Grant Thornton to Acquire CBIZ & Trump Puts Immunity Over Blanche

0:04David Leary: Nearly half of Gen Z workers say AI is making them less intelligent.

0:09Blake Oliver: Half? Half?

0:11David Leary: Yes.

0:13Blake Oliver: Coming to you weekly from the OnPay Recording Studio.

0:19David Leary: Hello, and welcome back to the Accounting Podcast, your weekly roundup of news in the profession. I'm Blake Oliver.

0:26Blake Oliver: And I'm David Leary.

0:27David Leary: And today, David, we are leading off with the big news that Grant Thornton is going to acquire CBiz, one of the largest combinations of accounting firms in history and an acquisition of the only publicly traded accounting firm in the United States. We will dig into this. Also, President Trump is choosing to put immunity from tax audits over his nomination of Todd Blanche to run the IRS. So, David, before we get into that, let's thank our sponsors.

1:07Blake Oliver: Yeah, our sponsors today, we have Cloud Account and Staffing, OnPay, Thomson Reuters, and Veltrix AI.

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2:23David Leary: Great to see you boring accountant, hazardous items, Steve Hawthorne, and can't pay attention. Great to be back with you on YouTube, LinkedIn, wherever you're watching us. don't forget subscribe to the accounting podcast on youtube find us search for the accounting podcast hit subscribe and that notification bell icon you can tune in when we go live and you can earn free continuing professional education credit whether you listen live or on the podcast feed get the free earmark app at earmark.app in your web browser or get the free earmark cpe app on the app store or google play store sign up for free earn one free cpe per week and get unlimited CPE from our library of over 1 ,800 on-demand courses for the low price of$200 per year.

3:12David Leary: All right, David, let's dig into this deal. Grant Thornton buying CBiz. What stuck out to you?

3:18Blake Oliver: So we'll cover the numbers, which I think are pretty common right there everywhere now. It's a$5 billion deal. It's going to be the largest accounting deal in over 25 years. It's going to basically make Grant Thornton jump to be the fifth biggest firm. So now we might have a big five, instead of a big four, maybe it's time to rebrand these types of things. This, if you remember, New Mountain Capital put a bunch of money in and bought a position in Grant Thornton in 2024.

3:44David Leary: It was a majority stake.

3:46Blake Oliver: A majority stake. To make this deal happen, New Mountain Capital is putting additional funds -

3:50David Leary: Wait, did you say Grant Thornton or CBiz?

3:53Blake Oliver: Grant Thornton. Okay. So in order to make this deal happen, New Mountain Capital is investing even more money into Grant Thornton to make this acquisition.

4:03David Leary: Okay, got it.

4:05Blake Oliver: And you're right. The key here is that one of these companies is public, which makes it interesting because we can see some of the numbers. And if you remember about a month ago, you made the argument that obviously the market is not valuing accounting firms publicly. So why would PE buy accounting firms? And maybe we'll see a decline in this. But this is exactly the opposite of that argument, which the PE company put more money in to buy a public accounting firm.

4:33David Leary: I guess I was wrong on this one. But, I mean, we talked about this in the past over the year on the show, and we saw C-Bus' stock price go from, you know, 55 all the way down to below 30 and just sit there in March, April, came up a little bit in May, a little bit in June. And now it's way back. it's all it's back to uh 55 dollars a share after the announcement of this acquisition

5:02Blake Oliver: and that they're going to that's the purchase price so it's it's about a 54 premium over it's rolling out a 30-day weighted average price um but what i what interestingly because this is public as soon as i saw it i was like 55 a share it's way cheaper than that right now so i went and pulled up the chart like you just had up yeah yeah what i observed in that um speaking of the stock price, that seven days before this deal was publicly announced, the stock started going up in price. And I'm starting to feel like, is this another situation of, you know, the impression of independence? You know, it gets muddy when PE and everybody else is involved.

5:39Blake Oliver: I suspect hundreds of people at both firms knew about this information. And who knows how many people at the PE firm knew that this deal was going through. I doubt it was something that was just one day of news. Like they've known for weeks, possibly months, who knows, right? But I can tell you this, if you were lucky enough to buy on July 23rd, you made a very, very nice profit in seven to 10 days. Very, very nice profit. But it's the impression again, right? Like, here we go. P is involved in some deal. And it kind of looks funky if you look at the stock price. It's interesting.

6:12David Leary: So I was wondering about this too. And I looked into it. But on July 7th, Bloomberg reported that an activist investor called Reference Equity sent the board a letter urging CBiz to stop buying back stock and pivot back to M &A.

6:28Blake Oliver: We talked about that article. I remember that. We talked about this. Yeah.

6:32David Leary: And the stock jumped 9 % on that news around July 16th. And then by the close on July 28th, the day before the deal was announced, the acquisition, CBiz was at$46.70. cents. And then on July 29th, that$55 Grant Thornton deal was announced and it popped 17 % towards$55. So what it looks like happened, and this is not to say that what you're saying didn't happen, right? That there were people on the inside who knew about this and the information got out because when deals like this happen of this size, there's like lots and lots of people who know. But the activist investor letter is a signal to markets that something could happen.

7:18David Leary: They're pressuring the board, they're pressuring CBIS to take the deal, basically, without saying it, right? And so basically, up to the announcement of the deal, about 15 % of that$55 deal price had already been priced in. So that is likely what happened, right? It's the activist investor signals to the market, something's going to happen. They buy, they buy, and the price goes up.

7:47Blake Oliver: So that seven days before, people were... the market had its instinct was to buy more. It doesn't necessarily mean anything inside went on. Okay.

7:57David Leary: But I do wonder about this deal, right? Because we'd been talking about CBiz as a potential example of how maybe the markets are not that interested in accounting firms. Accounting firms are struggling in the era of AI or the traditional business model will. Accounting firms are actually doing great. But we wonder about the traditional business model of large firms. And we saw that the stock price of CBiz was down 60%, 70%. It collapsed. It was down in the high 20s in mid-May. And it was because CBiz had acquired Markham and that integration ended up being more expensive than they projected. There was client attrition, they had revenue misses.

8:44David Leary: Q1, 2026, they dropped 9.4 % after a revenue miss there. And management was saying they're only going to grow 2 % to 5 % for 2026, which is basically just barely keeping up with inflation.

8:58Blake Oliver: Yeah.

8:59David Leary: So it's interesting, right? After all that, Grant Thornton decides, you know what? It's a buy. And they did it.

9:07Blake Oliver: And I imagine, and this is, did Grant Thornton make this buy or did the PE company, New Mountain Capital, really make this buy indirectly through their Grant Thornton acquisition channel? Because New Mountain Capital is putting the money in to make this possible for Grant Thornton to do. Right.

9:26David Leary: And so for New Mountain Capital to make its money back, what's going to have to happen is Grant Thornton is going to have to go public because now it's the fifth largest accounting firm. It can't be bought by the big four. They're too big, right? I don't think that would be allowed. I don't know. Maybe it would, but they're going to have to go public again. So that's this private equity game. Package these firms up together, make them bigger, more attractive, and then go back with an IPO. And that's what Alan Colton is saying, the private equity guru. He's predicting that many of the top 10 accounting firms, most of them will be public within, I forget his timeline, 10 years, something like that, which would be pretty amazing if that happened.

10:20Blake Oliver: Because then it's like, now the market could become the buyers and now you have this infinite pool of possible potential buyers and then you have the you know just like this head thing about spacex right if it's big enough it'll roll up into

10:34David Leary: the institutional buyers will have to buy it right so state pension funds etc will have to purchase these big huge accounting firm stocks yeah that's probably your only exit now it reminds me of the

10:46Blake Oliver: whole like hey if we can get the government like they keep escalating who can buy the crypto who you can keep exiting it to. It's like, it feels like a similar march. Like eventually they're going to try to exit accounting firms to the general citizens. Public markets. Yep. The general citizens in the same way they want to do it with get the government to buy the Bitcoin. So the general citizens are now buying the crypto.

11:09David Leary: Now there's one more thing I want to do before we move on, which is put this in perspective because it's a huge deal. And yes, Grant Thornton and CBiz combined will now be the fifth largest accounting firm globally, but they're still tiny compared to the big four. Global revenue will be about$7.5 billion. How does that compare to the big four? Well, Deloitte has$70.5 billion, PwC 56.9, EY over 53, and KPMG close to$40 billion. That's fiscal year 2025 numbers. So compare that. KPMG is number four with like$40 billion of global revenue. The fifth largest will now be Grant Thornton with$7.5 billion.

11:56David Leary: So the big four are still really, really, really big. Yeah.

12:00Blake Oliver: And all of a sudden, this$5 billion doesn't seem as much big of a deal now. Yeah.

12:04David Leary: All right. Let's move on to our next story, which is about Trump putting his immunity deal over his nomination of Blanche. But I guess before that, David, we should thank our next sponsor, and that's OnPay, and I'll let you take that one.

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13:21David Leary: President Donald Trump really, really wants to avoid the kinds of criminal prosecutions that he faced the last time he left office. And that has become an impediment to his pick for attorney general. And I think I misspoke earlier. I said Todd Blanche was being nominated for IRS. No, it's attorney general. This was in accounting today. I spotted this there. He said on Thursday, President Trump said that he may withdraw Todd Blanche's nomination rather than accept written limits on that controversial IRS settlement covering investigations into his and his family and his organization's past business dealings.

14:03Blake Oliver: Because two senators are saying they're going to kill his nomination if he does not put it in writing that he needs this to go away.

14:09David Leary: John Cornyn and Tom Tillis, they want the immunity limited to IRS enforcement and exclude other agencies such as the Justice Department, and their opposition postponed the Judiciary Committee vote. And without both senators, Blanche probably can't advance out of the committee. Trump has suggested that he's going to wait until Cornyn and Tillis leave the Senate in January because Tillis is retiring and Cornyn lost his main primary to Trump's pick, Ken Paxton. but that means that Blanche may not win the confirmation until the next Congress, especially if Democrats take control of the Senate. And looking at Trump's approval ratings, not that approval ratings necessarily mean that you're going to win or lose in the general elections, but it doesn't look great.

15:00David Leary: So if Democrats take control of the Senate, he definitely won't get his nominee through.

15:05Blake Oliver: I was thinking about this. Maybe they could do this. I could almost agree to this if all the families' tax returns are made public every year. The IRS won't audit them, but you're just going to make them public and just let all of us see it. We won't audit you as the citizens of this country and our government, but we just want to see them. And then they can just be audited in the public opinion, right? That would be the way to do it.

15:31David Leary: You know, hey, that's one way to do it. That's one idea, David. I like your out-of-the-box thinking here.

15:36Blake Oliver: Well, I think it's like at the end of the day, it's pretty clear. Everybody has these theories that they're making a lot of money by being in the presidency, the Trump family. They're making tons of money from this. And yes, maybe there's a chance to get audited because something's funky. Who knows? Right. But just make it all public. And then there'll be no IRS audit. Just the public will be able to form, have better informed opinions of what's happening in the Trump White House and the presidency and his family.

16:07David Leary: Another interesting fact from this confirmation hearings around Todd Blanche, Blanche admitted that he did not know who wrote the sweeping immunity language he signed and initially saw no need to document changes in writing, although he later reversed that position. So there you have it.

16:27Blake Oliver: Are we going to find out AI wrote it eventually?

16:30David Leary: AI is writing everything these days, David. Yeah. That's right. Okay. Let's thank our, let's see, is it time to thank another sponsor? Not yet. So let's go ahead and talk about this hack, this alleged hack of EY because right, EY has not acknowledged that this happened, but there's a group saying that they hacked EY. Yeah.

16:53Blake Oliver: So a notorious hacking group called Shiny Hunters has publicly claimed responsibility for breaching EY systems is threatening to leak stolen client data unless the firm pays by July 31st. Now we're recording this August 3rd. And from what I can tell, no activity has happened. So that tells us there's no evidence that besides their ultimatum that they've released this data publicly. There's no evidence that EY has paid or responded to their request. So we really don't know what's happening. Maybe this got handled. Maybe EY heard an assassin. I don't know. For whatever reason, nothing has actually occurred with this considering we've now passed the deadline.

17:35Blake Oliver: But if it's true, I mean, this is massive because they say they accessed EY's JIRA, which is your support tickets and GitHub, so code. So if this would be EY's probably internal code, they're working on internal things. And if they're doing work for clients, I imagine that's accessible now too. So that means these hackers, if they can get into GitHub and and see code, that means they can hack into other people's systems too.

17:58David Leary: Well, and they're saying they got into Azure, which is - Azure, well, the hosting system, yeah. Yeah.

18:03Blake Oliver: And passwords. And then, so the sensitive data, obviously, what do accountants have? So security numbers, credit card details, tax filing data. Like this hack, if it's true and they actually have this data, they don't even have to release it publicly. They could just put it on the black market and it's gonna be worth tons because it's gonna open the door to hack a bunch of Fortune 500 companies that they audit, et cetera. It's not good.

18:25David Leary: Now, EY has not confirmed that this happened, so this is just the word of the hacking group online, but they do have a history. Through 2025 and into 2026, Shiny Hunters ran a massive campaign against Salesforce customers, reportedly compromising over 1 ,000 organizations and claiming 1.5 billion stolen records.

18:48Blake Oliver: And they also, specifically the Qantas Airlines, Jaguar, Land Rover, SoundCloud. So they've hit some big brands as well.

18:56David Leary: Going back to Trump, Donald Trump has appealed the ruling against his IRS audit immunity deal. The president's lawyers filed a notice of appeal in federal court on July 23rd, challenging U.S. District Judge Kathleen Williams' July ruling against the settlement. As we reported on the show previously, the underlying lawsuit was filed in January over the alleged unauthorized leak of his tax information to the press. And then he settled with the IRS to resolve the$10 billion lawsuit, and that would give him that immunity against himself, his family, and his business interests from audits or other federal probes involving past filings.

19:42David Leary: and in her 56-page decision, Williams barred Trump and his administration from citing the settlement in future regulatory or judicial proceedings, finding it had no viable basis in law or fact. So the saga continues of the Trump immunity deal.

19:59Blake Oliver: Do you want to do an ad and then I have two pieces of zero news? Yes.

20:03David Leary: Let's thank our next sponsor, and that is Thomson Reuters. If your tax workflow still feels like a grind every busy season, you're not alone. We hear from firm owners every week who are buried under disconnected systems, manual data entry and staff stretched way beyond their limits. But it doesn't have to be that way. Thomson Reuters built the tax automation suite to solve exactly this headache. It connects SafeSend, SurePrep and UltraTax CS into a single ecosystem that covers every step with true end-to-end automation from gathering a client's documents to final delivery. We're talking up to 65 % fewer clicks per return, AI-powered data extraction that saves 90 minutes per return, a 58 % increase in capacity with current headcount, and a 55 % improvement in profitability because those time savings go straight to your bottom line.

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21:32David Leary: It helps them. It helps us. We appreciate you. You know what the hardest job to fill in accounting is, David? It is the controller job. The most accounting of accounting jobs, if you ask me. And I spotted this on controllercouncil.org. Controllers and assistant controllers remain the hardest finance roles to recruit. That's according to the Corporate Finance and Accounting Talent Study 2026. They, the controllers, were named by 44 % of respondents ahead of bookkeepers, accountants, and financial reporting professionals. The article said that controllers have held the top spot for four consecutive years.

22:21David Leary: Employers are struggling most with roles requiring institutional knowledge, technical accounting, leadership, business judgment, technology fluency, and the ability to influence executive decisions.

22:31Blake Oliver: What do we think the cause of this? Is it because people with that skill set can actually get better jobs in accounting? Or is it a lack of the market doesn't have the skill set? Does the market just not want to do those jobs?

22:43David Leary: It's the talent shortage. It's got to be, right? Controllers are mid-career or even more experienced senior level folks who have been doing accounting for 10 years at least in a lot of cases. and it's really hard to find people with that level of knowledge and expertise who also want to stay in accounting because if you have accounting knowledge and you're good at it, there's lots of other things you can be doing. So it's great if you can get to that level, you know, that's where you want to be. Let's talk about salaries too. I have a story here about salaries. Compensation, if I can find it. So pay.

23:31David Leary: This was in Accounting Today. Pay margin from associate to senior level flatlines. So normally when you get promoted from associate to senior, you get a pretty good pay bump, but it's not happening anymore. Accounting Today is reporting that a new distinct salary data survey shows the pay margin between associates and seniors in North America is flattening. So for example, in New York, associate pay averaged$105 ,000 and senior pay just$108 ,000. That's only 3 % more. In Ontario, the move from associate to senior went from$59K to$60K, let's round up$62K, just 4 % more. The bigger compensation jump is happening at the manager level, where salaries tend to rise by$20 ,000 to$40 ,000.

24:23David Leary: The highest manager averages in the data set were Connecticut at$147 ,000, Virginia at$140 ,000, and New York at$139 ,000.

24:36Blake Oliver: Do you happen to know or did it have any history on what was the difference historically speaking?

24:41David Leary: I don't have that in front of me, but I feel like when I was back in public, it was more. Like not just a few thousand dollars, but closer to that.

24:52Blake Oliver: It feels – yeah. Usually when you get that senior title in a company, you make that jump. It's significant.

24:59David Leary: I think it's because the associate salaries had to rise a lot. Like the very entry-level people, the firms had to raise the salaries to attract them into the firms in the first place. But then they didn't bump the senior level.

25:14Blake Oliver: Yeah, the people in the middle are getting lost in this. So partners are getting higher profits. The entry-level staff is getting a little higher salaries, but the people in the middle are the ones taking the cut on this.

25:25David Leary: And so it's the manager level. That's where you want to be. And that ties back to what we just talked about with controllers being in high demand. Managers, controllers are in really high demand. So if you can get to that level, you get the pay bump. And we also have two factors that are pushing down senior salaries. And that is offshoring and artificial intelligence. So this is going to create an even bigger problem, I think, at the manager level in accounting. Because who's going to wait around to get to manager to get the pay bump? Maybe people will just be leaving, right? And then we won't have enough managers.

26:03David Leary: The pay and manager level will continue to have to increase to keep people who know what they're doing.

26:08Blake Oliver: The silly thing is that next tier down, all those people are going to be managing AI bots. So now they're managers, but they're never getting the bump in pay. They're actually doing management work.

26:21David Leary: Some more job market news. This was in CFO.com. Dan Nepau is reporting that corporate finance accounting is in high demand. A third of companies are looking to increase their finance and accounting hires. It's actually 38 % of finance leaders plan to increase hiring this year. And that's up from 24 % last year. So 24 % to 38 % of finance leaders are going to increase their hiring. Only 4 % plan to decrease. Compensation is also rising in corporate. Average salary increases are 6.7 % for executives, 6.2 % for directors, and 5.7 % for clerical workers compared with 2025. 61 % of the respondents reported a corporate finance and accounting talent shortage.

27:13David Leary: That's up from 46 % last year. Those reporting significant shortages rose from 11 % to 15%. So that's also causing a problem in public. Your future managers are leaving for corporate because they can get paid better there.

27:32Blake Oliver: There's demand, right? Everybody wants to hire. They were hiring bodies. So in theory, the last 18 months, all this AI was going to reduce the amount of accountants you need in your controller roles in the controller department, internal accounting department at your firm, with how many accountants you need to do cash stuff with your clients, tax data. So this is the exact opposite. Like AI is not taking the jobs away, right? Like if they're trying to hire. So then I'm wondering, like, what is AI doing for people right now still in accounting? Is it actually reducing work? Yes or no?

28:05David Leary: I don't think it's reducing. Well, it depends. It depends who you ask. Yes, that's true. So I actually have answers for you, David, to those questions, or at least some data that might help you make a decision. Here's another CFO.com story. The headline is, AI's top value for finance now lies in improving judgment, not efficiency. David McCann, reporting for CFO.com, covered a recent KPMG survey of over 1 ,000 senior finance leaders across 20 countries at organizations with at least a quarter million in revenue. So these are not small businesses in a bunch of different countries, over 1 ,000 senior and finance leaders surveyed.

28:49David Leary: And the central finding is that AI's biggest finance gains are showing up less in classic efficiency metrics, meaning we're not going faster. It's more in decision-making quality, decision speed, and forecasting accuracy. Over the past 12 months, 70 % of the respondents said that AI moderately or significantly improved decision-making quality. 71 % said it improved decision speed and 64 % said it improved forecasting accuracy.

29:22Blake Oliver: That's huge because now at bigger companies, when people are like, why do I have this accounting department? Now, if they're getting better data from the accounting department and able to make better decisions, you're going to invest in that accounting department still. So this is actually really good news across the board, I would say.

29:39David Leary: It's the Claude effect. Claude in Excel. Claude for finance. It has changed every way that I do accounting and finance. I mean, it's changed my work completely. But I feel like when it comes to doing that really heavy analysis work and putting together those spreadsheets and -

29:59Blake Oliver: The advisory, quote unquote. Yeah.

30:01David Leary: Now, you can't let it go alone, but in terms of like automating all the work that has to get done to make a forecast, it's incredible. It's just unbelievable. So this totally makes sense. So this is interesting from an accounting perspective because a lot of the coverage has been about automating the tedious work, automating the manual work. And yes, you can do that. You can increase your efficiency. But the real benefit, the real gain that people are seeing is helping more experienced people, manager level, executive level people make better decisions. Okay, here's a story about how AI is not helping the younger generation.

30:51Okay.

30:53David Leary: Nearly half of Gen Z workers say AI is making them less intelligent. I spotted this in CPA Practice Advisor. Half?

31:02Blake Oliver: Half?

31:03David Leary: Yes. So, a company called GoTo conducted a survey with workplace intelligence. and the survey or the report is called the pulse of work in 2026 opportunity risk and responsibility in an AI driven workplace it's a survey of 2500 global employees and IT leaders and 39 % of workers are saying that over reliance on AI is eroding their abilities and making lesson making them less intelligent. So it's eroding their abilities, making them less intelligent, 39 % of workers. Among Gen Z, it's 46%. They say that relying too much on AI is making them dumber. 50 % of employees, not just Gen Z, but in general, 50 % of employees say that they depend too much on AI, and 30 % say they can't function without it.

32:01David Leary: This makes sense.

32:03Blake Oliver: Yeah, because if you deliver, if you're a junior employee and you deliver work results that are above average, the pressure of you to do the same thing again and again and again, over and over again, every time you have a deliverable, if you use AI to do the first deliverable, you're going to have to use it for the rest of them to either deliver the depth of the knowledge or the speed that's being requested for that deliverable. So yeah, I could see where the dependency, you have to use it more and more or else you can't keep hitting the bar.

32:34David Leary: Well, and the problem if you are young and learning and using AI is that if you just use AI to do something, it's like getting somebody else to do your homework.

32:47Blake Oliver: You're not getting the struggle.

32:49David Leary: You have to work your brain like a muscle in order to learn how to do these things. And if you never have to use your brain, you won't develop that skill. And so, yeah, it will make you dumber. Because then you're using AI to do the thing. You're not doing the thing yourself. You're not learning. And then you have to somehow evaluate the output, but you've never done the thing. I mean, to me, this is exactly like junior auditors who have never done accounting, auditing these big companies and expecting them to actually be able to like do anything valuable if you've never done the work how do you evaluate the work going back to your music career is a

33:34Blake Oliver: playing the cello but if i had a robot that just went under my arms and moved my hands and fingers around i'm not actually learning how to do this because i'm not doing the struggle on the ground i'm not creating those brain neurons and it's kind of the same thing if you're not doing the work and you're not making mistakes and feeling the pain, you're never going to create those brain neurons. Yeah.

33:53David Leary: Writing. Great example. If, if, if, if you don't actually have to sit there and put the words on the paper one after another on your own, your brain doesn't form the connections that allow you to then be a writer. You have to actually do it. You just, if you just have AI doing it for you, you're never going to learn. So, man, I feel like education is just, it's so interesting because AI is so powerful for learning things, but it also can take away the struggle. And without the struggle, how do you learn? Yeah. All right, David, where do you want to go from here?

34:32Blake Oliver: I have two zero stories we'll jump on. Okay, let's do it. So, zero unlocked an achievement this week. Zero is the new QuickBooks. All right. And now here's how. So Zero announced they are raising the prices on U.S. subscription plans starting October 1st, 2026. And it's necessary to fund ongoing product innovation enhancements. Now it's effective October 1st, but what caught my eye is there's a LinkedIn thread about this and it had this dramatic like fire, you know, It wasn't a dumpster fire, but it was like a bunch of things on fire, like they're burning their subscribers basically. And then it had 80 plus comments and it reminds me of all the threads every time QuickBooks raises the price.

35:17Blake Oliver: I'll just read two of these comments that kind of made sense. I think now it's starting to make people consider changing. There are several good and upcoming options that people have started asking for integrations as they just are sick of the price changes. With a somehow reduced service, it would have been the last thing I would have done based on what's happening on the ground. Another person says prompt your favorite Codi agent, build a simple MVP accounting app that compiles New Zealand tax law enabling invoices, bills, expenses, accounting for a limited company together with bank reconciliation using open APIs, GST and income tax calculations and payments.

35:50Blake Oliver: It's too easy now, right? So there's just on and on. This has all the hallmarks of a company trying to play like an American company without the backing, still not a major player. Difficult to be in finance in the States as a non-American company. All they can do is point to lots of new features. Is there an alternative? It just seems to be over and over again. Like it feels like the arguments that people make about QuickBooks every time they raise the price of QuickBooks. But my gut is they have a moat and I don't think anybody's gonna, nobody's gonna leave. It's all, I think it's gonna be all talk.

36:25Blake Oliver: And that's what I mean. Like, congratulations, Zero. You are now the new QuickBooks. Everybody's gonna complain, I'm gonna leave Xero, I'm switching, and nobody's gonna do it, right? They have the ability to raise the price. It's very, very tight. And another thing that is, so we think about the moat, right? We've talked about like, how do QuickBooks and Xero have moats against Claude or somebody just building the stuff? So Xero kind of addressed that this week. So Xero announced that they are gonna have a built-in Lovable connector. Are you familiar with what Lovable is, Blake?

36:54David Leary: Lovable lets you build web apps without code, right?

36:58Blake Oliver: It's a vibe coding tool that basically, you can vibe code with like Claude or one of the AI models, but then you got to like deploy the code, spin up a server. There's a lot of hard work there. So think about it being a self-contained environment for you to write the code, host it, connect it to everything. So Xero is going to be a built-in integration or data source for Lovable. So again, this is zero doubling down on this concept of the citizen developer, let accountants, let clients just build as many things as you can. But if you think about it, if you have thousands and thousands of custom applications integrating to your platform, the odds of somebody building your platform, it's almost like a distraction, right?

37:40Blake Oliver: Build this software instead that connects to us instead of trying to build us. And at the end of the day, it's pretty straightforward. If you don't make your data accessible, then they'll try to replace your app in GL. And I kind of think and I predict that you're going to see you remember QuickBooks and zero two years ago shifted to charge a bunch of money on the API's because they need to slow down some of these API companies that were just stuck in too much data. I wouldn't be surprised if the pendulum swings back a little bit and makes the API calls free for these products like levelable to encourage that citizen developer to build, because that's the moat, right?

38:17Blake Oliver: Tens of thousands of apps, custom apps connected to your GL, people aren't going to switch if you build that custom app.

38:24David Leary: What would you build with Lovable and Xero?

38:28Blake Oliver: Good question. I'm going to jump into another article that has some specifics about this. And then it also makes me think, we were at QuickBooks Connect or Intuit Connect last year. I was like, oh, Intuit should offer vibe coding, right? people should be able to vibe code their apps with the Intuit agent. And we're far from that. Maybe that's never happening. But really now, because of this with Xero, Intuit should buy Replit. Like, so every accountant just gets this amazing, you just create custom solutions for clients. You're never going to leave. Once you build a custom solution, that client's not going to leave you, and they're not going to leave the platform that it's in.

39:02Blake Oliver: Okay, hold on.

39:03David Leary: Before you go on, David, I want to thank our final sponsor this episode, and that is Veltrix. How much of your week is spent pulling reports, cleaning files, and explaining numbers clients still don't really understand. That's exactly where Veltrix AI helps. Veltrix is a finance AI co-pilot and collaborative workspace for accountants, advisors, and clients. Each client gets one private workspace where QuickBooks, Xero, and a bunch of other sources, messy PDFs and spreadsheets can safely sit together. You ask a question and Veltrix gives a clear answer with the actual reports and sources behind it.

39:37David Leary: So you, your team, and the client can work from the same context without exporting data just to double check it. And it's read-only, so it never changes the books. Veltrix does a first pass, flagging duplicate charges, unusual entries, and slow paying customers before you go looking. Firms also get onboarding, AI education, and direct access to the team behind it. If you want a safer way to bring AI into client advisory work and get a free month, use the code FREEMONTH26. That's FREEMONTH26 for a free month of Veltrix. Go check out Veltrix at accountingpodcast.promo.com. That's accountingpodcast.promo.com forward slash V-E-L-T-R-I-X.

40:27David Leary: And that code is FREEMONTH26, all caps. Again, FREEMONTH26, all caps. All right, David, before I so rudely interrupted you, what were you going to say?

40:38Blake Oliver: So you asked me what I would build. So instead of saying what I would build, I'm going to give an example of what somebody did build. So you know I talk about the Saster blog a lot, right? Because they kind of talk about how they run their company and the things they do. Well, they had a blog post recently about how they've moved. They used to have 30 AI agents at their company. And they've gotten rid of 10 and came down to 20 API agents. And because of this, they've out there, because 30 was too much to manage, right? So now they'd be able to 4X their output because they have this focused 20 AI agents just cranking.

41:11Blake Oliver: And it's easier to supervise them. But what's interesting about this post, he gets into what they build, right? So they have agents, for example, they have a, they call it their AI COO. And it handles marketing, finance, rev ops, collections end-to-end, reading contracts, creating invoices in bill.com, sending AP contracts, even calculating commissions all automatically. And this is the one that last week we talked about. The agent even recommended to get rid of Marketo. We talked about this last week. Well, he goes on to talk about specifically about we didn't vibe coat our own infrastructure.

41:49This is all about, he argues that the story that AI is going to replace all your software

41:55Blake Oliver: is wrong. We didn't rebuild build.com. We did not rebuild PandaDoc. We didn't touch QuickBooks. I don't want to build e-signature and I don't want to maintain it. We hooked existing infrastructure to the agent. The gain from using these tools we already pay for more aggressively because an agent can now use them so it's not i'm going to get rid of the software because of ai i'm going to use those tools even more aggressively because the ai is super efficient with this and it's kind of changing their mindset on the buy versus build framework you know uh you're going to still build in-house when you need the data and the solution doesn't exist but buying off the shelf and as long as it's connected through ai in the m mcp right yeah the mcp you can just build these bots and you're not going to get rid of any of your software possibly so the sas apocalypse could they and this is not an account this is like somebody who's like hey we're running our business and this is the decision we made the decision wasn't i'm going to vibe code the gl i'm going to vibe code quick bill.com i'm going to make my bots use these tools even more aggressively yeah I agree with you.

43:00David Leary: Why would you focus your energy on reducing your software cost when you can save so much money reducing your labor cost, which in most businesses is by far the bigger cost? It's the people that are running these systems. So don't try to eliminate these systems that you're already using or that you can buy that work reliably, that are supported, that are known, such as your GL or your marketing software. You use AI to automate the flow of data between them and save money on your labor.

43:39Blake Oliver: And I get it because you look at your P &L, you're like, gosh, we're spending so much on software. Then you're like, we don't even use some of this stuff to its full potential. This is where you can use AI to maximize your software spend. Because right now, you're not officially using what you're spending on software.

43:53David Leary: Or better yet, right? Not just cut labor costs, but actually increase the value of what you build for customers, which is where you really make the profits. It's top line revenue. If you can use AI to increase top line revenue, you don't need to worry about cutting your labor costs or your software costs, right? So that's where the focus is. Number one should be increase revenue with new services, better services. Number two is reduce your labor costs, like avoid hiring as you grow. And number three is then, only then, cut your software spend. And tokens cost is actually the least concern. Because you look at the cost of the tokens when it comes to all this stuff, it's like single digit percentages.

44:42Blake Oliver: very small and this is where i still think there's an opportunity for accountants here and zero is obviously leaning into this right if if this is just a business with no real i mean they're they're running their business it's not like the accountant or controllers doing they're building this themselves there's no reason half of your cast clients don't need the same solutions in their own business like this is an opportunity for firms to help vibe code custom solutions for clients. And now if your clients are on Xero, you can do this as easy as possible now. Everybody this weekend should go start learning Lovable and Replit and just make silly apps.

45:20Blake Oliver: Just start making silly apps and just see where it takes you because Xero's leaning into this. And this is where I honestly think it's the future. There's no doubt Intuit's going to have to play this game too.

45:29David Leary: I've got some follow-up on tariffs. Amazon disclosed approximately 600 million in tariff refunds last quarter during its Thursday earnings call alongside a 20 % year-over-year revenue increase that beat Wall Street's expectations. This is the largest, well, among the largest publicly disclosed tariff refunds since the U.S. Supreme Court struck down President Donald Trump's Liberation Day tariffs in February. They ruled that he could not impose them under the rarely invoked law that he used. I think, was that the IEPA tariffs? I can't remember which law it is at this point.

46:09Blake Oliver: He's tried them all.

46:11David Leary: He didn't get congressional approval for that. According to the court documents, U.S. businesses paid around$166 billion in related duties. The Customs and Border Protection opened its reimbursement portal in April, and Amazon, as it said, got$600 million in tariff refunds last quarter. The CFO, Brian Olsavsky, yes, he said the refund is smaller than might be expected because only businesses that directly paid tariffs qualify. And most products on Amazon come from third-party sellers who handle their own imports and duties. So these refunds were only for the products that Amazon imported itself.

46:57David Leary: And Amazon had reduced its exposure to tariffs by buying goods in bulk before the tariffs took effect. And Amazon also absorbed the remaining tariff costs rather than passing them on to shoppers, according to the CFO. But they did impose import charges in a limited number of cases. Those affected customers will be proactively contacted and automatically refund. And Amazon said the remaining refunds will be used to continue, quote, continue to invest in low prices for customers, unquote, without specifying exactly how much will be returned directly or how those investments will be measured.

47:34Blake Oliver: So is Amazon going to issue checks or are they just going to credit your Amazon account? Because I think this is genius. Amazon gets to come out, look at this great thing we're doing, right? We're giving you this money back. And if they just give you, if everybody gets 60, 70, $120, whatever it is in their Amazon gift balance, gift card balance, they're just going to spend more on Amazon. Amazon cannot lose from this. It's like a marketing gift from the heavens. It's brilliant.

48:03David Leary: And what,$600 million in tariffs is probably nothing to Amazon. Change.

48:10Blake Oliver: Well, that$600 million, almost none of it's going to leave Amazon. It's just going to stay in the circle. Right. They're going to credit your account and you're going to spend

48:16David Leary: it on Amazon products. Exactly. Brilliant.

48:19Blake Oliver: You're going to buy more Amazon products. Yeah.

48:20David Leary: I've got follow-up on the New York City P2T tax. New York City has pushed the deadline until September 18th. It was supposed to be August 21st. They pushed it four weeks to September 18th. This is that tax on second homes, luxury second homes that New York expects to generate$500 million a year from. The extension applies to homeowners who received a Department of Finance letter warning that their property may be subject to the new Pied-a-Terre tax. Owners can use the additional time to prove the property is a primary residence, establish another reason it should not be taxed, or seek assistance and answers from the Department of Finance before applying.

49:09David Leary: This tax targets condominiums and co-ops valued at$1 million or more and one to three family homes valued above$5 million when they are not the primary residence. And as we've discussed on the show, the challenge, of course, is then establishing what exactly is a primary residence and proving it.

49:28Blake Oliver: So is this an attack on Trump? Because Trump obviously has a second residence in New York City now, but his primary residence is the White House. That would be hard to argue that it's not his primary residence.

49:39David Leary: Well, yeah, I wonder if he's going to get caught up in this too. There's another wrinkle to this, which is that New York City published the names, addresses, and property values in a supplemental property role that identifies thousands of owners whose homes may face the proposed tax. and it contains hundreds of Staten Island properties, including residents who say that they do not own second homes and should not qualify. And they are objecting that the city disclose their names, addresses, and estimated property values before completing their eligibility review, effectively shifting the burden onto homeowners to prove a property is their primary residence.

50:30David Leary: For example, Yesenia and Brian Thompson, a retired nurse and retired NYPD officer, respectively, said they have no second residence. Brian said he arrested more than 600 people during a 20-year police career and fears former offenders could use the list to locate his family. Two others who were on the list warned that pairing identities and addresses with estimated home values could help scammers identify and target vulnerable residents. Staten Island Borough President Vito Fasella, who is also listed, called for the role to be withdrawn so ineligible owners do not have to jump through hoops. He compared the rollout to Havana and communism, saying homeowners had become targets and the American dream had become an American nightmare.

51:18Blake Oliver: And I think, you know, LeBron James is now going to go play for the Philadelphia 76ers. And, you know, in that tri-state area, it's very probably convenient to still live in New York City. And I thought I saw, like, he got called out, like, oh, you're going to have to pay taxes here because this is not going to be your primary home. But I feel like, you know, you see things fly by sometimes, but LeBron James.

51:43David Leary: Well, you look that up, David. I'm going to cover one more story that's been in my queue.

51:46Blake Oliver: All right.

51:47David Leary: And this is a big one. Well, maybe the fine isn't, but it's about the big four. PwC in the UK faces a$4.4 million fine after regulators there found serious failures of professional skepticism and audit evidence in two audits. The UK Financial Reporting Council sanctioned PwC over its audits of British aerospace and defense contractor, Babcock International Group for fiscal years 2020 and 2019. The engagement partner, John Waters, admitted serious and numerous breaches involving cash pooling, financial arrangements for an overseas contract, goodwill impairment, and other matters. The regulator said that PwC failed to exercise adequate professional skepticism and obtained sufficient appropriate audit evidence.

52:41David Leary: What did the auditors miss? Babcock, the client, presented cash balances and overdrafts net rather than gross, but PwC did not identify the treatment or test whether the offsetting complied with the relevant accounting standard. The financial statements also contained no disclosures about the cash pooling arrangements. Many of those breaches occurred in Babcock's aviation division, and it may have gone unnoticed because it was described as the company's smallest division. The FRC said the breaches were not dishonest, deliberate, or reckless, and were not committed for financial benefit. The engagement partner, Waters, had joined the 2019 audit at short notice after work had begun.

53:23David Leary: He got no handover and then faced the added difficulty of COVID-19 during the 2020 audit. But even so, the FRC Enforcement Executive, Penrose Foss, said the firm and partner should have addressed those challenges and completed work meeting applicable standards. And PwC and Waters cooperated with the investigators, which helped to reduce their penalty from 7.4 million initially to 4.4 million. PwC apologized that parts of the audits were not of the expected standard and said that audit quality and continuous improvement remain priorities and PwC no longer audits Babcock. All right. So I could talk about the LeBron James thing.

54:09Blake Oliver: So what prompted this, LeBron James said he's going to live in New York City. And obviously, he probably has houses all over the country. So he's probably, he's part of this loophole. They want to catch people to the hat. So, and it's not really, there's not a full tie that this was definitely his motivation because of this tax, but he's going to commute by helicopter every day to Philadelphia from his residence in New York. Like it's pretty clear there's enough money involved where he's willing to take a$4 ,000 daily airplane flight than pay this second housing tax in New York City. I like how you connect

54:43David Leary: the dots there, David.

54:44Blake Oliver: Yeah. Well, no, a politician called him out and used that. What's the term you call? What's the...

54:49David Leary: P to terror.

54:50Blake Oliver: Yeah. Like he got called out by the governor in New York.

54:53David Leary: Wow.

54:54Blake Oliver: For this. So like he's going to be in this fight. And then you said if Trump's going to get involved, this is going to be a nationwide kind of crazy fight we're going to see. It's going to get a lot of attention.

55:03David Leary: Thanks everyone who joined us live. That's all the time we have for this week. Great to see you. Mega, Tazmom, and Tino, and Samerta, and everyone else who joined can't pay attention. Great to see you all. We have someone from Cape Town here, Gene. Yeah, Gene, good evening from Cape Town, love your show. Thanks for watching us from around the world. Great to have you with us. You can earn free continuing professional education credit for this episode and our back catalog of now 499 episodes. Although I don't know if all of them are on the app for CPE, but hey, that's a lot.

55:44Blake Oliver: Some get old, some get old. Oh yeah, we retire some of them,

55:47David Leary: right? So go to earmark.app in your web browser or get the free earmark app on the app store, sign up for free, earn one free CPE per week, and support us by subscribing for the low price of$200 a year for unlimited on-demand NASBA CPE for listening to podcasts. Go reclaim 40 hours a week of time that you're not sitting at your desk where you can be learning on the go anytime, anywhere. David, always a pleasure.

56:14Blake Oliver: And next week, before you sign off, next week is our 500th episode, believe it or not.

56:17David Leary: Wow.

56:17Blake Oliver: So we're going to live stream. So all you people that are attending this live stream, bring a friend. I want it to be like a big party. We're going to have some special guests on the episode. We're going to reflect on 500 episodes. I actually found an article I pushed for next week that I had something I predicted. Maybe it's going to happen finally. It's happening now, three, four years later after I predicted it. So it'll be a fun look back show a little bit like that episode of Seinfeld where they looked at all the old episodes.

56:43David Leary: And that's going to be Friday the 7th, and we'll get going, I guess, shortly after, what, 11 a.m. Pacific? So tune in. I'll look at the calendar. We're going to start.

56:54Blake Oliver: I'm going to push it out. I think you're going to send an email reminder out, calendar events. We're going to really start pushing this out this week.

56:59David Leary: I guess we should just say we're going to start at noon. Is that the plan? Let's start at noon. Noon Pacific.

57:07Blake Oliver: It's locked in now. We have no choice.

57:08David Leary: It's the 500th episode of the Accounting Podcast. Hope to see you all there. Thanks for tuning in this week. See you on Friday. Bye, everyone.

57:43Blake Oliver: for November 5th through the 7th, 2026, and buy your ticket now before they sell out. Head over to accountingpodcast.promo slash reframe2026. That is accountingpodcast.promo forward slash R-E-F-R-A-M-E 2026.

58:03Blake Oliver: Are you an accountant with strong opinions on bill pay, spend management, or AP workflows? Flowglad is looking to speak with professionals who help clients improve cashflow, maximize card rebates and reduce manual work around payables and spend. They'll pay your hourly rate for a short research call to learn how you work and where current tools fall short for you and your clients. Reach out to them at founders at flowglad.com or use the scheduling link in the show notes.

58:31Blake Oliver: Want to get the word out about your newsletter, webinar, party, Facebook group, podcast, ebook, job posting, or that fancy Excel macro you just created? why not let the listeners of the Cloud Accounting Podcast know by running a classified ad. Hit the show notes for the link to get more info.