Loading summary
Transcript83 lines
- [00:01]
A
Welcome to the AICPA Town Hall Series, your resource for the latest news and updates on pressing issues facing the accounting profession.
- [00:10]
B
Good afternoon and welcome to this Thursday, November 20th edition of the AICPA Town Hall. I'm Michael Cerami and it is great to be here with you today. And I'm really excited to be joined in studio by Emily Remington. Welcome, Emily.
- [00:26]
C
Glad to be here.
- [00:27]
B
Thanks, Michael, nice to see you. I told Emily I'm not used to having guests when I host the Town hall, so it's great to have her here in studio with us. Emily leads the product management team for CPA.com on the audit side of the house. And she's got a segment coming up a little bit later. And so it's going to be great to have her take us through that. So let's go ahead and look at our agenda. We've got a very full agenda for you here today. We're going to have a DC update and a technical update from Rachel and Melanie, respectively. There's a lot to update you all on. Then Emily will be joined by Michael Brand, both the auditors, and both Emily and Michael are going to talk a little bit about audit transformation and what we're seeing across the firm landscape right now. And then we're going to bring in Aaron Hartman from the PCPS team, and Aaron and Michael Brody Waite are going to have a conversation on addictive leadership. So very good rounded agenda for us today and we're excited to go ahead and get started. So with that, I want to go ahead and bring in Rachel. How are you, Rachel?
- [01:35]
D
Great. Good to see you.
- [01:37]
B
Great to see you today. Actually, Rachel, I'm going to put you on hold for just a second. I jumped the gun. We have a couple of polls that we want to share with the audience today where as the town hall continues to grow, we like to take a good fresh look at who who's joining and from the various different backgrounds. So two quick poll questions for the audience. First, poll question is what is your practice area? So if you could go ahead and show the poll up here in the upper right of your On24 platform, go ahead and take that and give us a response to one of those questions. And I'm going to give you a minute or so to go ahead and complete that. And this really helps us continue to inform and refine the content that we share with everyone out every week. And then once you've answered what practice area you're in, for those of you specifically in public accounting, we'd love to know what your primary area of focus is within public accounting. So again, that's only for those of you that happen to be in public accounting. You can answer that question real quick. Your primary area of focus in public accounting. Super. So we'll go ahead and tally that, and that'll give us a nice window into who all attends week to week. So now let's go ahead and bring in my good friend Rachel. Hi, Rachel. How are you?
- [03:11]
A
Hi.
- [03:11]
D
Good, thanks. How are you doing?
- [03:13]
B
Great. So I know Rachel since the last town hall, thankfully the shutdown has concluded. I know Congress is back in session and there's a lot of stuff happening down in D.C. and invite you to go ahead and take us through that, if you would.
- [03:30]
D
Yeah, absolutely. So, like you said, since the last town hall, the government is now reopened. So we wanted to just give you a little bit of background on that and what happened and what, what is in the bill that they passed and the President signed into law. I know that we have a few new attendees to the town hall, so I will just give a very quick brief background on government funding and how we got where we were and how we got where we are today. So just a little bit of background. So there are 12 appropriations bills that the Congress has to pass and then the President has to sign in order to fund the government. And so they have to pass those individually or as a package or else the government will shut down by October 1st. And that is what happened. And with these government funding bills, it requires a filibuster proof, 60 votes. So currently in the Senate, Republicans hold the majority with 53 seats. So that means that at least seven Democrats would have to vote with the Republicans in order to pass a government spending bill. And so that anytime this happens, it means that the minority party has a little bit of leverage. So in this instance, Democrats were wanting to include in any government funding bill legislation to extend the enhanced Affordable Care act tax subsidies that President Biden signed into law during COVID And so that's why we ended up in a shutdown.
- [05:08]
A
Is because Democrats wanted this provision in there and.
- [05:15]
D
More time to pass these 12 appropriations bills. They wanted to pass a CR, or continuing resolution to fund the government at current spending levels to give them about six weeks to pass the 12 bills. So I ended up in a government shutdown that was historic because of the length of it, because both sides were dug in in their positions. Ultimately, what happened is last week they did up passing legislation to fund the government. And what the bill does that they passed is it funds the government until January 30th at current spending levels. So this gives them until January 30th to pass the individual appropriations bills. And that's an important date for the profession because should we come to January 30th and they aren't able to pass the bill that funds treasury, irs, sec, that could impact the profession directly or any of the other agencies that the profession has work under.
- [06:21]
B
So, yeah, on that, Rachel, I know we and Melanie's going to talk a little bit about this. We were down at the national tax conference in D.C. earlier this week and there was just a lot of discussion on a lot of anxiety, frankly, around the the timing of that January 30th date, as you would imagine. So more to come on that.
- [06:41]
D
Yeah, because it could end up being at the beginning of filing season. We not saying that this is going to happen. They could pass the bill to fund IRS before then, which would be great. We wouldn't have to worry about it. But it is something that we are absolutely keeping an eye on. Like you said, the bill also included what they call the minibus, which is just a few of the 12 appropriations bills. It included three of those 12. It passed the Agriculture bill, the bill to fund the veterans fairs as well as the ledgers. Those are the smaller bills that are quite frankly, easier to pass. They're not quite as controversial as some of the other ones can be. So included that so even if we hit January 30th and they haven't passed any others, those agencies will be funded in the bill. It also included language to reverse any of the rifts, the reductions in force that were announced during the shutdown. So any of the rifts in any of the agencies, including, you know, irs, those have been reversed. And then also as I mentioned, one of the sticking points and one of the demands for the Democrats was to extend the Affordable Care act, enhance subsidies that expand buyer at the end of the year. They didn't include that language in the bill. But what they did do is they had a handshake agreement, a promise to have a vote on something related to that before the end of the year. So we could see that coming up next month. So that is what was in the bill. Like I said, it was historic. It was 43 days. I don't know if this is something you want to brag to your grandkids one day that you lived through this, but nonetheless, you did. So thank you. That's a bit of a summary of the government funding.
- [08:35]
B
Yeah, that's a great update, Rachel. I think it kind of grounds us and brings us back up to speed because there is a lot happening. So maybe a little bit of a look forward to what's next here.
- [08:46]
D
Yeah. So for the next few weeks before the end of the year and then the beginning of next year, they will be working on appropriations, passing the nine other bills that they have not passed yet to fund the government. So that will be a key priority. They could pass those in some packages, some minibuses doing three, four at a time or they could pass those individually. But we know that that's something that they are working on right now and that they will hopefully pass some of those in December when they come back after the Thanksgiving recess. Another bill that is one that we're watching is the National Defense Authorization act, the ndaa. So this is an annual authorization that con passes every year and it's something that we as a profession watch because it is one of those must pass vehicles. So it's something that other things could be added onto it because Congress does have to pass it. So it's something that we watch for any profession related issues that could get tacked on to the ndaa. So they will also be working on that in December. Something else that they've talked about is digital assets. And you know, this is something that has some assurance related provision that could be included in it. So there's a potential of digital assets legislation moving through Congress as well as you know, there are some tax provisions that expire. And then also I wanted to bring this up just because there's been a lot of talk about a second budget reconciliation bill. And so it's something that senior White House official mentioned earlier this week that they could use budget reconciliation to pass something health care related as well as some of the tariff dividends the President has mentioned sending to some some individuals. So anytime there's a budget reconciliation bill that also becomes a vehicle for anything tax related. So we are monitoring that, especially since the White House did mention this earlier this week that it's something that they're taking a look at related to health care and tariffs. And then the other thing is there's always Senate nominations. They have hundreds of nominees to go through the Senate process. So that is something. It takes up a lot of floor time. But they will be working through that in the Senate. So that will be another key priority of what we expect to see from Congress. So that kind of gives you some insight of things to look for, things that the profession cares about in the coming weeks and months on Capitol Hill.
- [11:41]
B
Well Great, Rachel. That's a great update. Lots going on. And I know you and the team are working really hard to keep us surprised as things develop. So I'm sure you'll be pretty busy between now and the end of January. So thanks for that update and we'll see you in a bit in Open forum.
- [11:58]
D
Great.
- [12:00]
B
All right. So moving along here, let's bring in. Hi, Melanie. How are you?
- [12:05]
A
Hi, Michael. It's good to see you again.
- [12:07]
B
Yeah. So Melanie and I again, we're together down in D.C. fantastic conference. Melanie, I'm going to didn't tell you this, but I'm going to go ahead and give a shout out. I don't know how many members or how many folks dialed in here today's town hall attend the National Tax Conference, but it's a terrific event. You clearly are a rock star at that event. You were running around and hosting lots of panels and discussions, and it was kind of a who's who lineup. But great turnout this year. Lots of great discussions. So I know you're going to dive into that a little bit more. But just a big kudos to you for running a great event down there. So lots happening on the technical front. I'll go ahead and turn it over to you.
- [12:51]
D
Sure.
- [12:51]
A
And I just want to say thank you to the volunteers and the members who do watch the town hall and did approach me with that. And it's always great to get to talk to you and meet you. So Rachel's covered a lot of the legislation and of course, the shutdown is a big issue and I will cover on that. But I do want to cover a few other issues that are still important for us to be aware of. So disaster relief. Certain taxpayers in Alaska and North Dakota and South Dakota, they were granted tax filing and payment relief by the irs. Now, for Alaska, those that were impacted by disasters that began on October 8 now have until May 1. For North Carolina and South Carolina, taxpayers affected by severe storms and flooding that began on June 12 have until February 2. And additional information for those specific disasters are on this slide. And also as a reminder, we have the Disaster Resources Landing page that has a wealth of information on this next slide. Rachel did touch base on digital assets, but also if we can move to the next slide for digital assets.
- [13:57]
E
Yep.
- [13:57]
A
So Rachel did touch base on what's happening legislatively. But last week the IRS also released guidance establishing a safe harbor for investment trusts in grantor trust for them to stake their digital assets without compromising their classification for federal income tax purposes. And as usual, there are key provisions that need to be followed. And Those include a 14 part test wherein all the criteria has to be met in order to be able to keep their classification. And of course, the Trusts have approximately nine months from November 10th to amend their governing instruments to comply with the safe harbor requirements. Now there is a link there for the revenue procedure, but also for the digital assets FAQs for brokers that we've had there. But like Rachel said, we've heard a lot of things in movement happening up on the Hill. The Houseways and Being committee of Republicans held a one hour private meeting to discuss digital assets. And it seems like they are going to be taking those first early steps towards putting together something bipartisan. Now in the meantime, our digital assets task force, they are working on a comment letter and they're preparing for new legislation since, like Rachel said, the groundwork is being worked on now. And both parties of the Senate are also likely interested in working on something on it for early next year. So moving on to the next slide, the IRS has proposed a merger between opr, which is Office of Professional Responsibilities, and rpo, which is the return prepare office. Now, they're proposing this merger for efficiency. Now, the aicpa, we strongly oppose combining OPR and RPO because we believe the consolidation undermines the compliance, ethics and taxpayer competence and mainly because OPR and RPO have different functions. So specifically, OPR enforces Circular 230 where it investigates misconduct and disciplines credentialed practitioners, while RPO, they manage the PTIN program and also the enrolled agents programs, and they also promote voluntary compliance. So we do believe that combining the two offices, it creates a conflict of interest and also could divert resources from OPR's core mission. It also blurs that distinction between credentialed preparers such as US and also UN credentialed preparers, which could lead taxpayers into thinking that all preparers have practice rights before the irs. So it does get confusing there. But really there's also no meaningful efficiencies gained by having the two merge. So the negative consequences really just outweigh any of the benefits with that. Okay, so as I said, Rachel covered the shutdown and on this next slide we are going to touch base on it. And according to a statement by the IRS that came out yesterday, the IRS said that they resumed normal operations following the conclusion of the government shutdown, including the reopening of the Taxpayer Assistance Centers, which we call the TAS Centers. And there is a link to that center statement which also has additional links for resumption faq. So it's mainly on exams, collections and appeals. We still haven't gotten the bulk or the meat of what really what is the status of the irs. But tigta, the Treasury Inspector General of Tax Administration, they also released their semiannual report to Congress yesterday too. And they put out a statement saying that a reduction in the IRS's workforce force didn't significantly affect the 2025 tax filing season. But TIGTA is concerned how it might impair tax return processing in 2026. Now, they also said that the staffing reductions would harm the IRS's ability to process tax returns on time, which could delay refunds for taxpayers and of course cause the IRS to pay more interest. Now, I've heard unofficially that the IRS is still in the process of analyzing impact of the shutdown and what that really means to all of their statuses. And we hope to get more information sometime next week. So please stay tuned to the town hall because we will continue to update you as we get more information. Okay, next slide. We just finished. You know, we talked about wrapping up the 50th National Text Conference and of course I would like to share some of those highlights because I do think it was a great conference. And again, my highlights barely touch the tip of the iceberg and really does not do justice to what the conference was. But during the panel discussion with the former IRS commissioners, there was an overarching concern for IRS workforce challenges. And former Commissioner Koskinen actually warned that this is the toughest environment that IRS employees have ever faced and that we should absolutely expect delays and service challenges this next filing season, but not due to the lack of efforts of employment, but simply due to the lack of resources. Also, regarding technology, the commissioner stated that the IRS's vision for the future must embrace AI driven solutions to actually meet the taxpayer's expectations and reduce stress. But that technology wasn't enough and that the human intervention was also essential to being able to move forward within the irs. There was also a session with Erin Collins, the National Taxpayer Advocate, and she mentioned that historically the Taxpayer Assistance Service centers received about 5,000 new cases per week and with an extended shutdown, she really did urge patience for people because the TAS is really working hard to catch up, but the delays are simply just inevitable. Now, the National Taxpayer Advocate did announce that new for this upcoming filing season was the first time abate will be automatically applied to tax returns. So for example, if you file a tax return late and you qualify for first time debate, you would automatically receive a letter saying, hey, thanks for your tax return, but we're going to go ahead and waive that late filing penalty. And they would provide an explanation as to the rules rules and what they did. Now, in the past, you needed to request the first time abate relief in writing. However, the research has shown that over a million taxpayers a year were eligible for it, but they just didn't know how to ask for it. So they just didn't receive it. So this was a step forward. I did ask about reasonable cause and what would happen with, you know, a client or taxpayer that wanted to deny or decline the first time abate. And she said that they're still working through. They don't have a solution right now, but the benefits would outweigh and this is better than nothing for right now. Now, through the other sessions, we also learned of a new eform911 where we'll be able to submit it online soon. We also learned that in December, there was going to be a new portal for congressional staff allowing tax, allowing the tracking of cases. Now, it would be similar to where's my refund? But it would be where's my TAS case? And the hope for this is that it would be open in the the summer or even this winter, this coming winter to be able to have it open to the public after it's open to the Congress. Now, there was an individual tax and business tax updates, and a lot of the practitioners did provide their insights. And there were really good conversations. For example, one of them is the no tax on tips. There was a good discussion around it where some restaurants are actually changing their policy to mandatory TIP to avoid the complexity of the provision. But that could lead to unintended consequences of having a shortage of wait staff at that restaurant once the staff figures out that they're not eligible for the tip deduction and they can easily just leave to work at a restaurant that does offer those types of implementations or to be able to implement mandatory, not implementing mandatory tips. Also at the conference, we honor two outstanding volunteers. In particular, we mentioned Art Auerbach, who received the Arthur J. Dixon Memorial Award, which is the highest honor in tax of a lifetime of contributions that he's provided to us over 23 years. To the Tax Division. We also gave Corey Perry an award, the Jonathan Horn Distinguished Service Award, for his extraordinary contributions this past committee year as chair of the OECD Task Force and also vice chair of the International Tax Committee. And again, that is just a highlight and I hope to see you guys again next year. But it really was A great conference. Okay, onto the next slide. When members or their firms provide tax advisory or tax planning services to attestation clients, there are threats to independence that can exist. Now, the Professional Ethics Executive Committee, they issued an exposure draft in September with a proposed updates to the tax service interpretation in the Code of Professional Conduct that gives members guidance on maintaining independence in these particular situations. Now, the goal really is just to provide clarity and consistency for members providing tax services to their test clients and to allow members to employ their professional judgment to determine whether the threats exist to their independence or whether those threats are really at an acceptable level. So the proposal also includes examples of possible factors and considerations to take into account. So please take a look at that exposure draft and the links are on the slide. Okay, moving on to the tax round robin, we have erroneous notice and I did see some feedback there. But for those that have dealt with CP161 and CP504B, we have good news. The IRS has confirmed that they have adjusted the taxpayer accounts correctly and for those that did pay in 100% prior estimated tax payments for those. And we've actually confirmed that with some of our members. And there is a link that can be found underneath under erroneous notices that gives you more details about that. We also know that the Math Error Authority, which is one of the provisions in the Task act discussion draft, it became a standalone bill and it is waiting and is heading over to the President's desk to be signed. And that would provide for clear, specific and timely notices. And that really would be a win for taxpayers. Also, just to note that as we prepare for the upcoming filing season, the IRS will be shutting down their modernized E filing system at 11:59pm on filter Friday, December 26th. And it's typical that they shut down and the E filing won't be allowed until the start of the next filing season, which the IRS has not announced when that is. And finally, last Friday, President Trump did announce the withdrawal of Don Korb's nomination for IRS Chief Counsel. And at this time, there have been no successors named or identified. And this vacancy kind of proposes a little bit of a setback because we do have an Argentine need for guidance on HR1 to be issued. So we do remain hopeful that this critical position will be filled promptly. And with that, Michael, I turn it.
- [25:26]
B
Over to you, Mellie. That was excellent. A lot of ground to cover. Great job. And there was a lot of love in the Q and A for those that were in fact, at the National Tax Conference. So again, just A reminder to everybody for next year, but great job. We'll have you back in just a few moments. Thanks, Melanie.
- [25:43]
F
Thank you.
- [25:45]
B
All right, so let's shift gears here to audit and welcome Emily Remington back in. It's great to see you, Emily. We also would like to bring in Michael Brand.
- [25:56]
F
Hey.
- [25:57]
G
Hey, Michael.
- [25:57]
B
How are you doing?
- [25:59]
F
Great, thanks.
- [25:59]
D
Hi, Mike.
- [26:01]
B
Good to have you. So I'm just going to do a quick introduction for Emily and Michael and then turn the conversation over to them. But like I said earlier, Emily leads the product management team for CPA.com in the audit area. Emily's got 15 years in public accounting with a multitude of firms, was also in industry for a while as a controller. So she sees the audit side from both the practitioner side, but also from the client side. So has a lot of great experience. And maybe most importantly is she's he's been working with a lot of firms across the country as they pivot and switch audit engagement methodology and platforms. There's just a wealth of knowledge there about audit transformation in general. So it's great to have Emily with us. Michael, great to have you here again. Deep, steep experience in audit, a partner At BMSS Top 100 firm, Michael also is a current member of the AICPA's Auditing Standards Board Board and also was the past chair of ARSC, which is the AICPA's accounting and review Services Committee. So you have a lot of audit experience here in this segment. So it's great to have you, Michael. And I think, Emily, you're going to go ahead and talk a little bit about what you're seeing out there as it relates to audit from a public accounting perspective.
- [27:21]
C
Yep, that's great. Thank you so much, Michael. And it's great to be here. Great to be in the seat and chairing the studio. So in my role, I do I speak with firms as they think through technology adoption as a catalyst for practice transformation. So we are seeing, as you'll see in the slide, key themes and I'll focus on three. So really technology, efficiency and practice strategy. So first, technology today you cannot say anything about audit without technology as a fast follow. So technology is really shaping how we're doing audits, how we're thinking about audits and the audit experience. As firms are analyzing their tech stacks, there is a lot to consider. So firms are thinking through purpose built solutions, evaluating their audit platforms in their entirety. So from methodology to audit binder and client communications. And then of course thinking about AI, agentic AI and generative AI and We're really seeing firms really agnostic of firm size at various stages of this practice transformation process. And some are still on the cautious side. Those that are already in the process or well underway with audit transformation are seeing real and measurable gains. While there's a lot to consider, I do frequently get asked where to start, what should I be thinking about? And some of the elements in terms of being positioned for success is being intentional about bringing technology into your audit. So that really means striking a right balance between efficiency and quality, deploying solutions that are truly fit for purpose within an audit engagement, and embracing a transformation strategy that thinks not only about technology, but also about your firm's value proposition, really holistically about the entire audit practice. So what makes you different? Why is it different to work with you, how you upskill your people, your pricing models, and really that holistic approach. The second thing I'll focus on is efficiency and efficiency and quality and finding that right balance. So efficiency has always been a transparent motivator for change within audit, and something I think we'll continue to think about. But it's really when we talk efficiency, it's a little bit thinking differently about it. So still thinking about streamlining your processes, cutting out redundant tasks where automation can fit in, and the use of AI, the most advanced firms are seeing efficiency not just as speed, but as a way to really free up capacity and provide deeper analysis within the engagement, provide better client insights, and produce higher audit quality. So as we know, the true power of technology is about how we use it and how we deploy it. So for audit specifically, this really means looking at what technology can do throughout each phase of the engagement.
- [30:29]
A
Engagement.
- [30:30]
C
So thinking about workflow, thinking about usability, reusing data throughout the audit engagement, and looking at each stage of the process. So client acceptance, documentation gathering, planning, substantive testing, all the way through reporting, and how you communicate with the client. So really looking at where technology can add value to the process. So with that, you know, from a practitioner lens, I'd like to invite Michael Brand to just speak a little bit about how you're seeing technology in the audit space take shape from that practitioner lens.
- [31:06]
F
Yeah, Emily and Michael, thanks for having me on today. And I like how Michael said you got a lot of experience just to say, hey, you've been at this a long time. And I have been, you know, 30 plus years. And if I think about where the audit was when I started, where the audit is now, you talk about a transformation. You know, standards have been updated to get it and that type stuff. And so knowing now that I could sit in another part of the country and be able to access everything we do and everything we do with our clients through technology and the use of it like that, we're very purposeful. We have leaders within our own firm that are the champions of that technology. And be it you're using multiple different technologies or you're using just one that really handles everything, it's really up to the firm and that type stuff. But I like what you said about being able to give our clients really more than just the audit report. You know, that audit report obviously is, is the most important thing we're doing because that's our opinion. But being able to help them from the knowledge we have in accounting and standards and so forth like that, to help them, you know, better their business, their financials and everything around it, technology is enabling us to do that. When I first came to BMSS six plus years ago, they had, you know, gotten rid of the different technologies because they had merged in a couple of firms. And so it was all in one platform. And we're here in year six in that platform. And the built in efficiencies have just been tremendous. And again it frees up time to allow us to do those other things. So we love it. We love the champions in our firm who, you know, vet these different technologies. It's not a one size fits all always you have to do your work and that type stuff. But transforming it from where it was, where it is now, it's been great.
- [32:54]
C
And that's exactly right. Mike, you mentioned really being purposeful and I think that's an important takeaway. In the next slide we did our first audit benchmark survey, CPA.com and AICPA. We partnered with several experts, survey methodologists and Accountability plus and we'll be producing that report at Digital CPA this year. But some of the things even that you might mentioned, Mike, was just some of our early findings. So this is a little bit of a teaser of what's to come in the full report. But a couple things that stood out to me was most of the firms surveyed did not have a formal plan. So you know, there's a little bit of a gap between the ambition of how firms want to look and the execution. So just really marrying up those, those components. The other thing is, and Mike, you gave a great segue into this is that the, I think we had almost 55% say that the greatest client satisfaction comes from insights delivered outside the audit report. So you know, we're so used to thinking about, you know, the audit and working towards that deliverable. But that's where the technology enablement really is. It's, you know, whether it's a standard dashboard that you give to clients to show we're thinking about you, we're thinking about your data, we're thinking about your operations. That's really where clients are seeing the value add. So, Mike, one other thing as it relates to kind of hot topics and audit. We know that we have the December 15th deadline coming up. So I'd be remiss, not to mention, you know, we hear we're hearing firms say, oh, wait till, you know, my peer review cycle is. But that deadline is December 15th. So, you know, I know that you've done some, some work in terms of the intersection of technology enablement around adopting the new standards. So can you just give a little bit of background and your insight in terms of that?
- [35:01]
F
Yeah, you know, it's like an early Christmas present, right? December 15th. We can't even wait till the end of the year to get here. And we've been talking about quality management. That's one of those big ones, you know, since 2022. And the thing that I really like about it is it allows. It's a working document. It really keeps us up. It updates our quality management to the standards with SAS142 on audit evidence, updated those and stuff like that. And so, like you said, I've been talking with a lot of firms and marrying that technology. Here's the thing, we're getting really close. There are great tools out there to use. And the thing about it is people have been maybe burying their heads in the sand. And you've got a document right now, you can get into that document. And what it's really going to allow you to do is when it talks about things like resources and evaluating the resources that you use, the technologies, it's going to lead to audit improvement. It's going to lead to all those things that a quality management system should. And so what we're thinking about, you know, where we are now to where we need to be. There are great tools out there. Our firm has partnered with a vendor with QM Core that houses ours. It's in the cloud and those type things that are great for us that we've been talking about technology, it's great. It updates it. It does things that we used to do manually, that it will use, things like technology and AI and all those different things we've been talking about that are transforming the audit that are also transforming our system of quality management into the system to handle all those type of things so that we can, you know, ensure we're issuing reports that are appropriate and performing these engagements in accordance with standards. But then the big picture says that we can be a better partner with our clients to give them those things that really we're experts in. Right. That's really in our wheelhouse that enable us to do so. It's going to be an exciting, you know, last part of the year and next two or three years when it comes to the implementation. But all this. But I'm here for it. I'm excited about it.
- [37:08]
C
That's great. And that's great perspective. Thanks so much, Mike.
- [37:11]
B
Yep.
- [37:13]
C
And as your firm is thinking through audit transformation, here's a couple of resources just to be thinking about and also certainly stay tuned for the audit benchmark survey at Digital CPA as well.
- [37:30]
B
Well, great, Emily and Michael, that was great discussion, I can say, as we kind of go across the country and talking to firms about transformation, all the practice areas, whether it be audit, tax, client accounting services, there is a lot of transformation happening right now within the audit practice area. So there's a lot to follow there. So great job sharing that. And to Emily's point, we actually have a special audit track at Digital CPA in a couple of weeks where we'll be digging in in much more detail on this topic. So thank you, Michael. Have you back shortly, Emily. Thank you. And let's go ahead and bring in Emily Hartman. Hey, Emily, how are you doing?
- [38:12]
E
I'm good. How are you? Good to see you. We are happy with us today. Michael Brody Waite. And Michael is the founder of Addictive Leadership, which is an organization whose mission is to empower leaders to unlock their full potential. Michael, you are always very open and honest about saying you are not a typical leadership speaker. You're actually a recovering drug addict who has turned your life around. And in doing so, recognize the parallels between recovery and leadership.
- [38:44]
G
Yeah, absolutely. As a drug addict, I couldn't lead myself. And the more stressed I got, the more drugs I would use. And so at the end, I was homeless. I was hopeless. I truly believed I would be dead before my 25th birthday. And that in recovery, I was given a self leadership system based on three principles that not only saved my life, but it taught me how to more effectively lead myself through stressful times. And not only did I stay clean, but within eight years I went from a homeless drug addict to the founder and CEO of an Inc 500 business, which I grew 20,000%. After selling that company, I realized something. Not always people are going to have this realization. I could trace everything in my active addiction back to the difficult conversations I was avoiding with myself and everyone around me. And my observation was that professionals, especially in times of stress, do the exact same thing. So I dedicated my life to teaching the three principles that taught me how to do what we call uncomfortable work. And 30,000 leaders later, I can't believe, as a recovering addict, I get to be here talking about this with you.
- [39:52]
E
Well, we're glad you are. If you can pull up the three principles, please. Michael, you mentioned times of stress. Another busy season is almost upon us. And I know a lot of you who are watching do a lot of things to mitigate that and manage that stress. But let's face it, January 1st through April 15th is a high stress time for a lot of viewers. But it's a pretty powerful analogy to liken the work that an addict needs to do to the work that leaders need to do to reduce that stress. Or dare I say all of us, not just leaders, but all of us who are trying to be better and more effective communicators. It's really fascinating that even though it's something we all do on a regular basis, which is communicate, there are so many challenges we encounter with each other that largely boil down to it being human nature to not want to have difficult conversations.
- [40:46]
G
Man. So well said. Over the last three years, I've almost exclusively focused on the accounting profession. And I dare say that the three principles can empower everyone listening to this. So just so we're clear, here's what they are. So, number one, practice rigorous authenticity. The first step to solving a problem is admitting that there is one. And in the profession, instead of blaming clients or busy seasons, we do a searching and fearless inventory of ourselves to identify every single difficult conversation we're avoiding and how much that avoidance costs us. Principle two, Surrender the outcome. Even if we know what the avoidance costs us, we have tremendous fear about the outcome, typically, and the fear of how someone will respond, the employee leaving, the client firing us. This principle teaches us how to release that fear. Let go of the 50% we can't control and double down on the 50% that we can so that we can achieve outcomes we didn't think were possible. And so the third principle is do uncomfortable work. And there is a difference between hard work and uncomfortable work. I mean, how many times have you seen someone doing eight hours of hard work because they were avoiding five minutes of uncomfortable work? This is the Work we avoid even though we intellectually know it's what we should be doing. But it's also the ultimate act of self leadership.
- [42:14]
E
As you mentioned, you've been doing a lot of work within our profession. What are some examples of these types of difficult conversations that you have seen and witnessed?
- [42:23]
G
Sure, we have a lot, but I will give you two. So example number one is the most common internal uncomfortable work, and that is delivering constructive feedback. We work with so many in the profession that need to give constructive feedback to their peer, direct report, or even their supervisor, and yet they find reasons not to do it. This leads to partners, principals and shareholders working below their level instead of building the firm. This hurts top line revenue strategy and ultimately leverage. We see managers doing technical work instead of effectively managing projects or performance managing their reports, which leads to low lower realization utilization and increased burnout. And we even see staff not asking for help or agreeing to unrealistic expectations, which leads to challenges with timelines, accuracy and missed opportunities for development. And that's an internal example, but an external example. My second one is surprise, surprise, client scope creep. A client tries to increase the scope of a project while wanting the same timeline quality and cost and we avoid pushing back out of fear of losing them. This leads to less profitable projects, challenges delivering the same level of quality, upsetting clients by missing the deadline. And if we magically pull it off in the time frame that they asked at the quality that they asked for, our consolation prize is burning out our teams.
- [43:50]
C
Very true.
- [43:52]
E
So how do you apply these principles? These three self leadership principles a lot of us deal with often, or maybe I should say we don't deal with often. We, we think about, they're in the back of our minds, but we're not dealing with. How do you apply these principles to the two examples you brought up? The constructive feedback and the scope creep.
- [44:11]
G
Okay, I love that because I don't like just talk. I like action. And so let's do this for everybody that's listening. So with the constructive feedback example, principle one, practice rigorous authenticity. Typically we see people making excuses. They either convince themselves that they don't need to give the feedback or that it's futile if they do. In fact, we've seen people that avoid so much conflict they forget that the conflicts that they are avoiding still exist. And that is not practicing rigorous authenticity. It's denial. It's understandable, but still it's not self leadership. So an example of applying this principle is literally writing down every single constructive feedback conversation you are avoiding. Think about your peers Direct reports, if you have them, or even your supervisor, write them all down. There's incredible power when you write things down on a piece of paper that you're avoiding. Principle two, surrender the outcome. So now what do you do? How do you apply this principle? Well, people will think of the worst case outcome and act as if it's guaranteed. And that'll give them the rationalization not to take action. If I give that person feedback, they're going to leave or I'm going to get fired, etc. And we lose sight of the fact that it's the fear stopping us from leading and that is not surrendering the outcome. So an example of applying this principle is literally writing down the outcome you fear happening. And this is a neat trick that we've learned really works in the profession. Quantitatively calculate what you believe the directional probability is of that outcome coming true. And then here's the cherry on top, share it with someone else to sanity check your calculations. They will almost always show you why it's not as high as you think, which will actually help you bring down that fear. And so then principle three, do uncomfortable work. This is the actual act of giving the constructive feedback. But here's the trick when you have to give it, Lead with your fear. Like tell them literally I'm scared that if I give you this feedback you will leave or you will fire me. We teach a specific way to dictate leadership on how to do this. But in general, when you lead with your fear, it disarms the other person and it makes them assume what's known as positive intent, which completely removes the conflict. And so that we apply this to the external example the same way the client scope creep example. Practice rigorous authenticity. Write down every single client conversation you're avoiding. Surrender the outcome. Write down the outcome you're scared will happen, usually losing the client or upsetting them. And calculate what you believe is the directional probability of that coming true. And then have someone else sandy check your calculation, which will help you decrease the fear. And then principle three, do the uncomfortable work. This is the act of the actual client conversation. Same trick applies here. Lead with your fear. Tell them literally I am scared, that if I challenge the scope changes, you will be upset or leave us. Again, we teach us a specific way to addictive leadership in greater detail. But these actions are something that you can go do right now with success.
- [47:06]
E
I like that. Lead with your fear. I mean, you do bring in your own vulnerability, which, which just helps the conversation. Most of us, Michael, can relate to what you're saying and even a lot of these particular scenarios. And I think we know intellectually what you're saying is correct and you know a lot of it. We knew before you even said it. But something still holds us back. What are people so scared of, man?
- [47:30]
G
I think it's all about that third principle, do uncomfortable work. It is so literally physically uncomfortable to imagine giving constructive feedback to a teammate or a client and them having a negative reaction. And while we may not all be drug addicts, I believe we are all addicted to something else, our comfort zones. And when you have an addiction, you avoid leading yourself over and over and over again, even when you know it's bad for you. That's why I'm so jazzed about this form of leadership recovery that we teach.
- [48:04]
E
Said very well. We are addicted to our own comfort zones. So I believe all of our viewers have a situation at work. Obviously this applies to business and industry, it applies to other professions, it applies to our personal lives. But dialing into public accounting, I often talk to firms at this time of the year. We're in the fourth quarter of the year. It's November 20th. We don't have a whole lot of time before the next busy season is upon us, but we have a little time. What can we be doing to make busy season a little more manageable, a little less stressful? I think a great exercise for everybody who's watching is to have think about a difficult conversation that they need to have, whether it's with a client, a partner, a coworker, last minute advice and encouragement. Michael, on helping people to actually go do this.
- [48:55]
G
Yeah, I mean, other than do it totally. So in the accounting profession, we operate in a profession where we constantly battle external disruption, whether it's technology, talent, capital, government regulation. It's so much that we can get lost focusing on things that we can't control at the expense of the things that we can. And self leadership by itself can feel really scary. And yes, it's going to be uncomfortable if you go have these difficult conversations. But just a gentle reminder that that act of self leadership in the world where there's so much we can't control, it is 100% within our control. And at addictive leadership, we believe that the professional, the leader, or even the firm you want to be is on the other side of the uncomfortable work that you are avoiding. And the only one stopping you is you. So my final thought, and I say this a lot, I believe that there's a great leader living inside of each and every one of you. But if you want the world to see that great leader, I believe you're going to have to do. We're covering drug addicts, too.
- [50:07]
E
Thank you.
- [50:13]
B
Aaron. Michael, that was a great segment. Lots of appreciation, Michael, for your candor and your frankness and everything you said resonated. There's really great connection with the audience, so appreciate it. And we're going to have to have you back soon, so thank you, Aaron. Thank you, Michael. All right, let's pivot to open forum. So we do have a bunch of questions, so let's try to hit a few of them real quickly. Rachel, I'm going to pick on you first. This is a tough question. It's more subjective, but I think folks do have a lot of anxiety about that. January 13th, next deadline date, when do you begin getting a sense of whether or not that might move again or if. If another shutdown is possible? I mean, you know, from a confidence level standpoint, I'm trying to paraphrase the question as best it was asked a few different ways, but maybe you can comment on that.
- [51:09]
D
Yeah, so I think that we'll get some indication in December whether or not they're able to pass whatever they put on the floor for these appropriations bills, you know, the first bunch that they put on, whether or not they have a lot of resistance or whether or not they're able to pass them easily, that it will give us an indication on just kind of the environment. I will say that it is very partisan in D.C. that's not a surprise to anyone watching the town hall, but that will help us to get a sense of where things are headed. And then, you know, after the holidays, when they come back in January, that's when we will really have a good understanding. As we get closer to that January 30th date, I don't know when they will pass. It's the fsgg, and it stands for Financial Services and General Government Bill, and that's the one that includes treasury, irs, sec. I don't know exactly when they will pass that between now and January 30th or when they'll try to pass it, but we'll get more of an indication in December and then definitely, you know, early to mid January. And then, you know, I will also say in D.C. things oftentimes fall apart before they come together. And so that happens, you know, two, three times before a bill gets passed. So not a perfect answer for you by any means, but just kind of a general.
- [52:42]
B
Yeah, totally understand. And then, I mean, I think the second part of that maybe you don't know, but supposedly there's a bill that Lankford's trying to put out there about essentially no more government shutdowns. Is that something we're tracking or we've heard much about? Is there any context on that?
- [53:00]
D
Yeah, there's been different proposals that have been passed over the years just to try to avoid shutdowns again. The president has also said that he was, you know, pushing to get rid of the filibuster for government funding type bills. So there is just, there's a general sense that nobody likes shutdowns, nobody wants a shutdown, but it's hard to actually, you know, get any of these bills passed with the filibuster proof. 60 votes on government funding or anything else.
- [53:31]
B
And Rachel, I don't know if you can answer this, so it's fine. If not, we can follow up with town hall because Melanie had a drop. But there was some confusion on the e filing deadline for individual versus business. Is that something maybe you have an answer to?
- [53:46]
D
Unfortunately, that is more technical. That's beyond.
- [53:51]
B
No, that's fine. We will put that in the resources that we push out to clarify because we did get a lot of questions on that. But I know Melanie had a drop. Michael, there was a couple of questions on. You had referenced a platform that you use to house your quality control checklist. Can you maybe comment on that?
- [54:12]
F
Sure, yeah. We're using QM Core. That was one, you know, we looked at different vendors and so forth like that and they were one that really fit with what we were doing, what we like to do. And so it's a cloud based platform where we can, you know, we'll upload a lot of our information that has checklists, our system, you know, document all those type things that we're going to be able to do and monitor on an ongoing basis. And it enables us to use technology really to monitor at all times and to make changes as necessary. That's one of the big things really that is changing between quality management standards and quality control that we've been under for so many years now is it's going to be a management system. I mean, you're going to be, it's, it's going to be more hands on. It's not a set it and forget it. It's one of those that, that will be a moving system as the risk surrounding your firm and the engagements you perform, the technology you use as all that changes, you change with it. And so for us, we needed a system that would allow that to happen. And so we're able to do that again. It's cloud based so it can be accessed at any time. We can limit who gets on there, who can access it because you know, you're on system, you don't want everybody just to be able to access it, to make changes. And that type stuff has all those controls in place that we need to have one that's effective, that's efficient and that obviously keeps us in accordance with what the standards require.
- [55:41]
B
And I don't know if this is for you or for Emily, but the question too, the second part was how is that used in conjunction with the AICPA's Quality Checklist? Is that something, something that is embedded in that tool, you can use that independent of that tool? I don't.
- [55:55]
F
Yes, that answer is yes, you can use it independently. Our firm has gone to where we use the ICPA's tool really to complete that first and that's what will be uploaded into the system. And if you want to not use that, obviously you don't have to. You can do it on the platform and it allows you to take care of all your quality objectives and risks and procedures in place within the platform itself. Or you can use the tool that the ICPA has provided, complete that, upload that and that becomes part of the living breathing document.
- [56:28]
G
Great.
- [56:29]
B
Aaron, real quick, I know there was a lot of questions on if there was additional content that maybe Michael puts out. Someone even said a book. I thought at one of our events Michael did have a book. So I just want to give you the chance. It's something we again can push out in the follow up materials. But maybe you knew more on that.
- [56:47]
E
Yeah, there's a book, there are a couple webcasts. We'll definitely put some information in the newsletter of where you can access that information.
- [56:58]
B
Well, great. We'll thank all of you again, great sessions today. A lot of appreciation for the segments and we'll go ahead and kind of close things out. So wanted to just remind everyone about the 2025 National Management of Accounting. The MAP survey as we refer to it as the executive Summary is now available. So either via the QR code or we'll have the, you know, the link is in the is in today's slides. A lot of great feedback in there to compare and contrast how firms are operating compared to each other. So it's definitely something you're going to want to go ahead and get eyes on. We also have an upcoming webcast on both December 2 and December 5 in the transforming youg business model webcast series. These are really popular, one on competing for talent and one on navigating digital transformation. So wanted to do a special call out on those for the Town hall community. Our next Town hall is going to be live from Digital cpa. It's a Tuesday versus a Thursday, so I wanted to make sure we reminded all of you of that. It'll be Tuesday, December 9th at 4pm Eastern Time. So a little bit of a curve ball there on that one. But we like to do an update live from the Digital CPA conference and really bring in a lot of what's being discussed there at the conference, at the event and leverage our speakers for that. So be sure to make that programming note and then just wanted to remind everybody of our Town hall digital resources. Everything you kind of need@cpa.com townhall whether you want to watch past episodes on demand. If you're not receiving our Town hall newsletter to make sure you go ahead and register for that. We have the Town hall in podcast format if you want to listen to it on a good walk or on the bike and all of the resources are there on the online portal and this edition will be rebroadcast on Monday, November 24th at 1pm Eastern Time. And with that I just want to thank all of you for tuning in today. Great segment. Thank you Emily. It was great being with you here in studio. Great to be here and maybe most importantly, want to wish all of you and your families a very happy and healthy Thanksgiving. We hope you all have a great, great break and we look forward to seeing you back here on the next Town Hall. Thank you everyone.
- [59:37]
A
Thank you for your participation.
- [59:39]
D
You can also subscribe to the AICPA.
- [59:42]
A
Town hall series on your favorite podcast.
- [59:44]
D
Platform, as well as watch archives on.
- [59:47]
A
YouTube and find resources@cpa.com Townhall Tune in for live broadcasts Thursdays at 3pm Eastern Time.
- [59:58]
B
This podcast is designed to provide illustrative.
- [60:00]
G
Information with respect to the subject matter.
- [60:02]
B
Covered and does not represent an official opinion or position of the AICPA or AICPA.org it is provided with the understanding that The AICPA and AICPA.org are not engaged in offering legal, accounting or other professional service. If such advice or expert assistance is required, the services of a competent professional person should be sought. The AICPA and AICPA.org make no representations.
- [60:28]
G
Warranties or guarantees as to, and assume.
- [60:31]
B
No responsibility for the content or application of the material contained herein, and especially disclaim all liability for any damages arising out of the use of reference to.
- [60:41]
G
Or reliance on such material.