Hey. Got a little news for you.
Podcaster and observationalist David Leary has a prediction for the future of firms. The tweet:
HOT TAKE: AI isn’t going to save accounting firms; it is probably going to kill them.
When a VC firm invests $1 billion into OpenAI … they need a return …so now they are planning to spend $500 million to acquire accounting firms that they’ll make “use” (or should we say buy) OpenAI products.
This is similar to how PE was heavily involved in the shrimp industry …they needed a return on all that shrimp they owned …so they acquired Red Lobster, then forced them to buy and sell unlimited shrimp. This caused Red Lobster to have massive losses and declare bankruptcy.
This is also the same strategy Pepsi used to sell more Pepsi, they bought Taco Bell, KFC, Pizza Hut, and other fast food chains …and forced them to buy Pepsi. 43,000+ restaurants that do NOT serve Coca-Cola.
Ever been to one of those KFC/Taco Bell monster things?
What kind of hybrid monster will accounting firms be in the future?
To prove his point, he shared a link to this recent article making the rounds: Thrive-backed Crete to acquire accounting firms with $500M, boost growth using OpenAI tools. I’m pretty sure we already shared a link to the original Reuters article in a news brief, in case you missed that:
Crete Professionals Alliance, a fast-growing accounting platform backed by Thrive Capital, plans to spend over $500 million acquiring U.S.-based accounting firms over the next two years, according to an exclusive report from Reuters. The investment is part of a broader effort to bring traditional practices into the AI age with tools developed alongside OpenAI.
Crete PA is part of a broader trend where venture firms are buying up companies in older industries—like healthcare, property management, and now accounting—and layering tech on top. It’s a modern roll-up play, and Crete’s moving fast.
Founded in 2023, the company already generates over $300 million in annual revenue and includes more than 20 accounting firms under its umbrella. It has 900 employees spread across 17 offices, including international operations in Asia.
Crete Professional Alliance says this on their website: “Crete Professionals Alliance (“Crete PA”) is not a licensed CPA firm. Its subsidiary entities, which are not licensed CPA firms, provide tax, advisory, and other non-attest services to clients. Crete PA Network Firms practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. Crete PA does not provide services to clients.”
People are poo-pooing David in the replies, reminding him that audit firms can’t be majority owned by outside investors. While that may be true, we’ve been predicting for a while that any day now, some firm is going to get messy with their attest/non-attest silos and run afoul of independence rules.
Feel free to throw in your $0.02 on his thread.
Directly related to the above, Accounting Today‘s opinion pages published this: What PE means for the future of accounting.
Which says:
Focus on tech and efficiencies of scale
The reason this trend is so important to everyone in the industry right now is that the private equity firms entering this space are not trying to become accountants. They are looking for profitable exits. And they will do that by seizing on a critical inflection point in the industry that’s making it possible to scale accounting firms more rapidly than ever before by leveraging technology to deliver a much wider range of services at a much lower cost. So, whether your firm is interested in partnering with private equity or dead set on going it alone, the hyperscaling that’s happening throughout the industry will affect you one way or another.
…
Over time, this could reshape the industry’s market dynamics by creating the accounting firm equivalent of the Traveling Wilburys — supergroups capable of delivering a wide range of specialized services that smaller, more narrowly focused firms could never previously deliver. It could also put downward pressure on pricing as these larger, platform-style firms start finding economies of scale to deliver services more cost-effectively.
Traveling Wilburys huh. I’m sure many of you are going to have to Google that one.
Oh right, them.
The Times gave PwC UK top dog Marco Amitrano an enthusiastic handy in its Sunday edition:
What even is this article lede?
Marco Amitrano is demonstrating how to lose an election. The now-head of PwC UK fidgets in his seat, folds his arms, and sheepishly avoids my eye. “If you do this,” he says, “that is what they [the electorate] notice.”
As I go to ask a follow-up question, Amitrano interrupts with an “aha!” Oh dear. It seems I have inadvertently folded my arms nervously. “See what you did there,” he laughs triumphantly.
And this?
On the top floor of PwC’s vast corporate offices, an architectural feat that is literally hung above London’s Charing Cross station, the boss is reflecting on his first year at the helm. He is sporting his typical business-casual garb: a navy blazer, tailored by Thom Sweeney, on top of a thin jumper — no shirt and jeans. With his dark glasses, bald head and slight stubble, Amitrano looks like an accountant-rendered version of the US musician Moby.
Halfway through the article we finally arrive at the point:
Amitrano insists the worst of the restructuring is behind PwC. “The scale of the drama associated with last year — I wouldn’t expect that to repeat,” he says.
“When I see an organisation resetting or reshaping, including making redundancies, [I ask] what’s that about? Are they failing … or are they raising the game, changing the game?” He says his firm is in the latter camp.
Given all the cuts, Amitrano could be forgiven for feeling dour. But looking out on to the sweeping views of the capital, he is in a bullish mood. “We’re about to enter the golden age of the Big Four,” he says, excitedly.
Color us skeptical, we don’t believe this. Not after this happened just a year ago: PwC Forces People Out and Then Tells Them to Fib in Their Farewell Emails
In Singapore, we get details on a case involving money laundering, conflicts of interest, and ass-beating.
Wanting “quick cash”, a director of a company allowed others to control its bank account, which was later used to receive crime proceeds totalling nearly US$1.68 million (S$2.15 million).
In an unrelated incident, Alson Tong Shao Tian, 37, also rained blows on another man.
His company, Ambite, categorised by the Accounting and Corporate Regulatory Authority as providing “management consultancy services and wholesale trade”, was fined $10,000 over a charge relating to money laundering.
The man was sentenced to one year, three months and two weeks in jail along with a $4,000 fine.
Haven’t seen much buzz around this new lawsuit: Deloitte Accused of Ignoring NFT Exchange Mark For AI Tech
Digital asset-exchange platform Zora Labs Inc. sued Deloitte Consulting LLP over its use of the “Zora” trademark for its new “digital workforce” AI platform.
Deloitte announced Zora AI in a press release on March 18 soon after launching Zora.ai, identical to plaintiffs’ domain Zora.co, according to the complaint filed Wednesday in the US District Court for the Southern District of New York. But the accounting giant hasn’t filed a trademark application for “Zora,” which Zora Labs says it’s owned since March 2024.
Note: Zora is a client.
Merri C. Moken, the partner at law firm Brown Rudnick representing Zora Labs, had this to say:
“Zora is a client of Deloitte Tax, and was disappointed to see Deloitte Consulting adopt Zora’s mark without permission,” Moken said. “After making multiple attempts to resolve this matter amicably, Zora was ultimately left with no choice but to seek a restraining order to prevent further infringement and harm. We are confident the court will restrain Deloitte and find Deloitte liable.”
Jonathan Gandal, Managing Director, Reputation at Deloitte, said the suit is meritless and the firm intends to defend itself “vigorously.”
Surprised Nintendo hasn’t sued them too, we all know how litigious they are.
Docket report from Justia here.
We’ll do a deep dive on the Deloitte whitepaper featured in this Times of India article shortly:
India-based Global Capability Centres (GCCs) have emerged as strategic hubs for multinational companies to manage complex global tax operations, including corporate tax, indirect tax, transfer pricing, and litigation, according to a whitepaper released by Deloitte India.
“GCCs have become an integral part of the global tax ecosystem, providing organisations with a competitive edge in managing their tax functions,” the whitepaper noted.
Completely unrelated to this is an EY study:
According to an EY study titled ‘The First Firewall: Background checks as India Inc.’s frontline defense’, employment frauds have surged significantly over the last year. In cases of fraud, most offenders were experienced professionals: 96% in healthcare, 88% in financial services, and 79% in IT/ITeS had already spent a few years in the workforce.
Arpinder Singh, Global Markets and India Leader, Forensic and Integrity Services, EY said, “Employment fraud has been a longstanding menace in India. To tackle this, today, employee background checks have become a non-negotiable across sectors. As we rapidly adopt technology in the workplace, the risks associated with it are evolving equally fast. HR professionals are struggling to keep up with the changing landscape of hiring frauds in India.
KPMG lost in court and is still dealing with the aftermath of Silicon Valley Bank’s collapse:
Silicon Valley Bank Financial Group’s auditor KPMG LLP, along with its underwriters and a number of former executives and directors must continue to defend themselves in a proposed securities class action over the bank’s collapse.
The investors suing KPMG, underwriters including Goldman Sachs & Co., and others adequately alleged their claims under the Securities Act and the Securities Exchange Act, Judge Noël Wise said June 13 for the US District Court for the Northern District of California. Wise denied three separate requests for dismissal in her ruling.
That was plenty to chew on for a Monday morning, eh? Email or text if you have anything of note you think should be on our radar and have a great week!