounting operates under rules most tech companies don’t understand. When a sales AI messes up a lead, the stakes are minimal. But in accounting, every transaction must be traceable, every decision documented, and every process capable of withstanding regulatory scrutiny.
This creates a fundamental conflict between how most AI systems work and what accounting requires. “AI is really about automating work, and agents are doing non-deterministic work,” Whitmire explains. “So that becomes a little scary when you’re thinking about auditability.” Most AI systems function as “black boxes.” They can produce results, but they can’t explain their decision-making process in the detailed, step-by-step manner that auditors and regulators demand.
The problem is about to hit the industry hard. When AI systems can’t provide proper documentation and audit trails, auditors are forced to recreate all the work, defeating the entire purpose of automation.
Rather than getting swept up in the AI marketing that dominates press releases from major ERP vendors, FloQast took a different approach. “We tried to avoid the noise and think about how AI should be applied to accounting,” Whitmire says. They started with their experience as former auditors and accountants, asking: How do you combine AI automation with traditional software code and human oversight to create something that actually works?
The answer required rethinking the entire approach to accounting AI, leading to a solution that preserves audit trails and human oversight while still delivering efficiency gains.
FloQast Transform: Building AI Auditors Can Actually Trust
Rather than chase the latest AI trends, FloQast built something different: an AI system that auditors can actually work with. The FloQast Transform product harnesses AI’s power while maintaining the audit trails financial reporting demands.
The approach is simple: let accountants describe their processes in plain English, then use that narrative to generate automated scripts and complete audit documentation. “You build your agents,” Whitmire explains. “You chat with the product and explain your process in pretty extreme detail.”
As accountants describe their workflow step by step, the system populates what looks like a familiar Excel workbook. “This Excel workbook will ultimately be the audit evidence,” Whitmire notes. This isn’t just a user interface choice. It’s a deliberate design decision to ensure every AI-driven process produces the documentation auditors expect to see.
Take FloQast’s benefit allocation journal entry example. The process starts with integrating with UKG Payroll to pull down employee data. The accountant describes each step: “integrate with UKG,” then “pull down information around names, dollar amounts, state,” then “populate column A with this, populate column B with this, and bold and make the header gray because that’s the format I like.”
The system combines different types of automation. For routine tasks, it generates deterministic code that produces consistent results every time. But when the AI encounters something new, like when FloQast hired its first Kentucky employee, it doesn’t guess. Instead, “it surfaces the question to the reviewer of that work,” Whitmire explains. The accountant can approve the change, and going forward, Kentucky will be handled properly.
This approach changes the accountant’s role. Instead of being the preparer who manually processes transactions, they become the reviewer who oversees AI agents and approves exceptions. “Our goal is to empower accountants to automate the really repetitive, rote part of this job. Elevate them into the reviewer of the more complicated work that the agent’s now doing,” Whitmire says.
The system preserves every prompt sent to the AI, every output generated, and every decision made. When auditors come knocking, they can trace exactly how each transaction was processed and where humans intervened. It’s the kind of comprehensive audit trail that makes regulatory compliance possible while still delivering efficiency gains.
Beyond transaction processing, FloQast applies AI to other areas like variance analysis. When account balances trigger materiality thresholds, the system analyzes the biggest transactions causing the change and drafts explanations. “It’s like balance went up because of boom, boom, boom, boom, boom,” Whitmire says. “It’s not these wonderful essays on how things change. It’s like a list of transactions.”
The Future of Accounting: Cyborgs, Not Replacements
The auditability challenge yields a surprising conclusion: rather than replacing accountants, AI will transform their role in ways that could solve the profession’s biggest problems. But this transformation requires rethinking what it means to be an accountant.
Whitmire envisions accountants becoming “accounting transformation information managers,” professionals who combine accounting knowledge with software engineering capabilities. “It will be much more like the merging of an accountant with a software engineer,” he explains. “So you have the accounting knowledge, supplemented by software engineering tools like FloQast, where they can take their accounting knowledge, use our product, and automate their work.”
This isn’t just about learning new software. It’s about fundamentally changing the structure of accounting work. Instead of spending hours manually processing transactions, accountants would deploy AI agents to handle routine work so they can focus on reviewing exceptions, making judgment calls, and ensuring compliance.
The career implications depend on where you are professionally. For younger professionals, Whitmire recommends “Get really good at technology, learn these tools as they come out, and continue to learn about accounting. You’re going to be a very, very valuable employee going forward.” For experienced professionals, “You need to be really great at reviewing the work. Continue to be really great leaders, and run great organizations.”
This evolution could address the profession’s talent shortage. By making accountants more productive and the work more intellectually engaging, AI could help attract and retain talent. “My hope is that it does a really good job of plugging the talent gap we talk about so much,” Whitmire notes.
But there’s a learning concern. Whitmire worries about newer professionals who might skip foundational manual work and jump straight to reviewing AI-generated results. “I feel like the old man saying this, but I did learn a lot doing the work manually and struggling through it,” he admits. He recalls learning about jet lease accounting by struggling through contracts and GAAP guidance—work that an AI could now handle instantly.
The solution may require restructuring how accountants learn their craft. Perhaps starting in accounting roles where they do manual work before moving into audit, rather than the current model, where most start as auditors reviewing work they’ve never performed.
As Oliver puts it, “I would rather manage AIs than manage people.” It reflects both the appeal and reality of this AI-augmented future. Managing AI agents eliminates many interpersonal challenges while allowing professionals to focus on technical and analytical work.
The accounting profession is heading toward becoming a hybrid of human judgment and AI automation. The question is whether professionals and firms will adapt quickly enough to thrive.
Regulatory Changes on the Horizon
The discussion also touched on significant regulatory changes that could reshape the profession. There are efforts in Congress to eliminate the Public Company Accounting Oversight Board (PCAOB) and transfer its responsibilities back to the SEC without additional funding, effectively ending independent audit oversight.
“When I was at EY, we were always scared of a PCAOB audit. So it was a thing that drove behavior,” Whitmire reflects. The fear-based incentive improved audit quality, even if the overall effectiveness is debatable.
Without the PCAOB, the industry would likely return to peer review, where accounting firms review each other’s work. As Oliver notes, “You’re not so afraid of your buddies reviewing your work.” That’s the same dynamic that led to audit failures before the Sarbanes-Oxley Act.
This regulatory uncertainty adds another layer of complexity to the AI transformation. Firms implementing AI systems need to consider current audit requirements and how oversight might change in the coming years.
The Path Forward: Auditability as Competitive Advantage
The accounting profession’s rigid requirement for auditability is often seen as a weakness. But it may become its greatest competitive advantage in the AI revolution. While tech companies rush to market with AI agents that promise to automate everything, firms that understand and embrace the auditability challenge will build sustainable, scalable solutions.
FloQast Transform demonstrates that the future isn’t about choosing between human judgment and AI automation. It’s about creating systems where they work together seamlessly. By preserving audit trails, maintaining human oversight for exceptions, and generating documentation that auditors can use, they’ve solved the fundamental problem that will likely sink many AI accounting startups.
For accounting professionals, this is a career evolution opportunity. The future belongs to those who combine accounting expertise with technology capabilities. These professionals will be empowered by AI to focus on higher-level analysis, judgment calls, and strategic work. The professionals who master these systems now will find themselves in increasingly valuable positions as the technology matures.
To hear the complete conversation about FloQast’s approach to accounting AI, including detailed technical examples and Whitmire’s predictions for the profession’s future, listen to the full episode above.