Programming note

Hey, newsletter readers. A quick word to say that this is the penultimate edition of On the Margins before an indefinite hiatus starting in April. I’m going to be focusing on a couple other projects over the spring and summer, so the newsletter is going on the shelf. Could OTM return? Sure! Will it return? I don’t know! It has been fun writing it for nearly 5 years—over 120 in total, and I’ll definitely miss it, but in the near-term, I’m going to work on some other things. 

You can still catch me on The Gustonomics Podcast asking Liz Wilke all the econ questions, and if that’s not enough of my voice for your liking, you can also find me yukking it up with Greg Kyte on Oh My Fraud. Thanks for reading, thanks for listening. Hope you continue to do so.

And now, the newsletter.

Accountants vs. Robots

We’re in the back half of the winter/spring tax filing season, and, per usual, many accountants have been busy preparing and filing tax returns. Too busy, I’m sure, to have any idea about how successful of a tax season artificial intelligence has been having. After all, as you’ve no doubt heard, AI will be doing ALL THE THINGS before we know it, including tax returns. 

Now, it stands to reason that in its quest to dominate all tax preparation, the AI TAX BOT 3000 will prepare the simplest returns first. These are returns that don’t require the attention of a CPA or other tax professional, and if we’re really lucky, those returns will just go away someday. But in the meantime, these taxpayers with relatively easy returns are still fending for themselves, and they may encounter an AI assistant here or there when trying to prepare their own tax returns. So perhaps you are wondering if AI is showing early signs of its tax preparation prowess?

If that’s you, then I’ll just share a story of a Washington Post journalist who checked out a couple of popular tax prep tools that are using AI, and the results were, um, not great. Actually, the headline says, “It’s awful”:

This year, TurboTax and H&R Block added artificial intelligence to the tax-prep software used by millions of us. Now while you’re doing your taxes online, there are AI chatbots on the right side of the screen to answer your burning questions.

But watch out: Rely on either AI for even lightly challenging tax questions, and you could end up confused. Or maybe even audited.

“Question after question, I got many of the same random, misleading or inaccurate AI answers,” Geoffrey Fowler wrote, and that’s not good! 

I have to say—it’s more than a little funny that the way AI’s been pitched to the masses is that it’s basically witchcraft and can do all these dazzling things. So naturally, some companies are throwing it onto their platforms to try to get people excited… and the results are basically the equivalent of a monkey throwing darts at a collection of words taped to the wall. 

“I feel that my job as a tax professional is very secure,” said a tax pro who reviewed the AI’s responses. 

AI definitely has a lot of potential, and it’s going to improve, so that statement could easily be read as either reassuring or foreboding. Your call.

Oh, auditors

I’m old enough to remember when auditing was an essentially self-regulating profession. But just barely. Sarbanes-Oxley became law in 2002 when I was a senior in college, and with it came The Public Company Accounting Oversight Board to oversee the firms that audit public companies. That oversight has had its ups and downs over the last couple of decades, but what has been made abundantly clear is that auditors do need oversight. We need watchers to watch the watchers, etc. It’s ironic because auditors were long seen as the sober, unimpeachable, independent professionals looking out for investors and other stakeholders in the organizations they audited. 

Somewhere along the way, however, auditors lost a lot of credibility in this regard. I can’t recount all the events that caused this loss of credibility, but suffice it to say that they’re not earning it back any time soon. 

Auditors have often bristled about having been subjected to this oversight, but they’ve also occasionally conducted themselves in ways that have underscored just how necessary that oversight is. Observe:

The Public Company Accounting Oversight Board wants to prohibit audit firms from misrepresenting the status or significance of their registration with the regulator, especially in reports they have increasingly issued that verify cryptocurrency companies’ reserves. 

The board on Tuesday voted unanimously, 5-0, to propose barring registered firms and their staff from making false or misleading statements about the registration status or what the registration signifies. There are no existing rules clearly prohibiting this. 

Yes, lying is still frowned upon. This is particularly hilarious because this is a profession that was revered for its trustworthiness, but now it can’t even be trusted to tell us the truth about how trustworthy they are! Or not? I don’t know. It’s basically like if a health inspector gave your restaurant an “F” and then you used a Sharpie to turn your “F” into “A.” The health inspector isn’t going to be happy! 

So, yep, they needed to make a rule expressly stating that lying about your firm’s registration status with the PCAOB is not allowed. And, yes, this “you can’t lie” rule was spurred on by firms that threw around the popular-but-largely-meaningless “proof-of-reserve” report for crypto companies. But then there’s the firm that had this on their website:

“The PCAOB label is a seal of approval and a mark of excellence that we are proud to wear, and the distinction of being a registrant allows us to offer the highest level of service and expertise to our clients,” 

There’s no PCAOB label! It’s not a seal of anything! You aren’t wearing it! Why do we even have to talk about this? Come on. 

Fresh from Gusto

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Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.
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