The Accounting Podcast

Is private equity eroding the soul of the accounting profession? Blake and David unpack NASBA’s PE task force, the BDO–First Brands meltdown, and why ‘appearance of independence’ matters. They also break down the end of IRS Direct File, Intuit’s TurboTax stores, the Supreme Court’s skepticism of Trump tariffs, and a new IRS notices law. Plus: AI agents that fall for scams. Learn what these shifts mean for firms, auditors, and your clients this tax season.


Chapters
  • (00:00) - Welcome to The Accounting Podcast
  • (01:16) - Viral Tweet and Personal Anecdotes
  • (01:53) - Interview with Furloughed IRS Lawyer
  • (05:45) - Government Shutdown Economic Impact
  • (10:11) - Intuit's New Retail Stores and IRS Direct File Shutdown
  • (14:30) - IRS Leadership and Controversies
  • (17:28) - Trump's Pardons and IRS Math and Taxpayer Help Act
  • (24:53) - Supreme Court Hearing on Tariffs
  • (31:17) - Major Authority and the Power of the Purse
  • (32:03) - AI Agents Falling for Scams
  • (35:32) - NASBA's Private Equity Task Force White Paper
  • (37:02) - Concerns Over Auditor Independence
  • (49:10) - BDO and First Brands Scandal
  • (01:02:35) - Wrap up and Final Thoughts
 

Show Notes
Longest Shutdown in History Costs U.S. Economy About $15 Billion Each Week
https://www.cpapracticeadvisor.com/2025/11/05/longest-shutdown-in-history-costs-u-s-economy-about-15-billion-each-week/172368/

IRS tells states Direct File 'will not be available' in 2026
https://federalnewsnetwork.com/it-modernization/2025/11/irs-direct-file-will-not-be-available-in-2026-agency-tells-states/

Intuit to open 20 brick-and-mortar TurboTax stores+offices
https://www.accountingtoday.com/news/intuit-to-open-20-brick-and-mortar-turbotax-stores-offices

Social Security, IRS Leader Bisignano Panned After Fiserv Stock Tanks
https://401kspecialistmag.com/social-security-irs-leader-bisignano-panned-after-fiserv-stock-tanks/

Trump Tariffs Face Supreme Court Challenge From Chicago Toymaker
https://www.bloomberg.com/news/features/2025-11-02/trump-tariffs-face-supreme-court-challenge-from-chicago-toymaker

Supreme Court justices appear skeptical that Trump tariffs are legal
https://www.cnbc.com/2025/11/05/supreme-court-trump-trade-tarrifs-vos.html

AICPA Applauds the Passage of the IRS Math and Taxpayer Help Act
https://www.aicpa-cima.com/news/article/aicpa-applauds-the-passage-of-the-irs-math-and-taxpayer-help-act

First Brands founder accused of looting company
https://fortune.com/2025/11/05/first-brands-bankruptcy-founder-allegations-patrick-james/

Are Alternative Practice Structures in Private Equity Considerations and Questions for Boards of Accountancy (NASBA White Paper) https://nasba.org

Microsoft Gave AI Agents Fake Money to Buy Things Online. They Spent It All on Scams
https://decrypt.co/347709/microsoft-ai-agents-fake-money-buy-online-they-spent-scams

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Transcripts
The full transcript for this episode is available by clicking on the Transcript tab at the top of this page

Creators and Guests

Host
Blake Oliver
Founder and CEO of Earmark CPE
Host
David Leary
President and Founder, Sombrero Apps Company

What is The Accounting Podcast?

The Accounting Podcast (formerly the Cloud Accounting Podcast) is the world's #1 accounting, bookkeeping, and tax podcast! Join us weekly for a roundup of accounting news, analysis, and interviews. Plus, earn free NASBA-approved CPE credits for listening with the Earmark app. Learn more at https://earmarkcpe.com.

Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Blake Oliver: [00:00:04] We are getting to the point where private equity is now creating this challenge for the profession when it comes to our our integrity, our ethics, our objectivity. And we as a profession are going to have to decide, do we take a stand or do we allow private equity to continue to take over accounting firms? And ultimately, when they have enough influence, control the regulatory apparatus and really then have control. David.

David Leary: [00:00:33] Coming to you weekly from the OnPay Recording Studio.

Blake Oliver: [00:00:39] Hello and welcome back to the Accounting Podcast, your source for news in the accounting profession, I'm Blake Oliver.

David Leary: [00:00:46] And I'm David Leary.

Blake Oliver: [00:00:48] And it's November David. The government shutdown is officially the longest in history, but it looks like it's about to end, which is great news For tax season.

David Leary: [00:01:01] Well, I think the shutdown got real this weekend. I know my wife tried to fly to San Francisco and got to the airport and it was just delayed delayed, delayed, delayed, delayed. The flight just kept being delayed. She just said forget it because she didn't want to get stuck somewhere else and just got her money back and went home.

Blake Oliver: [00:01:16] And you tweeted.

David Leary: [00:01:17] Yeah, I tweeted about that.

Blake Oliver: [00:01:19] You said you said like if you're at the airport, just go home. I think is what.

David Leary: [00:01:22] Just get your money back and go home. Just get a refund and go home.

Blake Oliver: [00:01:25] And somehow this tweet got over a million, a million views. I don't understand it.

David Leary: [00:01:31] People are freaking out over it. It was like the dumbest blurt of a tweet ever I've ever done. It just got, like, exploded. Makes no sense. But yes, the government shutdown is real, right? It's affecting real Americans who are just trying to go about their pre-holiday travels, right? I mean, this is in theory, because the holiday tomorrow is an extra long weekend, right? People were impacted by it.

Blake Oliver: [00:01:52] Well, you know what? Since since we started out with the government shutdown, I want to play a little video. Uh, this is an interview with an IRS lawyer who's been on furlough since the shutdown started. And, uh, it's on Instagram.

David Leary: [00:02:07] And he is the hot dog guy.

Blake Oliver: [00:02:09] This is the hot dog guy? Yeah, the hot dog stand guy. You saw this?

David Leary: [00:02:12] No, but I heard about this guy. I know he exists.

Blake Oliver: [00:02:14] All right, well, here it goes. I'm gonna play this, and then we'll thank our sponsors.

Speaker3: [00:02:19] I'm selling out every day. I've said this before, but if I can make one person, uh, laugh or smile with my shtick and menu, that that makes me really, really happy. Hi. Uh, my name is Isaac Stein. I'm 31 years old. Uh, I live in D.C.. I am here at my hot dog cart shysters, operating it in full swing. It is an ironical play on the fact that I'm a lawyer. It was originally intended as a weekend project, but since I've been furloughed on October 8th, I've been operating it most days. There's been a tremendous outpouring of support from the community, and I've been meeting tons of interesting people each day. The correct hot dog with mustard and sauerkraut. That is me simply saying that I think that's how a that's the best tasting hot dog I've been doing it, uh, pretty much, uh, all myself. I'll get to my kitchen before noon. Okay, then. Um, the prep in order to actually, like, setting up the condiments, uh, and stuff takes like an hour. I'm vending for as long as I'm actually vending. Condiments get on absolutely everything, including my suit. The cleanup is at least three hours a day, minimum. So there's a lot of back end, uh, cleanup. I will always be at the corner of this corner. First in M, there's a specific permit called a sidewalk permit, and it's tied to this location. A DC is full of really phenomenally accomplished, interesting people, and I have the privilege of getting to talk to them on a daily basis.

Blake Oliver: [00:03:46] So there you go. That's Isaac Iris lawyer operating a hot dog stand while he's on furlough. Hopefully he won't be for very much longer, because it seems like the the shutdown is about to end as we record this on Monday, November 10th. We'll talk more about that. But David, first, let's thank our sponsors, our sponsors.

David Leary: [00:04:01] This week we have relay bill and cloud account and staffing. So between Blake and myself we now have three, four, five business entities 20 or so checking accounts dozens and dozens of virtual cards. It would be impossible to manage all of this if we weren't using relays. Our small business bank relay is truly part of the tech stack we use to run our businesses. Relay allows Blake and I to each have our own logins. We can grant access to our team and even our accountant without sharing passwords or two factor authentication codes. Relay allows us to grow and scale our banking needs without ever going to a physical branch, and I recently added an account to receive inbound merchant services with just a few clicks, and I had to create a payroll checking account. Again, just a few clicks and instantly I have access to my ACH info to give to my payroll provider. With relays virtual cards, we can issue debit cards to our team around the world for their needed business expenses. I can instantly spin up a new visa debit card set both daily and monthly spending limits, and when the team member doesn't need their card, I can freeze it until they need to use it again. Relay also has an automation feature to sweep money automatically from one account to another based on dates, amount or target balances or percentages. For example, inbound payments could be split daily to your payroll sales tax payable. Operating and savings accounts all based on predefined rules. To learn more about using relay for your firm and clients, head to The Accounting Podcast. That is The Accounting Podcast. Thank you relay.

Blake Oliver: [00:05:30] And thank you to our livestream viewers who joined us on this Monday morning. It's a little light today. I mean, it's a Monday. Everyone's getting their work done. Uh, BJ glute says three coffee emojis, and I think it just got enough votes to pass officially in in in reference to the, uh, the government reopening bill. I brought a story to the show from CPA Practice Advisor about how this is the longest government shutdown in history. Uh, at the time of the writing of the article, it was November 5th and it was 36 days. So I guess we're now on to 40 or 41 days.

David Leary: [00:06:07] I think we broke 40. I think that's official. Yeah.

Blake Oliver: [00:06:10] And it's been costing the US economy around $15 billion every single week. The Congressional Budget Office projects that Q4 economic growth could drop by two percentage points as a result of the shutdown. If it extends through Thanksgiving, which it won't be, then approximately 14 billion in economic damage would be permanent. But hopefully with this reopening, it won't be that that money will get into the paychecks of federal workers who will then spend it into the economy. And also people won't be canceling their trips. They'll still be going 650,000 federal employees have been furloughed without pay. And, um, I guess now that those furloughed workers are not are furloughed, workers are counted as unemployed when they're furloughed. So the we're going to see a jobless rate spike to probably 4.7% in October. It was 4.3% in in August. Um, the ripple effects are that this money from the federal government is not going into the private economy. 24 billion in federal spending on goods and services was suspended in the first month of this shutdown, and the impact on small businesses is significant because the Small Business Administration has been unable to process 2.5 billion in loans for 4800 businesses, and that was as of October 21st. Uh, additionally, 42 million Americans on Snap, the food stamps program, were receiving only half of their benefits for November after a court order. 8000 children and families lost access to Head Start daycare and education services. And so that's the impact then, you know, on on on services for needy families and individuals. Um, but yeah, it looks like it's going to get, um, it's going to be ended now that it was, um, a handful of Democrats in the Senate who have broken to vote with Republicans to reopen the government, the Democrats were trying to secure an extension of Affordable Care Act subsidies to prevent premium hikes for 24 million Americans. But it looks like they failed to do this. So we had this government shutdown and the Democrats didn't get what they were looking for.

David Leary: [00:08:34] Yeah, basically, it's going to be whatever the original offer was. They're just saying yes to that now, just to basically just trying to get the shutdown to stop. Yep.

Blake Oliver: [00:08:42] And, you know, I think this is something that, uh, I guess it's the Thanksgiving travel. That's what. That's why this always happens this time of year. Because everybody knows that travel is going to get disrupted. And so then it's like a game of chicken. Who's going to blink first? And Democrats blinked on this.

David Leary: [00:09:02] One because all the senators and representatives take off for Thanksgiving weekend and head back home to their constituents. That's right. And they don't want they don't want to be stuck in airports either. All right. Even take those those meetings with their constituents.

Blake Oliver: [00:09:15] That's right. Um, we got lots to talk about. Um, in addition to government shutdown news, we've got news about tariffs. The Supreme Court has held a hearing oral arguments on tariffs. And it's looking like they might hold against it. Trump's tariffs might get struck down which would be a huge deal. We've also got information um about First Brands which is that company that BDO was auditing that failed or went bankrupt and without a going concern warning. Uh, and I guess the first brands founder has been accused of looting the company of hundreds of millions of dollars. I want to talk about that. The Nasba has a white paper on private equity and accounting firms that we can go through. They've they've they've got a task force working on it. Um, you you have some news about Intuit, right? David, let's let's start with that because we were just talking about Intuit Connect last week. We were just there at the conference. There's something about Intuit is going to open retail stores.

David Leary: [00:10:21] Intuit is going to open 20 new brick and mortar TurboTax stores. And apparently they're going to be a hybrid online, in-person experience similar to Apple's retail approach. So I guess I'm imagining these, like stark white buildings with some TurboTax spread around. And you'll have computers and you'll start working on your return. And then you've got to get a ticket to go up to some, like, what do they call it, the Genius Bar. It'll be like the the AA bar, and you'll go up to the A bar and they'll handle with the question. Then you go back and do more work at your desk.

Blake Oliver: [00:10:51] Wait, is this your speculation or is this.

David Leary: [00:10:52] Just if they're saying it's gonna be like an Apple Store, I'm imagining what that experience could be.

Blake Oliver: [00:10:56] So what do we know about these stores? There's going to be 20 stores. You said. Where are they going to?

David Leary: [00:11:00] They're going to be walk in retail locations that offer guided services from CPAs and IAS. And they specifically have said it's going to be like Apple Stores for tax help and support.

Blake Oliver: [00:11:11] Okay, so you walk in and you work on your tax return, your TurboTax tax return. So and then you get help, you can get help because it's hybrid.

David Leary: [00:11:21] It's like they're not doing it for you right. Like it's almost like TurboTax live. But instead of getting the video pop up, you'll just walk over to the Genius Bar and get interesting.

Blake Oliver: [00:11:30] Okay.

David Leary: [00:11:30] It's it's kind of strange. And they also announced they're adding an additional 200 TurboTax expert offices. So I'm assuming what these are because it's not really well defined because they already have 400 of them. These would be like if you're doing your taxes online with TurboTax live, and you need to go visit or make an appointment with somebody, these would be localized tax expertise within a 50 mile radius of wherever you're at. So they're but all of this comes under the umbrella of how convenient this week. I don't know if you saw the IRS is officially killing direct file.

Blake Oliver: [00:12:04] Yes, I saw that. Um, it was only running for two years and they are shutting it down despite it having a 98% user satisfaction rate.

David Leary: [00:12:13] Yeah. And the argument of the Trump administration is the private sector can handle electronic filing more efficiently. Um, Treasury Secretary and IRS Commissioner Scott Bessent said that the program wasn't used very much and and said the private alternatives are better. But the reason it wasn't used much because it was a pilot, they were still just rolling it out. It wasn't marketed or advertised. It was really still brand new of a pilot. Yeah. Um, and obviously this comes after.

Blake Oliver: [00:12:40] 12 states and the second year it was in 25 states. Yeah. But but it's being shut down. Um, how many returns did they file? It was close to 300,000. Returns were filed through the system in 2024. In its first year.

David Leary: [00:12:54] Yeah. Almost twice as many. So 140,000 in 2024, 300,000 in 2025.

Blake Oliver: [00:13:00] Got it, got it. 300,000, which is um.

David Leary: [00:13:02] It's a some place it's a significant number in the grand scheme. If that's 300,000 paper returns, the IRS doesn't have to touch. That's a victory. But all of this really came I mean, from on the back of tax prep companies like Intuit and H&R block lobbying against this and then criticism from Republican lawmakers. I mean, we we predicted this our episode in June 2024 was Intuit would go red in the election, and then they did it. They donated $1 million to the Trump inauguration. And this got killed. It is dirty and gross, and it really grosses me out because I think it just reeks of hypocrisy on both sides. Right into it. Compromise its own values just for the almighty dollar of getting a TurboTax competitor eliminated. And arguably, MAGA and the Trump Republicans turned a blind eye to what they would consider as a woke company. I mean, Intuit was one of the first companies to offer same sex marriage health benefits, right? Intuit I'm pretty sure in the, uh, the like, sex change operations and gender change operations, Intuit allowed that under their insurance. This is not the type of company that the MAGA people are pro, but everybody turned a blind eye as soon as $1 million came in to pay for the inauguration party. And then Intuit got exactly what they wanted. It just reeks of grossness. It's really gross. I hate it. I feel bad for Intuit employees that this is the company they work for. It's gross.

Blake Oliver: [00:14:30] Speaking of the IRS, Democrats are investigating the new IRS CEO's past role at Fiserv. David, you mentioned this on a previous episode that instead of appointing an IRS commissioner, the Trump administration has come up with a workaround for appointing a new head of the IRS. They they hired a CEO. Not a not a not a not a job that you have to get confirmed by the Senate to perform. And, um, so the new CEO is is Frank. Do you know how to say his last name? David.

David Leary: [00:15:06] I'm going to get my on here.

Blake Oliver: [00:15:07] Bisignano. Bisignano. I think Frank Bisignano. He's the new CEO of the IRS. And he was previously involved in a company called Fiserv. And Fiserv shares tumbled in late October after the company slashed their full year earnings outlook and delivered Q3 results well below analyst expectations. Um. Bisignano exited from Fiserv, but managed to. He exited from Fiserv to join the Trump administration in May of 2025, and he owned approximately 594 million in Fiserv stock upon his Senate confirmation. He then sold those shares between May 16th and July 1st for about 530 million, and avoided 300 million in losses by selling before the October downturn. So now Democrats are asking, well, what did you know and when did you know it?

David Leary: [00:16:06] Yeah, they're possibly implying that he had inside information that the stock price was going to fall, but he really had to divest because he was nominated and accepted the nomination to be the commissioner of Social Security. So that's where he was first before they moved him to CEO of the IRS. But the interesting part of this is like if as soon as you have to. Um, divest from your stock when you take a government position like this that could you basically avoid the capital gains, and you could basically go through the rest of your life without paying the taxes on this gain. So he had a huge gain that he may never pay taxes on, depending on where he put that money when he divested it.

Blake Oliver: [00:16:46] Oh, right. Because you get a tax break. So if you if you are a presidential appointee and you have to sell your stock, uh, if divest like you said, then you don't have to pay capital gains.

David Leary: [00:16:58] And the spirit of this makes sense, right? You you want to eliminate conflict of interest, but I don't you know, they're not appointing the, you know, a schmuck like me right there, appointing a guy that has half $1 billion in stock profits right to now. He doesn't have to pay capital gains on this.

Blake Oliver: [00:17:22] All right, well, um, let's see, what else do we have in news? Tax news. Here's here's a random story. Trump has pardoned baseball legend Darryl Strawberry on tax evasion. This is a charge from 30 years ago. Darryl Strawberry pleaded guilty in 1995 to underreporting over $350,000 in income from autograph shows and personal appearances. He got six months of home confinement as his punishment. The white House says he's been sober for over a decade, found faith, and now runs a recovery center to help others. And this fits a pattern of Trump pardoning white collar criminals, including Chong, Changpeng Zhao and former Representative George Santos.

David Leary: [00:18:16] So that's an interesting one because, like, I think a lot of the other pardons like Trump has some something to gain. I guess with this he gets to get a photo op with Darryl Strawberry, I don't know. I don't know where the what the gain is on that for him.

Blake Oliver: [00:18:30] Uh, we can keep going with, uh, IRS news. Uh, Congress has passed the IRS Math and Taxpayer Help Act. This is, uh, one of the most frustrating parts of dealing with the IRS. This new act requires the agency to actually explain tax filing errors clearly, including which specific line caused the problem and how to fix it. So the current situation today is the IRS will send you a letter and they'll say, we found an error and we corrected it. And now, you know, this is the adjustment, but they don't tell you all the details of like what they did and why. And so now they have to do that. Uh, so they have to tell you exactly what went wrong. They have to tell you exactly how much you owe. And, um, there's also now multiple ways to dispute errors. You can dispute them by phone, online mail or in person. And it sets up a pilot program for certified mail notices.

David Leary: [00:19:23] So assuming all of those options are fully staffed by the IRS would all be great options.

Blake Oliver: [00:19:30] That's right. Um, so the, uh, the AICPA strongly endorsed this legislation. Uh, the AICPA also wants a safe harbor for reporting tips and overtime pay. This is this is not law yet, but this is what they're working toward. So remember how Congress passed tax breaks for tips and overtime pay? Yeah, well, there's a problem with that. The 2025 tax forms don't have fields to report that information. The amount of wages from overtime pay, the amount of wages from tips. And the IRS says they're not going to change the forms for 2025. So employers don't know how to report it. And taxpayers don't know how to claim the deductions that they're legally entitled to. And the AICPA is asking the IRS to accept alternative documentation like pay stubs, Letters from employers. Taxpayer tip sheets.

David Leary: [00:20:22] Ai generated images. Yeah.

Blake Oliver: [00:20:25] Um, it's just crazy to me that, like, the IRS is not going to adjust these forms because, yeah, we have this now, this tax deduction. But how are taxpayers supposed to claim it? How are they supposed to substantiate it? That is not.

David Leary: [00:20:38] This is one of the first things we heard from Billy Long. When Billy Long started talking to the IRS employees before they sent him off to. Is he an Iceland? Is that where they sent him off to?

Blake Oliver: [00:20:47] Yes.

David Leary: [00:20:47] They got rid of Billy Long. It was he he he kind of was saying that they're not sure they can implement all the changes in the big beautiful bill. Like there's just too many changes. How do you roll that out? How do you change every tax form? And obviously that wasn't acceptable opinion to have. And you know he's gone. So the so the I, I summarize the story correctly. So the AICPA is suggesting that the IRS allows alternative ways to document this to get it right.

Blake Oliver: [00:21:13] Yeah. Like we should be able to use a pay stub that shows the amount of overtime wages instead of a W-2, because the W-2s aren't going to have a box for it.

David Leary: [00:21:24] So makes sense.

Blake Oliver: [00:21:25] You know, this is the sort of like common sense legislation that we need, but here we are dealing with a government shutdown instead. Like this is the this is the stuff that Congress needs to be working on. Otherwise we are going to have a disaster in January February. So, David, um, where do we go next?

David Leary: [00:21:46] Well, this tariffs this is still government related. We still tariff related. But apparently now they're saying we might be getting a 2000 tariff dividend. It's on its way.

Blake Oliver: [00:21:55] Okay. Before you do that, let's thank our next sponsor. And that is Bill accountants. You really do it all. You don't just crunch numbers. You steer strategy, shape growth and help businesses stay strong through change. This International Accounting Day bill is celebrating you. Bill is the all in one financial operations platform built for accountants, powering them for nearly two decades. From AP and AR automation to spend and expense management bill helps firms streamline the back office. Bill has watched the evolution from spreadsheets and late nights to scalable firms filled with smart processes, steady growth and clients who rely on accountants for more than just bookkeeping. And to celebrate International Accounting Day, Bill is hosting free, insightful CPE webinars. November 11th is Practice Transformation Rethinking How You Work, and November 12th is business strategy planning for long term success. You'll earn one CPE credit for each webinar you attend. Bill is here to make the year ahead brighter, easier, and more rewarding than ever. And Bill wouldn't be Bill without accountants. You power businesses and Bill powers you. That's a reason to celebrate. Don't miss out on the free webinars this week of November 10th. Register now to do that. Head over to The Accounting Podcast. Promo bill. That's The Accounting Podcast promo forward slash b I l l. All right, David, tell me about this. Uh, what is it, $2,000? I get my I want my money.

David Leary: [00:23:31] Right. So on ABC's this week, Bessent suggested the payment. This is where it's confusing. Like Trump makes it feel like everybody's going to get $2,000 checks. But the way it's being explained is it could take the form of reduced taxes on tips over time and Social Security income or new deductions like auto loan interest. So.

Blake Oliver: [00:23:50] Wait wait wait wait wait. But they already passed the the overtime and tips. Yeah.

David Leary: [00:23:57] So they're going to try and give the $2,000 somehow using the already included policy bill.

Blake Oliver: [00:24:05] Like how.

David Leary: [00:24:07] Are.

Blake Oliver: [00:24:07] They saying is that basically saying like we're already giving you.

David Leary: [00:24:10] Like that's the way I read it. Yes. Like you're getting the 2000, because look at all these things we put in the bill.

Blake Oliver: [00:24:16] I see.

David Leary: [00:24:16] Or they're going to, like, pull a lever like, oh, we can we have the freedom to adjust auto loan interest or allow an auto loan interest deduction, which you can't do of up to $2,000. It's it's not really clear, but it's they're going to it's marketing. Right. Everybody's going to say like oh look we're all getting a tariff dividend. And then when push comes to shove when you do your taxes, you might not actually get one, but everybody's going to think they got one because there's no it's not like a stimmy check we're going to get we're not going to get our $2,000 in the bank account. So yeah, it's confusing how they plan on doing it other than using the existing bill, which is very strange.

Blake Oliver: [00:24:53] Well, my bet is it's not going to happen because I think that these tariffs are going to be ruled unconstitutional by the Supreme Court, which started hearings on the tariffs on Wednesday. The case is a toy company versus the Trump administration. It's an educational toy company near Chicago, run by Rick Waldenburg, that employs 500 workers, with about 250 plus million in annual sales. And they are going to be paying. It's a real midsized, Main Street type of business. They are going to be paying an estimated 20 to 30 million in tariffs this year, and that's up from 2.3 million. So their tariff bill has gone up more than ten times as a as a result of, uh, of the Trump administration's policy change. An example is that their bubble plush yoga Ball buddies product was hit with a $50,000 penalty when a shipment arrived six hours late because they they missed the window to get the shipment in before the new tariffs went into place. Why are they paying such incredible tariffs? Well, it's because the tariffs on China jumped to Jump to 145%. In April, the company tried to shift manufacturing from China to India. Trump then reduced China duties and raised India tariffs to 50%. And so the company just can't win. The Trump administration claims authority under the 1977 International Emergency Economic Powers Act to regulate trade and therefore to unilaterally impose tariffs without congressional approval. They cited the national trade deficit and the fentanyl crisis as emergencies.

Blake Oliver: [00:26:41] And um, so the challengers representing this toy company are saying that the Constitution vests tariff power with Congress, not the president, and that tariffs are taxes on American importers requiring congressional authorization, and that the emergency powers law doesn't specifically mention tariffs or taxes. So while the president could theoretically, under this act, stop trade completely with a country due to an emergency, he can't implement a tax in the form of a tariff on American businesses. Importing goods. And the coverage of the Supreme Court hearings seems to indicate to me that the Supreme Court is skeptical of the Trump administration's arguments. There were three hours of oral arguments, and Chief Justice John Roberts said that tariffs are an imposition of taxes on Americans, and that has always been the core power of Congress. Neil Gorsuch expressed alarm at the administration's broad interpretation. He asked, quote, what would prohibit Congress from just abdicating all responsibility to regulate foreign commerce, or, for that matter, declare war to the president, unquote, which is, I think, an argument that is, uh, you know, very powerful. If this act allows the president to now tax American companies without Congress, without an act of Congress. That's like a that's Congress delegating its powers to the president, which it is not allowed to do to that extent under the Constitution. And the point of that is to prevent us from having a king or an emperor or a dictator.

David Leary: [00:28:26] So under that act, the president could say, we're not doing any more trade with China and just turn it off. And that's okay. What's not okay is saying we're going to add tariffs and play games with the numbers and the import taxes and all that.

Blake Oliver: [00:28:38] That's right. And and it really has to be an emergency. The court has to agree that it's a true emergency. And the issue here, the question here is whether or not persistent trade deficits that have gone on for decades count as an emergency under the act, or fentanyl counts as an emergency that would qualify for shutting down trade or so there's kind of two questions here, right. The first is what is an actual emergency under this act. And then the second question is, um, well, going back to the first one, it's what is an emergency? And who gets to decide what that is? Does the president, can the president say that anything is an emergency, or will the court narrow the scope of that? Um, and then the second question is whether or not tariffs count as an appropriate response. Is that within the scope of the president's powers under this act? So, um, basically the the conservative justices, liberal justices across the board expressed a lot of skepticism in the oral arguments. If ruled unconstitutional, the decision could force more than 100 billion in refunds to American small and, well, just American businesses in general. Um, so that would really screw with the budget this year, that's for sure, because the tariffs have raised a significant amount of revenue. Um, and a ruling could come as quickly as the end of the year because the Supreme Court has accelerated the timeline of this because of the the impact. So, um, there's been a bunch of different tariffs under different acts. So this wouldn't eliminate all of them, but it would, uh, prevent the Liberation Day tariffs. Those would be.

David Leary: [00:30:29] Which were the big ones. Right. Those were the 20 to 50% ones. C did it.

Blake Oliver: [00:30:33] Yeah. This article says 10 to 50% taxes on most US imports, depending on the country with separate tariffs on Canada Mexico and China for the fentanyl trafficking. Um, so that would that would be eliminated. Um, and the the name of this doctrine that is like central to this case is the major questions doctrine. It was the same legal rule used to thwart Biden's expansion of presidential power in his administration. It requires explicit congressional authorization for sweeping economic actions. So Roberts said. Chief Justice Roberts said, quote, the justification is being used for a power to impose tariffs on any product from any country, in any amount, for any length of time. It does seem like that's major authority, unquote. So the chief justice seems to think that what the president is doing is falls under the major questions doctrine, in which case it would need congressional approval.

David Leary: [00:31:34] And you could argue that it's messing with the purse. It's messing with you're pulling the budget levers, like how much money is coming in? You're. That's not the president's job. President's job.

Blake Oliver: [00:31:45] Right. Congress. Congress has the power of the purse. We all learn this in civics class, right? That's like one of the major, major.

David Leary: [00:31:52] We learned it like crazy when Biden tried to forgive the student loans. This was beaten to our head. Who controls the purse? It was beaten into our head.

Blake Oliver: [00:32:00] Exactly, exactly. Um. All right. David. I'll let you decide where we go next. Something about agents wasting money on scams online.

David Leary: [00:32:11] Yeah, we could start with that one. So Microsoft created an experiment in a collaboration with Arizona State University there in your backyard. And they they basically gave 100 customer AI agents money, fake money to go shopping against 300 business cited agents, you know, to do things like buy dinner, you know, order a plane ticket, you know, things you would, things you would possibly want to use an AI assistant to do. And what they found out is that when they gave them fake money to spend, the AI models quickly fell for scams, fake reviews, and manipulation tactics. And they basically spent all their funds on fraudulent sellers. And so how this kind of happened, for one thing, is they freeze when there's, you know, you do a search and you get 100 products on Amazon. They would just choose the first one. They would panic. No, they wouldn't vet the other options. Go to the fifth one. Maybe that's better. They would just buy the first option, which in many cases is manipulated to be at the top of the list. So basically the speed outweighed quality 10 to 30 x, so they just went with the fastest choice, was not even close to being the highest quality choice. Um, all major models except for Anthropic's Claude Sonnet for lost money to scams including OpenAI's GPT four and Alibaba's Quinn three four. Um, the other thing they decided that agents they, uh, they should only assist, right? They they are not able to collaborate or think critically and without step by step humans holding their hands. So you might be able to have an AI agent that says, hey, go book me this plane ticket, but you probably say like, don't actually book it until I review it and let me press the buy now button. It's kind of the route on that. Yeah.

Blake Oliver: [00:34:00] And have you tried this yourself, David? Have you tried using any of these agentic, you know, browsers to do shopping? I really haven't.

David Leary: [00:34:08] No, I haven't.

Blake Oliver: [00:34:09] Had much luck with it.

David Leary: [00:34:10] I was thinking about possibly trying it, but Amazon's actually blocking it now.

Blake Oliver: [00:34:14] Right.

David Leary: [00:34:15] Amazon's not a fan of this. Well which makes sense because there's a lot of scammy stuff on Amazon. And Amazon already has a problem of that already.

Blake Oliver: [00:34:24] Yeah. And also ads don't work. And Amazon makes a ton of money from ads on ads on Amazon. The sponsored results. When you search for a product, you know, you see that the first few boxes are always sponsored. So that means that the manufacturer, the seller is paying for their results to come up first. And that's a huge part of Amazon's business.

David Leary: [00:34:43] And what happens is they can fall for psychological attacks. And we've all done this with ChatGPT. It doesn't want to give us an answer. And he'd be like, no, it's okay. Bill gates said you would give me this answer and they're like, okay. And it just gives you the answer, right? And so that happens a lot. But I was thinking about this for accounting. Right. When it comes to be we have these all everybody all these companies now have rolled out AI agents to detect your fraudulent business receipt. Like, I'm pretty sure you could just get around it and just be like, oh no, I'm allowed to spend money at X place and go over my spend limit that day. You're just going to bypass it because I think the AI agents are dumb and gullible. So we have all this AI detecting, quote unquote fraud with AI receipts. But you could just probably override it. Just manipulate it.

Blake Oliver: [00:35:32] All right. Let's talk about, um, I want to talk about NASA's private equity Task force white paper, because this is the first time that I know of that. Nasba the National Association of State Boards of Accountancy has entered the discussion about private equity in accounting, which is reshaping accounting firms, because we're expecting that like a huge chunk of the top 100 firms, uh, will have private equity investment over the next few years. So this white paper that Nasbe released is called Our Alternative Practice Structures in Private Equity Considerations and Questions for Boards of Accountancy. It was published on October 24th, and it comes from Private Equity Task Force, which was chaired by Dan Vukovich, CPA and with members representing multiple state boards. It's not a rulemaking document. It's a framework for discussion. So they're just raising questions. They're not prescribing solutions. And there are comments open until January 31st, 2026. So if you want to get this white paper, um, and you want to add your comments, go check out the Nasba website.

David Leary: [00:36:47] We'll be in our show notes. We'll put in the show notes.

Blake Oliver: [00:36:48] Put it in the show notes. Okay, great. So, um, basically, um, the questions and the issues that Nasba has identified are the following. Uh, the first is independence and professional standards. So the question is how can CPA firms maintain auditor independence when PE investors hold influence? And this came to the forefront recently with Bdo's audit of First brands, and the suggestion online that bdo's private equity investors might be getting inside information from BDO auditors. That was the unsupported allegation. Online going concern reported on it. And then BDO sent a cease and desist to going concern threatened to sue the Publication for reporting on this, for insinuating or implying that that BDO had done this.

David Leary: [00:37:49] But I don't even think the risk is yes. You don't want accountants at BDO passing information directly to the PD side of the business, right? But I think it could just happen on accident. Like, oh there's a spreadsheet. There's a file on a Microsoft drive somewhere. Somebody stumbles upon it. Look at the great information in this file. Like I don't think it's purposeful behaviors that it could be. I mean, that's really dirty. But I think it's going to be just carelessness that occurs. Like it's the opportunity is too sweet for the company not to click around and browse through drives and see if they find a document and gain information.

Blake Oliver: [00:38:26] In my mind, it doesn't even matter. It doesn't even matter whether it's accidental or intentional. It's simply that the opportunity exists. Yes. And the the the incentive exists. So, Um, the private equity group. There was a private equity group that was shorting the stock of First Brands. Bdo was the auditor. Private equity also had loaned BDO over $1 billion. So people online, on Twitter, on Reddit, in the investor community made the connection and made the allegation or insinuated or implied that there could have been information passed inappropriately could have been.

David Leary: [00:39:18] The words like audit independence. They were calling out independence and audit. Yeah.

Blake Oliver: [00:39:22] And going concern reported this BDO took great offense, sent the cease and desist and then the story kind of like got even bigger as a result. And we talked about it. And I've been thinking a lot about this, especially now that Nasba is looking into private equity. And the issue to me, the core issue, uh, to me is that auditor independence needs to not just be. In fact, it needs to also be in appearance. If there's any appearance that auditor independence has been compromised or could be compromised, then that's a problem that needs to be addressed. And I don't see how you can have private equity investment in firms that do audits and maintain the appearance of independence and objectivity because money, uh, creates an incentive, whether it's debt or it's future gains investment, when you have, uh, like a parent company, like a PE company that owns an accounting firm or owns the debt of an accounting firm, and they also have investments in firms that are being audited by that audit firm. That's a connection that to me, just inherently, uh, harms independence.

David Leary: [00:40:38] And it wasn't alone. It was a loan that was quote unquote causing financial stress to BDO enough where they had to lay off employees. So that's a whole and renegotiate the interest rate. So this is not just like oh it's a loan and the money's there. This is like creating financial stress, which is that really opens the door for opportunity.

Blake Oliver: [00:40:56] Even more so, the AICPA, their ethics committee is working on new independence guidance that should come out soon. And Nasba is asking whether states should go farther than the AICPA standards to protect the public. They asked the question in this white paper, should firms have to clearly disclose which parts of their organization are CPA owned versus P owned? And that goes to this alternative practice structure where you split off everything but the attest but the audit function into a separate non CPA firm entity. And the non CPA entity takes the private equity investment. But the CPA firm, which is now just doing audits and a test work, has the same name as the Nonnatus Firm. So BDO did this. All the big firms that have us, most of the big firms that have taken money, have done this in order to get around the independence rules. But in the eyes of the public, they don't know there's a difference. Like nobody. I'd actually be curious if you did a survey like how many, how many, uh, customers or clients are aware that there's even this structure in place. And the the non CPA entity provides management services of the attest firm. So like that's a big question is is you know, how do you disclose this. Uh I mean if you ask me, the only way to make this really clear would be if the attest firm just didn't have the same name as the non attest firm, like that's in my mind.

Blake Oliver: [00:42:33] That's the only way that you can actually make it. Like crystal clear. They shouldn't have the same website. They shouldn't have the same name. Um, it should be totally different. But then you have a problem. Where? Well, does that just, like, narrow the scope of what a CPA firm is to the point where we're almost, you know, irrelevant, like it's shrinking the CPA firm to just this one function. And as a profession, we don't want that. I think in general we want the CPA to represent audit, tax consulting uh, anything to do with the numbers. Right. Uh, finances, finances. Like, we don't want to just be about a test. So all of this, like, all these workarounds to eliminate the, the the independence issue from a legal perspective have actually ended up over the last decades, potentially shrinking what a CPA firm is. So like that, that solution though, like, could hurt. Well, it might solve the problem of the appearance issue, it it it it hurts the profession, right? Individual CPAs would be hurt by that. Because it would.

David Leary: [00:43:42] Because all that's left is the commodity part, that it's like a race to zero from a revenue standpoint. It's the piece of the business nobody wants. Everybody has to buy it. That's all it's left.

Blake Oliver: [00:43:52] And it's not that nobody wants it. It's like, you know, audit is a is a, um, important, very important part of the profession. But it's not the biggest part and it's not the only part. Yeah. And so we don't want to just be that. So you know, it's like a really challenging problem to solve because we have all these firms that have set up this, this alternative practice structure. But and we want to fix this problem with the appearance issue. But then we also don't want to. I don't know what the word is or we don't want to like, shrink what it means to be a CPA.

David Leary: [00:44:34] So going back to the stock. So Nasba created this PDF. How many pages is this? How big is this document?

Blake Oliver: [00:44:39] Uh, let's see here. We're it's about 15, 15 pages.

David Leary: [00:44:43] About 15 pages. And the purpose of this then is to provide an outline for states to go, hey, states go. You figure out this on your own. Here's some guidelines and ways to to a framework to have meetings about this at your state level.

Blake Oliver: [00:44:57] Well yeah. It's it's it's designed to get states thinking about this um, beyond just what the AICPA is doing like, and I think the issue with the AICPA is that often like the rules, the rulemaking, the the like the AICPA is heavily influenced by large firms, and they don't want anything to change because they've spent a lot of money and time setting up these alternative practice structures to get around these rules. So it's it's it's the states that may have to take the lead on this, just as with the 150 hour rule, in order to make change happen, because it's the state regulators, right, that actually have the power to do something, but they need to act together and do something similar, or then they create all these problems for firms that are operating across state lines.

David Leary: [00:45:50] So the difference is there's going to be lots of money lobbying against these changes versus 150 hour rule. They got to just make the changes, pass the laws and move on. There was nobody spending money to prevent that from happening. And as soon as the state goes on this journey, you know, outside money will be coming in to influence those legislature.

Blake Oliver: [00:46:10] So this is this is this is really it. Like, this is where we are getting to the point where private equity is now creating this challenge for the profession when it comes to our our integrity, our ethics, our objectivity. And we as a profession are going to have to decide, do we take a stand or do we allow private equity to continue to take over accounting firms? And ultimately, when they have enough influence, control the regulatory apparatus and and and really then have control? David. Like I don't know if you've talked about this on the show, but we've talked about this privately that that is your.

David Leary: [00:46:51] That's the next step. Like, like once you control the means of production, you want to control the governing bodies of the means of production. You control it. That's what he does. They they take over the whole thing, all parts of the equation. That's where the value chain is. They just they just buy all parts of the value chain. And they're going to they're going to come after these organizations or compromise them. Right. Somehow.

Blake Oliver: [00:47:14] Yeah. And and my concern is that it's just simply like, I don't know if there is a solution to the problem of private equity, of outside money, in accounting. Can you actually maintain independence in the ownership of an accounting firm and the management, when there is all this money from outside coming in? Money that is not controlled by CPAs. And like it may not be possible, but I'm glad we're asking the question.

David Leary: [00:47:53] We should do our next ad and then jump on to some other stories.

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Blake Oliver: [00:49:10] All right, so, David, um, if you'll indulge me, I want to follow up on this private equity discussion. What we and and the BDO audit of first brands because there's more news about that, more scandalous news. Um, so taking a step back, uh, I'm not sure how well I summarized it, so I want to do it one more time. I'm going to try again. Okay. So BDO was the auditor of First Brands. They signed off on First Brands financials in March showing $5.23 billion in debt. This is according to a Wall Street Journal report. Six months later, First Brands collapsed into bankruptcy, with restructuring advisers finding 11.63 billion in total obligations. So the financials showed half as much as there actually was in terms of total debt, 2 billion of investor money is simply unaccounted for. So the audit missed massive off balance sheet debt from sketchy factoring arrangements. That's where you sell invoices. Uh, like you invoice factoring, David. Right.

David Leary: [00:50:23] You you you have an invoice for $1,000. Somebody will buy it from you for 700. So you get the cash right away, and then they're going to go collect the $1,000.

Blake Oliver: [00:50:33] And then when the $1,000 comes in to pay the invoice, they get it. Yes.

David Leary: [00:50:36] But I don't even think it's that good of a deal. I think it's like much lower your pennies on the dollar. I don't think it's a great deal.

Blake Oliver: [00:50:41] So first brands was doing sketchy factoring arrangements. Right. They were selling invoices to financial institutions. They would then collect payments from customers, but they apparently they weren't passing the money along to the financial institutions that loaned it to them. They had 2.3.

David Leary: [00:50:55] Billion. So they they sell the invoice to, to to to Blake. They sell you the invoice. In the meantime, the customer paid me. So I just keep the money and then maybe you'll collect the money. But I already got money from you.

Blake Oliver: [00:51:07] Know, the way it works is like first brand still collects the money, but they're supposed to remit it when they get the invoice payment because they got paid up front through the factoring arrangement.

David Leary: [00:51:16] It was Mark alone. They really didn't sell the. They just took a loan on the invoice. Okay.

Blake Oliver: [00:51:20] So Wall Street Journal is reporting they had 2.3 billion in unpaid in unpaid balances backed by only 347 million in actual receivables. So what's that like like 7A7 times discount. They they had like seven times more unpaid balances, but they had only, you know, so over 2 billion unpaid balances that they owed to these factoring companies backed by 347 million in actual receivables. So there's something fishy going on here. Bdo says they weren't hired to audit these entities tied to most of the off balance sheet financing. But like this is this is to the point where it's like, how could you how could you miss this? Like, right. So that that's the Wall Street Journal coverage of this. And that was as of October 31st. So Halloween, that story came out. Then I see another story here in Accounting Today. The first brand's founder has been accused of looting the company. The bankruptcy lawyers filed a civil lawsuit Monday, accusing founder Patrick James of orchestrating widespread fraud to secure billions in financing and then siphoning hundreds of millions for personal use sales invoices for this factoring scheme. They were inflated by up to 50 times. So an example in this story is that a $179 invoice was inflated to $9,271. So that's how we got to this point where they were they had these obligations for the invoices that were way in excess of the actual accounts receivable. Apparently.

David Leary: [00:53:11] So I claim to that. The company provided me financing. Okay, that's $9,000 invoice, but it's really a $700 invoice. They give me for $9,000 far less. And then I have really a receivable for 700 bucks. Yeah. You can't pay that money back that way. That business model does not work.

Blake Oliver: [00:53:27] Yeah, just straight up fraud. Uh, so the allegations are that the founder, Patrick James, sold non-existent or doctored invoices to factoring firms for immediate cash. Um, apparently, the same inventory was allegedly used as collateral for multiple lenders. First brands is an auto parts retailer. I believe, um, they use special purpose vehicles for off balance sheet financing without proper records. And there are allegations of personal spending, and this is always the fun part. Okay, so, um, in 2024, the founder spent half $1 million on a celebrity chef, $3 million Dollars for a New York City townhouse. $3 million in rent for a single year. $110,000 for a six week Southampton hotel stay and six figure personal trainer bills. He also owned 17 exotic cars and at least seven properties, including homes in Malibu and the Hamptons.

David Leary: [00:54:27] Now you can argue his exotic cars could be necessary and ordinary. He is in the auto parts business. You know, they have like 17 or 18 brands that falls under this umbrella.

Blake Oliver: [00:54:38] So here's the crazy part, right? Uh, there was only $12 million left in the bank accounts at filing, which was at the end of September. And the allegation is that the founder transferred over $700 million out of the business, $700 million before this, and it wasn't even caught. The business went bankrupt.

David Leary: [00:55:03] Because this was.

Blake Oliver: [00:55:03] Over a period.

David Leary: [00:55:04] Of time. Audit after audit after audit after audit after audit. This wasn't like 700 million all at once. It was over a period of 2018 to 2025. So that's that seven eight years.

Blake Oliver: [00:55:16] Yeah. So BDO was the auditor from 2020 at least 2020 through 2025. So it looks like five years. Yeah. Um, so this is going on for a long time. Um, and at least $10 million was transferred to James's entity, Battery Park Holdings, which is like owned by James, uh, related entity there. Um, it's just it's it's wild. Like, I just wonder, like, how could you audit this company and not, like, be aware of this, right. Like the company has the company has only, you know, I mean, we don't know what it was when the audit report was signed or the audit letter was signed right when the audit was completed. But like at the bankruptcy, the company only had $12 million or something like that. So you look at like just looking at the balance sheet, right? You're looking at like, here's $12 million, here's all this debt. So money cash came in because of the debt. Where did the cash go. Right. It's like credit liability debit, cash. Now the cash is gone. So we credited cash. Where where was the what was the expense? Right. Where did this go? Where did the money go? Um, and it's a lot. So, like, this is the sort of thing that, in the mind of the public, just seems impossible. And to me, as an accountant seems like crazy. How could you audit this company and not know that something is up? And I guess I guess it's.

David Leary: [00:56:47] The argument that's not the job, right? Like that's the argument we've we've heard before. That's not the auditor's job to detect fraud in the company. Well that's what but that's what the public thinks your job is like. That's the only thing they expect you to do is this this is the number one expectation of what a CPA and audit should do is find this.

Blake Oliver: [00:57:06] So I did a little research on this. And um, I found three core weaknesses that traditional audits have that could have, you know, led to this just being missed by accident. Right. So one is overreliance on management representations. So auditors often request documentation from management itself. They don't go out and get documentation independently. So if management alters invoices, ledgers or manipulates off balance sheet entities, then auditors can be deceived because they didn't go out and independently verify this stuff.

David Leary: [00:57:44] Pause right there. That's exactly the problem. Those AI shopping cart people. If if the if the if the AI auditor, we're going to have these AI auditors. Oh they're going to check everything. They're going to be manipulated by management. They're going to say, oh no, it's okay to have this penthouse. Okay. Thank you. And they'll just move on like it's it's the same fundamental problem. The manipulation is going to be there. It doesn't matter if AI is doing it or not.

Blake Oliver: [00:58:08] So the second weakness of traditional audits relating to this, this bankruptcy or this failure is the complexity of off balance sheet and factoring arrangements. So in a factoring arrangement, the you know, the invoice value is sold to a third party receivables sold to third party. So how do you get confirmation of that. Right. You're not auditing the third party. You're auditing the company that sold it. So it's hard to follow that. Um, and often these, you know, special purpose vehicles like entities that are created to hold the debt so that the primary entity doesn't. That can be hard to find, right? It can be hard to like if you're auditing one company, how do you know that this other entity is related? How do you know the owner?

David Leary: [00:58:53] Just because it's tough cannot be like an excuse, like it's too hard. The work was too hard, so we didn't really dig in that much. Like like, no, the expectation is you do it like, this is why are you working eight hours a week? What are you working on if you're working 80 hours a week, if you're not doing the hard work?

Blake Oliver: [00:59:08] The other weakness, the final one is scope and timing limitations. So if you're doing audit sampling, you could miss fraudulent entries simply because your sampling didn't didn't hit one of those. The but I mean, that seems kind of like given the scope of this seems like hard like, how could you not find a fraudulent invoice if you were actually sampling them or. I don't know, um, but also it can be difficult if management manipulates the results after the field work is done or uses cutoff timing tricks. So they create the fake invoices or alter the fake invoices near the period end or after the field work has been done. Um, and like that, I suppose, is how I could see the company only having, you know, $12 million when they went bankrupt. But the auditors signed off at, say, the year end because the bankruptcy didn't happen until September. So in nine months, could the founder have looted the company, allegedly enough to where like now, the now the cash balance doesn't make sense.

David Leary: [01:00:16] Well, eventually catches up, right? Because you're kiting you're basically you're kiting, right? Yeah. Eventually it catches up to you.

Blake Oliver: [01:00:22] And um, boring accountant life in the chat says auditors don't have control of other entities needed to confirm or deny fraud transactions. And I think that is probably the like the, the biggest reason that this kind of stuff happens. Yes. Is that like they don't have access, the auditors do not have access to these other entities. And so figuring out what is going on when you only have a visibility into the entity or auditing is tough when stuff's off balance sheet, when it's in another entity.

David Leary: [01:00:55] So let's just say the other entity was also audited by BDO. Do you do you have to maintain independence? Or you could go to the other entities auditing team and ask them questions like like where does it like like what's the responsibility to get the truth or to remain this independent?

Blake Oliver: [01:01:18] I think the issue is that when it comes to audit, um, as a profession, we have created all these rules to protect ourselves. So if I, as the auditor, go through the checklist and I do what is required according to auditing standards, I don't have to step back and take a look at the big picture. And so we don't because what is the incentive to do that? What is the incentive to find a massive fraud, especially when you've been auditing this company for five years. You think in year five somebody figures it out and they're going to speak up. You definitely don't want to find it then, because it's just going to create a massive lawsuit against your firm like there is. There's every incentive to look the other way. There's there's no incentive to find it. It's not like we are like police investigators, you know, or that that are hired to find criminals and, you know, out, out the fraud. We are hired to do the audit and do it efficiently, quickly get it done. So the client to.

David Leary: [01:02:25] Protect the.

Blake Oliver: [01:02:26] Firm, file their file with the SEC. Right. So that is like the fundamental issue here. All right. David. Um, I gotta go. That's all the time we have for this week. Thank you. Everyone who joined us live. If you haven't, follow us on YouTube, hit that subscribe and notification button. You'll get notified when we go live, and you can comment on any of these stories or chat with us or See what we look like. And you can also earn free CPE for listening to this podcast. Download the free app at earmarks. Well, actually, you can just use it in your web browser at earmarks app, but you can also download it on the App Store. And it's free. Free to sign up, free to earn CPE every week. And if you want to support our work, become a subscriber. For the low price of $169.99 per year, get unlimited CPE for listening to podcasts. David.

David Leary: [01:03:22] The time to do it. All of you have that December 31st deadline. Start. Chop chop. Let's go.

Blake Oliver: [01:03:27] Come on. Don't be doing your CPE all at the end of the year. Don't do it between Christmas and New Year's. Um, you can find more enjoyable ways to avoid your family than CPE. All right, David, great talking with you as always. Thanks everyone for tuning in and we'll see you here next week. Bye.