Oh My Fraud

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[00:00:15] Introduction

Caleb: This is Oh My Fraud, a true crime podcast, but instead of Inspector Jacques Clouseau, we have Jacques Clouseau, CPA. Hello, I'm Caleb Newquist.

Greg: Hello, I'm Greg Kyte. We're so glad to have you joining us for this episode today.

Caleb: We are. It's kind of a different episode, Greg.

Greg: Yeah, it is. Tell them why.

Caleb: Well, it's an interview or a conversation that we had with Francine McKenna, who I've known for quite a while, and I've never met in real life. But you are brothers from another mother of going concern, sort of.

Greg: Let’s just say siblings from another parent.

Caleb: Okay. Right maybe that was not as elegant as it could have been, but in case.

Greg: You're good. You're good. We're good.

Caleb: Yeah. Anyway, if you've worked at a Big Four firm over the last, I don't know, 10, 15 years and like kept up with the chiefs may in the accounting world, chances are you've probably read Francine's work. She's been an independent journalist, covering the Big Four accounting firms. And she mostly focuses on audit. And she's published at Forbes. She was a columnist at Forbes for a long time, or had a column at Forbes, American Banker, Financial Times, her blog is called “re: The Auditors.” I think it's now a part of her Substack, which is called “The Dig”. So, if you like newsletters, get her newsletter, at Substack. But she was also a transparency reporter at MarketWatch from 2015 to 2019. And she’s soon to be joining the faculty at the University of Pennsylvania, and the Wharton School of Business there. So, she's big time.

Greg: Yeah, if we're going to have a guest on this podcast, we got ourselves a legit guest on this podcast. And Caleb, I'm excited to... because we had an incredibly engaging conversation with Francine. And apparently, according to our producer, we're just going to parachute in to the portion of the conversation where we were talking about the effect of COVID on auditing. So, with no further ado, join us in our interview in progress with, the one and only, Francine McKenna.

Francine: It's not clear what the next step is, because nothing is coming back in a consistent, smooth, predictable way.

Greg: Great. People are still expected to go out to their clients, and we were all set up to work remotely, but the expectations are still go to the clients and then you don't know what's going on with the clients. I swear near the beginning of the pandemic, I read a couple of things, maybe in the Journal of Accountancy, about how that screwing would specifically like inventory audits and the whole existence assertion of auditing standards. But I just read something that says, yeah, this is hard, and people are kind of doing a couple things that are interesting. And what what's happened with all that?

Francine: Well, we've had a lot of mixed messages from that. So, in the lead up, you had people expecting to hear how is this all going to work? How are companies going to do the work with everybody remote and maintain the controls over all of the processes? And then how are auditors going to come in at your end? And now we're at two year ends where there might be a lot of places where everybody is still remote that works there, and the auditors are like, "Can I or can I not go there in person?"

And we thought that we were going to hear a lot more about how exactly that happened. How did they make up for the fact that you can't look at stuff or look people in the eye or do things physically? And I co-authored an update for SOX on Sarbanes-Oxley controls for IT auditors.

And there was a whole big section that we wanted to talk about, well, what happened at last year end, and what can we expect going forward? And what was clear is that we did not get a lot of guidance from the PCAOB from the audit regulator. We did not really hear a lot from the firms in terms of practically how did they do this, which tools. I remember an editor actually had came back to me and said, "Do you know whether or not the audit firms actually used any kind of remote cameras or how did they actually view what was going on with the clients and stuff?"

And the thing is, is that it was never explicit. So, then you had a whole bunch of people saying, “Wow, so what's going to happen with the inspections of the audits from 2020?”

Greg: Yeah, with the PCAOB inspections.

Francine: How in the world could we have good audit quality, given the fact that this whole thing was up in the air?

Greg: Right. And just to make sure I understand what you are saying, because I remember that from the little thing I read was that some of the inventory audits could be like, "Okay, you will face time this whole thing, and you turn your camera around and I'm going to ask you to point your camera at certain things and you do that.” And it totally brings back to my mind that it's the case that I assume we all studied in school of the company that had like the salad oil-

Francine: The salad oil.

Greg: Where it's like, you can totally salad oil with very little skill at filming.

Francine: Right. Or Z, Z, Z best who was shipping bricks.

Greg: You're right. Right.

Francine: So, you have this expectation that one, it was going to be hard at the companies to do things with all of their people remote. Then secondly, the auditors come in and how are the auditors going to do an audit if they can't come in. And I always talk about things like tone at the top. In the end, the auditor has to look at the CFO and the CEO and the board and the audit committee. They have to look them in the eye, and they have to make sure that they believe that what they're getting from management is true and real. And you want to look people in the eye. And we all know the challenges of video and Zoom and all the different video tools. It's not the same thing as being in a room, being in a conference room and confronting people or looking people in the eye.

So, then we looked and said, okay, the audits took place in 2020, the companies produce results, and then the PCAOB came in and inspected. And we had one firm, PwC, that had had a really lousy 2019 inspection results situation, like unexpectedly lousy compared to previous years. Like suddenly they were in the doghouse on the defensive.

But their head of audit, Wes Bricker, who used to be at the SEC started talking about how they were going to have almost a perfect score. He knew from like January 1, 2021, that they were going to have a perfect score. I was like," How does that happen with all of this other stuff that's going on?" And lo and behold, they produce the inspection results for the 2020 audits about a month ago or so. Caleb, correct me if I'm wrong. And Deloitte and PwC had almost perfect results.

Greg: That sounds like a classic corruption right there. He still knew somebody, and he pulled some strings.

Francine: Or the alternative is that-

Caleb: Are they just studying to test.

Francine: Well-

Greg: No, there you go.

[00:08:11] Did auditors relax inspection standards during Covid?

Francine: That was the KPMG issue. But the question is, is did they relax the inspection standards? Did they say everybody gets a pass? Companies are going to pass-

Greg: Because of COVID. Yeah.

Francine: For financial reporting. Auditors, you need to give the companies a pass, and regulators, you need to give the auditors a pass. Did everybody get a pass because of COVID and pandemic and this lack of access? Well, when are we going to see this gerbil come out the other end of the boa constrictor? When we see this lousy financial reporting lousy auditing come out the other end and show up with-

Greg: You know where this is going.

Francine: Frauds and receipts and all of that.

Caleb: I guess, you know-

Greg: Where's it going Caleb?

Caleb: Well, I think if fraud occurs then, we'll just give the perpetrators a pass. No. Fraud was allowed in 2020. It was a hard time, it's a hard time for everyone. Some people maybe did some things they shouldn't it's all understandable, so fraud, you get a pass.

Francine: We were all under pressure.

Greg: No, it's the movie “The Purge” but it's just a long form. Where you've got two years until we get the right amount of booster shots. You've got that amount of time-

Francine: Is it only two years?

Greg: What was that?

Francine: Is it only two years? I mean, we're going on two years now. So now we're going to have 2021 results. We're still in a limbo situation. When is this going to-

Greg: Well, yeah, I mean that's the question everyone wants to know not just because they want better audit results but because they want to go to a movie. To see The Purge.

Caleb: Yeah, they want to go to the movies and not have to wear a mask.

Greg: Right, exactly. Be able to sit next to a stranger like we used to do.

[00:09:57] Estimate of how many articles Francine has written over career.

Caleb: So, Francine, I'm curious. I was trying to look through your archive today just to see how many articles that you've written about fraud in the last 15 years or so. I mean, do you have any idea? Like it's got to be, it's certainly dozens, maybe hundreds?

Francine: Well, it'd be interesting to divide them between the ones that I wrote after there was some kind of enforcement action or legal action, versus the ones where we wrote about it, and it just kind of fizzled out and nothing happened. So, I think about the cases like Herbalife where nothing really happened. Valiant where nothing happened, which is Bausch house where nothing happened until years later. And it was a dribble just sort of a little thing.

I've written probably 1000s of articles, if you were to go to the blog, the Legacy blog, read the auditor's, I can count the number of posts, although some of them are not my lengthy detailed reporting. But I probably have 2500 posts. I tell people that I probably have 10 million words on that Legacy blog. And that's what's stopping posting actively there when I started working at MarketWatch in 2015.

It's one because I write long, but two because during that period of 2006, 2007, 2008, 2009, 2010, I got in at the beginning of an amazing situation in terms of people actually paying attention to accounting and audit. And that is the beginning of the crisis. I couldn't have picked a better time to start writing and try to get people to pay attention to accounting. It wasn't easy at the beginning, but as they started paying attention, really the Lehman case, the Lehman Ernst Young case was the catalyst, I could have written three things every day. I mean, it was just unbelievable.

And I feel like it's that way right now. I have a list. Actually, I had a sit still last night because there was so many things going through my head, so many people calling, so much stuff going on Twitter. I had to sit and make a current editorial to do list. And I probably have 10 things on the list. I put two in the pipeline last night in terms of actually asking for comments. As you know, Caleb, we got to work ahead. Because I still follow the journalistic process and ask for comments and let people know and et cetera.

I have a couple of people working with me, one in particular, who's a data journalist, so he's throwing stuff at me constantly. He likes to write about crypto and GameStop, Robin Hood-

Greg: The meme stuff?

Francine: The new stuff. Yeah, the meme stuff. And he's always looking at sentiment analysis and what happened next in terms of companies that are specking or IPO and tech. So, there's just an enormous amount of stuff to write about. And Jim Chanos, the famous short seller is on Twitter constantly saying this is a golden age of fraud. We are really, really out of control right now. Really out of control.

Greg: With fraud, specifically?

[00:13:19] Auditors playing whack-a-mole.

Francine: With fraud and with the complacency. Or, as I say specifically with regard to the auditors and auditor independence, it's the regulators are just playing whack-a -mole. They cannot keep up; they cannot address the fast enough. They still are approaching things with the same old diligent legal process. They're still entertaining crap from the defence lawyers. And everything takes way too long. And we're not taking people out of the game. So, they keep slapping risks, and then they wonder why these people pop up somewhere else doing something like the specs?

I mean, if you went through the specs, the hundreds, thousands of specs that have come in the last 18 months, you can easily find bad actors from previous enforcement actions. They're all over the place. And yet, why can they do this? Why can they become officers or directors of new potentially public companies? Because when they were called out before, the SEC did not take them out of the game, did not give them a buyer. Why do we have Elon Musk now contemplating going back again and being chairman of Tesla. Why is he named Time man of the year?

Caleb: So, if it's the golden age of fraud, and the article that you wrote or the newsletter that you wrote, I guess it's been a couple of months ago now about basically there's this myth, you call it a myth, that auditors don't have an obligation to find fraud, then I think the lagging indicator on this stuff will be some shitty auditing.
Francine: I think so. And we've already seen that. Yeah, I mean, we've already seen that. So, I wrote another article, an op-ed for the Financial Times that showed up last week. And it was about non-GAAP, non-standard metrics. So, this is a global problem. This is a problem all over the place. You have companies reporting everything, but the standard accounting metrics, GAAP or IFRS. And they're crowding out the actual accounting numbers with all of this other alternative stuff.

And the regulator's, again, are helpless to do anything about it until it gets to be super egregious. I've told a lot of potential, whistle-blowers, or these amateur research analysts, you are not going to get anybody to pay attention to non-GAAP abuses, unless it translates into the executives trying to make out on their compensation unless it goes all the way. In other words, they're using those alternative metrics in order to goose executive comp. That's where the SEC has stepped in, that's where there have been lawsuits and et cetera.

But otherwise, the standard setters, the FASB and IFRS, are kind of helpless, like more disclosure is their solution, or in case of the US, "Oh, well, then that must mean GAAP is not good enough. Let's just create another project for FASB that's going to take 14 years to realize in some of our teen crap that they need to send out 92 white papers in terms of guidance.”

And so, they're just kind of stymied because we're allowing companies to produce earnings reports that are devoid of actual accounting numbers. They may have them at the bottom, they may have them mixed in, but the focus is always, how do I want to tell the story? It's a narrative. And you see that with to the extreme in GameStop meme stuff. It doesn't matter. You see that to the extreme in crypto. It doesn't matter what's going to happen, even next week. What's important is, how do I take advantage of the trade right now?

[00:17:31] Auditing standards make it clear what they should be doing.

Caleb: So, you point out in that newsletter… Since you mentioned accounting standards, and you point out in that that newsletter edition from October, you point out like the auditing standards make it pretty clear. And so-

Greg. Wait, make what clear?

Caleb: Well, the auditing standards say that audits have to be... there has to be a risk assessment. And keep me honest here, but there hasn't been a risk assessment and planning of procedures to detect material misstatements due to error or fraud. And so that's part of what audits are designed. That's what part of audits are designed to do.

But if I hear you right, the companies, their focus is on telling a story that they want to tell about their business. And so, if an auditor says, "Well, there's not really a big fraud risk there,'' they can design it however they want. And as Greg has pointed out to me in the past, it's like, if somebody says that something isn't their job, then I'm going to take them at their word that it isn't their job. So, how are they fulfilling their duty, but also advocating? They're basically advocating their duty but fulfilling it. They're basically checking the box, but then advocating the substance of what they're really supposed to do. Is that kind of where you fall?

[00:18:48] Using non-GAP metrics to fudge the numbers.

Francine: So, let's think about it from a hierarchy perspective. Why do companies exist? Public companies exist because they're producing results, and those results translate into a share price that their shareholders and other stakeholders benefit from. So, the company is focused on the share price. And that is a whole nother discussion about shareholder primacy and focusing on the share price in terms of why are you even in business as a public company? But if you focus on the share price as the ultimate metric of whether you are a successful company, and you're driving everything towards how do I fulfill this goal of the share price, that has absolutely nothing to do with the audit or the quality of the audit or the quality even of the underlying accounting anymore.

Because companies can drive the share price and could drive the perception of the company's success via metrics that are completely divorced. As I say in the FT column, completely divorced from the fundamentals, divorced from the reality of the accounting numbers. So, you have non- GAAP metrics, alternative metrics that are transforming losses into adjusted profits. You have alternative metrics that are decreasing losses or increasing marginal profits, that are making companies able to be analysts estimates which are established on an alternative metric basis, beat analysts estimates, not just match them, but beat them not just by a penny or two, but Jake Welch used to shoot for GE, but beaten by 10, 15 cents.

In other words, you get the big oomph so that you get that one-day earnings release, movement of the stock that everybody takes advantage of. Volatility traders love volatility. And these retail traders that are operating on a mean basis, or these other opportunities in other markets like crypto are operating on volatility. It doesn't matter whether it goes up and down, it matters whether it moves a lot. And so being able to move the narrative, the audit doesn't matter at all. So, the ultimate example of where the audit doesn't matter at all, or if the auditors detect or don't detect fraud, or whether there even is fraud, are the companies that were never audited at all, like Theranos.

You have people investing an enormous amount of money, and never asking for audited financial statements never demanding audited financial statements. The company up with 7 billion or multi billion-dollar valuations. And you have the same thing with companies that have been serial, problematic companies like GameStop or Activision. I mean, you name it. Every gaming stock I've written about in MarketWatch. And over and over and over again, they abuse the GAAP accounting, and they even abuse the alternative metrics, and yet, they're being viewed as a trading opportunity because the management is able to change the narrative by just telling the market whatever they want on earnings day.

Greg: But just to make sure that I'm clear on this, because I would assume if any company received less than an unqualified opinion from the auditor, that didn't-

Francine: That never happened. That never happens.

[00:22:46] Audits don’t matter if companies never get a bad report.

Francine: It doesn't happen.

Greg: Okay. Right. So, which that right there is the whole point you're trying to make that the audits don't matter because no one ever gets anything except an unqualified opinion.

Francine: Right, it's like WOBEGON. All the children are above average. If an auditor is ready to impose a material weakness in internal controls, Caleb, you know, this, we've seen over and over, the auditor gets fired. They hire another Big Four auditor who's ready to jump in there and work with the company to figure out how to work around it. And even if they report a material weakness or a restatement, it's like, oh, old news.

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Francine: Lordstown, I wrote about a few months ago. That was a perfect example where you had Lordstown just non-stop creating narrative and yet it had all kinds of crap hidden under the covers. And when they were forced to restate their accounting because of the spec war issue where the SEC said all the specs have to restate all the warrants from equity to liability, they issued an amended 10-K and then shoved a whole bunch of stuff into that amended, 10-K including a going concern morning, material weaknesses, additional corrections that caused them to go into a going concern situation. And they thought, oh, it's an amended 10-K. Nobody even reads the K’s or the Q's. Nobody even is going to read it amended 10-K. And they thought they were going to get away with that. The only reason why they didn't get away with it is because Lordstown was such a highly scrutinized stock that there are anal retentive nerves, analyst type wannabes, who are watching every single thing that's written even if it's on a post it note about some of those companies.

So, they spotted that in the stock tanked. But Lordstown still going. They fired the executives, but those guys still sold stock when they were faking it for 18 months before they actually acknowledged all these other problems, they hid SEC investigations within that amended 10-K. So, they had a whole bunch of stuff that they had never disclosed. And they tried to hide it in an amended 10-K because they knew or thought nobody looks at the filings. Anybody pays attention to, for the most part, in terms of active traders, is the earnings releases.

[00:26:37] We’re in a postmodern era.

Caleb: So, it kind of sounds like… And maybe I'm overstating this, but it almost sounds like we're in kind of… it's kind of a postmodern era. So, if the modern era was that you have these SEC filings and you have these rules and people follow all these rules, but now if none of that stuff matters, but it's all still going on, it's kind of evolved to this point where it's… I don't know this. I'm kind of perplexed-

Francine: What is it when you have a whole book of rules and nobody pays attention to them, but nobody gets punished for not paying attention?

Greg: It's postmodernism where nothing matters and everything's fake.

Caleb: Right. That feels like postmodernism.

Francine: Yeah. There's a term that I learned as a fellow at the Stigler Center at University Chicago Booth a few years ago. There's an active effort, in some cases by companies, to make sure there's a certain level of regulation and a certain level of regulator activity in order to give the market the appearance that there's something regulatory going on.

Caleb: So, wait, there's a term? They’ve got to come up with a term.

Francine: Yeah. But the regulators are captured. And the regulation process, the regulatory process is corrupt. Because they're the revolving war and regulatory capture. So, you have this appearance of so this is why the tech companies are not so actively lobbying and getting involved in regulation over privacy. This is why the crypto firms are right now trying to propose their own structure for regulation of the crypto industry. They're trying to create a structure that gives the appearance that regulation is going on. So, then they have cover. Then they can operate within that structure that they know is captured or corrupt or-

Caleb: Or they design themselves, that they wrote themselves.

Francine: Right.

Caleb: Right. Yeah.

[00:28:58] The push to put PCAOB back in the SEC.

Francine: Right. So that's what happened with the PCAOB. I wrote several months back when Trump was trying to mould or push the PCAOB into the SEC, they thought, oh, budget, whatever, like there's duplicative activity. Push the PCAOB back into the SEC. That was the original idea that some people had when Sarbanes-Oxley was passed-

Caleb: I remember.

Francine: Harvey Pitt was a big proponent of that. They never wanted a separate independent agency. However, that's kind of not a good idea for the firm's for the for the largest global accounting firms. Why? Because if you eliminate a separate independent regulator, then you sort of told the markets and told everybody else and the critics and consumer and investor protection people there is no separate regulator.

But if you create a separate regulator, but it's one that's weak and captured and affected by the revolving door and can be completely corrupted by a firm like KPMG, then you get to operate and continue to operate whatever way you want. I think that there's a regulatory process. I think there's inspections. They think we're people with their eye on the ball.

Caleb: I think I have the word for it.

Greg: What's the word Caleb?

Caleb: The word which I think is nihilism. I think that's where we're at. Does that sound right?

[00:30:56] Audit firms aren’t selling their ability to catch Fraud - so is it their responsibility? Greg’s plumbing story.

Greg: I wrote that down. I wrote down nihilistic accounting. It's on my notes. Me too. Nihilism, I have it underlined. Oh my gosh.

Francine: (inaudible)

Greg: Here's the thing. Caleb, should we turn the corner? Because actually, we wanted to orchestrate a fight, Francine, between you and me about fraud and the detection there of in audit setting. Because Caleb sent me an article that you wrote, which apparently is one of many where you're like, damn it, auditors, this fraud was hanging right in front of you, and you didn't do a damn thing.

Francine: Get over yourself.

Greg: Yeah. And for me, I'm very much of the opinion that at this point in time, and I'm trying to divorce it of whether it's right or wrong, but what we've found is that we've got audit firms, they're not selling, to clients, their ability to catch fraud, they're selling to clients that they can navigate the complexities of audit standards to come to a result.

So, for me, I liked it. So, I just had plumbing problem like a week ago where I had a leak. I was trying to fix my toilet I had overconfidence in my own abilities. I pull the hose that goes from the wall of the toilet off that was leaking. I was like, no problem. I got this cap, and I ended up stripping the threads. I had to get a plumber that came over my house at 10 o'clock at night so it didn't flood my basement with this whole thing. And they came over and they did the job I wanted. They came in and they fixed the pipes so that my basement didn't break.

I'm not going to go back to them next week and go, "Why the hell didn't you tell me that my water heater was about to go out too." Because that's not what I hired him for, I hired him for the leak. So, I liken that to the auditors where I'm hiring you to make sure that my books are devoid of material weakness, regardless of where it comes, fraud or anything else.

Francine: So, let's think about your water heater potentially going out as a golden concern warning. It's because it's a matter of judgment and discretion. You're going to look at it, and you're going to say they were in there to fix something else. And maybe somebody happened to see your water heater and they looked, and they said, "You know, this thing is quite old?'' He bought... this is like 20 years old, this water heater. And I see some corrosion blah, blah, blah. And it doesn't look like he's got this under warranty. And there's a little bit of leaking down here. And in my judgment, this could last another five years, or it could blow tomorrow. I'm not sure. So, what do I do? And they already were in, and they are going to give you an expensive bill for-

Greg: Oh, and it was expensive. I could have bought a whole new toilet and I'm smart enough to just replace the whole damn thing. I could have got like a Donald Trump level toilet for the amount they charged me.

Francine: And you said, "Man, we got two bathrooms here and you put one out of commission while you fix this and my wife is going bitch at me and so, get the hell out of here as fast as you can. I don't want you hanging around. I got things to do places to go and we got to do.''

Greg: Yeah, it's 10 at night, I got to go to bed. Yeah.

Francine: I don't want to spend any more money or time on this equation. The necessary don't be trying to upsell me to the gold standard or whatever, if anything. Except if these guys spot this, if they're there, and they see this and they look at you and they look at you and your nine kids and your wife.

Greg: I am in Utah. Is that a dig at Utah that I have nine kids?

Francine: And they go, “What could happen to this family if we don't say anything, and we let this water heater blow?” Yeah, they'll call us, it'll be an emergency. It'll be winter. We'll really, really you know rake it in.” But is this really something we should do? Should we let this go just because we don't want to hear this guy pitching it as for spending a little bit more time or trying to get him to spend a little bit more money now, and he might not want to.

And this is the exact situation that the auditors are in. Let me go back to, Caleb asked me about the article I wrote, which is basically repeating something I've written over and over again, from probably 10 years ago, I'm trying to remember when the PCAOB first put this document out. But I was sitting at a standing advisory group meeting their advisory group one day, and they put fraud on the agenda. And I was like, “Holy Toledo.” And I was in DC, and I'm sitting at this meeting, I'm like, “Oh, this is going to be a really spicy conversation.” And instead, it was a conversation about the reporting of how the auditor does or doesn't tell the client what or what they're not doing about fraud.

[00:36:07] Amazing document auditors had made but didn’t make public.

Francine: But underneath the covers, not for public view on that day, but available to the public later, they had put together a comprehensive, incredible document, that was my dream document, which is, let's go back and look at every single standard related to auditing that relates to the assessment, planning, detection and post a realization of fraud at a client. And it's an amazing document because it references every single standard and law that was in place at the time. Some of them have been updated, but in general, the whole spectrum still exists. All the way from do you even except an engagement with a client that you know is a problem child.

[00:37:04] Herbalife example.

Francine: So, let's say for example, when Herbalife had to look for a new auditor, because the KPMG partner there was inside trading against its information, Scott London. And Herbalife said, "Man, we're going to have to find a new auditor." But that wasn’t everything that they were dealing with. They were also under an enormous siege by Ackman, the short seller, who was saying it was a total multilevel marketing fraud. It was trying to get the SEC and the DOJ to shut him down for good, as a multilevel marketing fraud. And then there were hints that they were also having some bribery issues in other parts of the world.

Greg: Wait a sec, just to make sure I'm clear, so you're saying that there was a short seller. So, he had a financial interest in the demise of this company, and he was the big push to get them shut down?

Francine: Well, there was like a lot of cases of someone who had done the analysis and had determined that this company was potentially committing all kinds of fraud and breaking laws and was bringing that to the attention of the regulators and law enforcement and saying, “This company should be put out of business.” Now, you can argue whatever, that he had a financial interest in doing that, but he was also highlighting the fact and reported it to the regulators that this company was potentially violating laws and fraudulently reporting its results.

Greg: Oh, just a second. So, I'm not trying to besmirch that guy because it's a cart and horse kind of thing, too. Because if I found out that some big company, like if I was like, Oh, these guys are 100% committing fraud,” I would want to short them too, because the frauds eventually going to implode them.

Francine: He wasn't the only one. He was just the one that had the financial wherewithal to put a financial stake in putting money where his mouth is.

Greg: Got you.

Francine: But there were a lot of people who had heard for a long time said Herbalife had lots of issues. So, all this was going on, and then they find out that the KPMG partner in charge in California was trading on information that he was obtaining from sitting under annual meetings and other meetings. It's quite hard to switch out KPMG who had been there a long-time auditor. You think like a problematic company like that might have trouble finding a new auditor. Oh, lots of take on this risk. You're going to have a lot of work to do. It's not going to be an easy road to hoe, except bing-bang- boom, PwC was in there clickety split. Took on the assignment, and they even had independence violations.

Greg: PwC did?

Francine: PwC was doing consulting work or other units of Herbalife. And the SEC gave him a pass because it was such an urgent situation.

Greg: It's kind of like COVID.

Francine: PwC walks in. So, number one, do you even take on risky clients? Do you even, as a firm, give them the benefit of your brand if they're a bundle of crap?

Caleb: If they're a big ball of fraud.

Francine: Right. So, the same thing happened with the Chinese reverse mergers. You name it, there's lots of examples of that. You have companies that are very problematic, that have had lots and lots of stuff going on, that have investigations of this or that, but they're potentially going to be delisted from US exchanges, like other Chinese companies. And yet, there is no shortage of companies or firms, even Big Four firms that are willing to be their auditor.

[00:40:45] Questions auditing firms should ask themselves before agreeing to represent a client.

Francine: So, the first question is, acceptance and continuance. The firm has an obligation under the standards to really look at kick the tires and say, “Do we want to take on this company to audit? Do we have the skills and abilities and staffing? Do we have the knowledge and experience in that industry? Do we have the ability to go to all the locations that it has? Do we want to you deal with the management who maybe is a bunch of jerks?”

Caleb: Or just shady characters. Or just shady characters?

Francine: Well, whatever? Well, in many cases, it's very clear that some of the management have done other things before. So, that's step number one. Then, okay, we can take it on, we're ready. We're a big firm, we got a lot of good people, we know what to do with these people, and we can stand up to them. And we're going to do our public duty. And we're going to take this audit on because it's important to protect the shareholders in the markets. So, they take on that audit, then they go in, and they say, “Okay, we need to plan our first-year audit, we need to look at what the previous auditor did.” And we need to plan this audit, keeping in mind that it needs to be planned with an eye towards whether or not there is a risk of material misstatement due to error or fraud. And we need to do all that kind of, what do they call it, sitting around the campfire stuff?

Caleb: Brainstorming.

Greg: Assessment. Yeah.

Francine: Brainstorming stuff. And what we found in many cases, and there's lots of academic research is that the firm's go through that brainstorming process, and they document a whole bunch of crap, and then they never change the audit plan. They never change the procedures or the processes of the test that they're going to do. They never expand the scope, they never go back to the client and say, "You know, this is a little bit more risky or a little bit more difficult, or you know what, that unit down in Brazil or in Chine, we need to put that in… Many, many, many times.

Caleb: That seems like that would actually be the funest part of the audit where you're just kind of sitting around and you're saying, let's come up with some crazy things that aren't really that crazy. But also, aren't that crazy. Like you say, well, they got this Brazilian unit, and they seem to have hired mercenaries and or local mafia to do parts of their business. That seems like should we go check in. And what you're saying is, if you have that conversation, and you pick up the craziest ideas possible, but they're not that crazy, they're actually pausable, what you're saying is, they're doing all that, but then they don't change the audit plan. It's like, you know what, that mafia, we changed our minds, we think they're good guys. And we're just going to do what we planned originally.

[00:43:30] Wirecard fraud.

Francine: So, the classic case of that recently is Wirecard. You have stuff happening all over the Wirecard. You have lots of news reports that the people that they're doing business with are potentially shady characters, and that they're accepting payments for all kinds of adult entertainment and gambling, and they're partnering with people that have organized crime activities. And yet, Ernst and Young Germany didn't do anything different. In fact, they shut down whistle-blowers within their own firm who were telling them "I think this is a straw man, you know, I think there's a related party here that's doing this stuff. I don't think these clients exist, that they're telling you exit."

Caleb: They got the German regulator to go after the short sellers and the journalists’ network that were covering.

Francine: And the journalists. To say the journalists were in cahoots with the short sellers. So that's only two steps. This document that the PCAOB put together, starts with the beginning, which is should you even take the client on. Number two, when you take the client on and you look at it, and you scope out, like, how are we going to staff this audit and what are we going to have to do and how much are we going to charge them, maybe we need to be realistic and we need to actually go back to the client and tell them when we find out realize, hmm, maybe we need to do more work here in order to do a good job. Then you do the audit, and you actually find stuff. Then what do you do?

[00:45:16] Why do auditors let these fundamental things get through?

Francine: So, there's a whole set of standards of how do I assess the materiality of that particular situation. And we had a whole speech a couple days ago, last week, when we had the AICPA SEC PCAOB conference in DC. And we have the chief of enforcement from the SEC say, "I really don't understand why these auditors, these gatekeepers, are letting crap get through that is fundamental.'' The stuff that they've been doing enforcement actions for recently at Kraft Heinz, he named a whole bunch of cases recently. It's fundamental stuff. Where were the auditors? He said that in the speech. Where were the auditors?

Greg: Like it was that blatant.

Francine: And why are they making assessments of materiality that is only based on quantitative? The standard 10% or 5% test. They're not looking at the qualitative, like maybe the people that are in charge of this operation are known criminals.

Caleb: So, I want to bring something out here-

Francine: They're not looking at...or how would the investors’ view if they found out that Wirecard had been doing business with shady payment processors in the Philippines and never went down to the Philippines, actually, check the bank balances.

[00:46:28] $1of fraud is fraud.

Caleb: I want to bring something up that Greg and I talked about a lot and what you're describing. So, everything you're saying makes sense to me. And so, Greg and I do a lot of ethics webinars, and the thing that is coming to mind for me, Greg, is that if they focus on the quantitative aspect of the fraud and they say, "Well, you know, it's immaterial.” But Greg, if we talk about it in an ethical context, $1 of fraud is $1 to many if you talk about it in the qualitative sense. And it also primes that company or primes that unit, wherever the fraud is occurring, that prime's that particular aspect of the enterprise to perhaps engage in more suspicious or untoward activity, which means that it has the potential to fester beyond the $1 of original fraud. You see where I'm going with this?

Greg: Yeah, absolutely. Yeah, festers and grows. It's opening Pandora's box. You crack it open, and then you go, “Oh, nothing bad happens,” so then you continually open it wider and wider until you get massive scale fraud.

Caleb: If you think about it in that way, doesn't the question of materiality become very different?

Greg: Well, in materiality with fraud. And Francine, I mean, you know this as well, there is no materiality threshold when it comes to fraud. If you find $1 fraud, it's fraud.

Francine: Not necessarily. There is no materiality threshold for Foreign Corrupt Practices Act for bribery, that is illegal activity. But when it comes to fraud, if you are like, let's say in GE, and you're down and some teeny, weeny little unit in Long Island or something like that, and you have a secretary who was embezzling $10,000 or whatever, to GE, that's immaterial. But to that particular company and to the business unit, it's illegal activity. And certainly, if you're an auditor and you were to find out about that, you have an ethical and an illegal obligation as a licensed professional to raise that up. But that doesn't mean that it's going to show up in the audit report. That doesn't mean that you're going to give them some kind of a compromised opinion. It means that you have to watch, you have to look at these situations, and you have to make judgments. But you can't ignore as a professional.

So, when we're talking about auditors looking the other way when something is qualitatively material, in other words, investors really would care if they found out that this situation, this would move the stock versus something that is a huge number that actually has a significant impact on the financial balances, the balance sheet or the income statement balances. When it comes to making a decision about whether an auditor should highlight that, raise that up, adjust their procedures, look at whether they can trust management, it's all the same. It's all the same.

So, let's go back to you're in the middle of the audit, and something comes up and it's sort of on the on the border. You're not really sure, is it material to the financial statements in either quantitative or qualitative perspective. Will this error or this fraud, in other words, something that's going to misstate the financial statements because of an error or fraud, is this something that the auditor needs to address in terms of changing its procedures and potentially highlighting in the opinion, maybe look at like a critical audit matter mentioned, like this is a highly risky area because we've seen sort of slippage here, whatever. What should we do?

[00:50:21] Formal vs informal consultation with national office partners of firms.

Francine: So, what do they usually do? Well, that's what the national offices of the firms are for. You call up the national office partners, and you say, “I need a consultation?” Do you want a formal consultation or an informal consultation? What's the difference? Well, an informal consultation is I call my buddy that I think may give me a good reading on this, but it doesn't go in the record, doesn't go in the database. I don't have to tell anybody whether he tells me-

Greg: It's just a phone call. We talked about some things. So, no big deal.

Francine: I bounce something off my buddy. A formal consultation is we're at a crossroad. We think this is the issue. The client is saying it's not an issue. It's holding up, continuing the audit or filing the financial statements, and we need to get a u-turn. And we need to go to a higher power and get answer. And you go to the national office, and you get somebody on the line, and you have a couple phone calls or conference calls or whatever. And the national office guy says, “What the heck are you doing? This is a big client” We need to find a way to work with these guys. How can we make this work? How can we make it work so that we're not giving them a hard time about this? How can we reinterpret or reorganize the accounting, such that they can do what they want to do? Or this is not an error or we somehow net this against something else so that it doesn't pop out in a big way.

So, this is something that has been identified in enforcement actions at the PCAOB and the SEC many times, but it doesn't get much press. And that is when the actual guys that you're supposed to be calling for advice were supposed to be the arbiters of the firm standards and the auditing standards, and the accounting standards end up putting commercialism before professionalism. They put commercial interests of the firm, maintaining the client, relationship not making a CFO who's an alumni of our firm look bad, whatever. They put commercial interest before our professional ethical and standard requirements. Doesn't pop up that often. It happens all the time. There are many enforcement actions of this, and there's each actually some academic research that talks about how does this happen?

[00:52:57] Commercialismm vs professionalism & the KPMG scandal.

Francine: Why does this happen? Well, it's about the question of commercialism versus professionalism, which is a huge issue in the firms and is resurfacing again, as the advisory groups grow and surpass the audit practices in terms of money generators, the tax and the consulting. Why? Because the firms have an enormous amount of interest in maintaining these business relationships, in making sure that they don't make their alumni who are out at various companies look bad. And they are always torn in terms of the commercial versus the professional.

And the worst case, the most egregious case of this was the KPMG scandal. Where it was the guys in the KPMG national office, the national office, the guys who are supposed to be in charge of making sure everybody else follows the rules, who decided to steal regulatory data and do something illegal in order to polish their results.

Caleb: I mean, that's an extreme example. But I guess what comes to mind for me is like, and you can imagine this happening at firms of various scales, but you have the partner out in the field who finds something weird. And he goes to his superiors and say, “Hey, we found something weird. What do we do?” In ideal scenarios, the national office, if you're talking about a big firm, or if you're talking about a firm leadership on a smaller scale, the person they call up says, “Well, this looks pretty weird.” They might suggest additional procedures, additional inquiries, this and that, whatever. But what you're saying is-

Francine: Which costs time and money.

Caleb: Which costs time and money. But what you're saying is that it's the exact opposite. And you would expect the partner in the field to make the case of, well, this is an important client, this is important relationship to me, et cetera. But what you're saying is the opposite is happening. That when the conversations are happening, it's the people in the national offices. It's the ones that are supposed to be the objective, kind did you think about this? Did you think about that? Did you consider doing this? They're the ones like, well, we got to think about the business relationship here. We got to think about how important this is to our firm. And that strikes me as completely backwards. And I don't know you say these-

Francine: It is backwards. And I wouldn't say it unless I had seen over and over again and recently, national office professionals being part of the problem, not part of the solution. And that's not to say that an engagement partner, a client partner may be reluctant make a call because they know they're going to get an answer that says, “You really need to like push the client back on this or push back on this.” But the other problem is that not one firm, not one of the Big Four firms says that the national office decisions on these issues are the ultimate decision. In the end, there's an enormous amount of respect for each partner and their franchise, their client portfolio and nobody wants to take food out of somebody else's mouth.

So, if the national office level, in many cases even the largest firms, the national office folks, that's not a terminal assignment. In other words, that's not just the elder statesman who are going to retire in two years who get to go and be completely objective and independent and be the grouchy folks who don't have to worry about the result. In some cases, including in the KPMG case, those guys still had engagement responsibilities. They were still collecting accountancy income from engagements. They are not completely separated from the commercial interests of individual clients and the practice. And they're at the top of the practice, so they're getting compensated on this success of the practice and the success of the firm overall in the end. They're getting bounded on all of that stuff. So sometimes you might have a partner who goes, “Man I really need some help, I need some backup.” But what they're looking for is they're looking for backup to go and talk to a tough client and try to do the right thing and keep everybody's tail out of the fire.

Greg: Right. Or at least be able to say, “I'd like to help you out, but national offices, I can't.”

Francine: Right. But in some cases, you've got obviously really good people, ethical people, smart people in the firms, in all places, national office and at engagement levels. And you have people who want to do the right thing. And they go and they ask a question, and they realize, Holy Toledo, I never should have opened this can of worms. They're going to make me like back down because there's a commercial aspect to this. Or there's some other relationship aspect to this. I mean, how many CFOs in public companies are alumni of one of the larger firms? Lots. Chief Accounting Officer.

Caleb: Certainly controllers

Francine: You call out a problem and you're making someone look bad. You're ruining their career.

Greg: Although maybe it rightly should be ruined.

[00:58:29] What is the best fraud for someone to commit in 2022?

Greg: We're getting close to the end of time. I've got a burning question that I want to ask you Francine, while we got you. And that is if this goes back to what you said earlier, where right now is the golden age of fraud. So, with that in mind, I just want to know what your opinion is of what is the best fraud for me to commit right now since this is the golden age where I could get the most money and I could most likely evade any sort of repercussions.

Francine: I'm torn between create a token.

Greg: Crypto? Okay.

Francine: Versus sponsor some SPACs.

[00:59:09] What is a SPAC?

Greg: Okay. What's a SPAC? You'd said that before. Is that a non- fundable token?

Francine: No, no, no, a special purpose acquisition vehicle. So, it's basically a fancy reverse merger transaction where you have a bunch of people who have a brand name or experience in finance or venture capital or private equity or, whatever, money people. And they go out and they say, there's so much money floating around. There's so many rich people with money, they don't know what to do with it. They go out, instead of raising a hedge fund, they raise money within an acquisition vehicle that can go public with absolutely no operations, no revenues, no idea yet, theoretically, of how they're going to eventually become an operating company, but they raise money because they're such brilliant minds.

Greg: Great. Got you.

Caleb: And they got Shaquille O’Neal.

Francine: They have experience in running other companies and whatever. And the celebrity thing, just like in crypto, the celebrity thing matters. So, you've got interesting people that you want to hang out with involved. So, you want to be part of this-

Greg: Yeah, I do.

Francine: Right. So, you go out and you raise a bunch of money. And you create a complex structure that includes warrants and a reverse transaction that's going to bring some operating company that's out there that's private that doesn't want to go through the full IPO S-1 process and scrutiny by the SEC. So, this non-op operational, no revenue, no shell goes through an IPO, and then they merge with a private company that's already operational. So, I wrote in the newsletter about how Forbes media, where I used to write, finally went public. They just could not sit out this round. They finally went public.

And Forbes had actually become wholly owned by a Chinese investor. That's where they were. They were a private company wholly owned by a Chinese investor, a Hong Kong guy, and they wanted to go public. But they don't want to go through the whole process on their own. So, they get another company, another set of Chinese investors who are going to raise a bunch of money and they are going to give to in a reverse merger, they are going to give to the guys who are originally investing in the Forbes media outlet. And the neat thing about the SPAC process is that before the whole merger takes place or at the time that the merger takes place, or in the case of the Trump's SPAC for his new media company, you can actually take all the money off the table before the retail investors ever get involved.

Greg. Okay. Good.

Francine: Or you take all the money off the table right at the merger when it occurs.

Greg: Like is a commission. Because I'm so smart, I made this happen. So, I-

Francine: I made this. Deal-maker kind of-

Greg: Yes.
Francine: So right now, the Forbes thing is going to close early next year, but it's pretty much a done deal. But Forbes, the premier media outlet, is now double whammy Chinese owned. The primary investor, primary shareholder is a Hong Kong person, and the original guys who have brought the whole thing public who are going to take the money out are Hong Kong. And we're doing this in a period where we have all this rattling of cages about how we're going to kick Chinese companies off of the stock exchanges. So, that's a whole different element to this.

But in the Trump situation, they're talking about the fact that Trump is going to get hundreds of millions of dollars out of this transaction. And you have people buying into this or who want to buy the shares as soon as it combines with the Trump media entity, which absolutely doesn't exist yet. And they're so enamoured with supporting this effort that you're going have a whole bunch of retail investors holding the bag later. But the savvy guys are taking all the money off the table.

Greg: They'll be long gone by the time that happen.

Francine: We're actually going to take all the money off the table pre-merger. So, it's like a money machine. The SPAC’s a money machine.

Greg: That's it.

Francine: And the retail performance of the companies that have gone public in this process, somebody from Motley Fool put out a really nice chart where basically it goes from like negative 150% down to negative 20%. I mean, like in the last 18 months, almost everybody that's gone public in this process is a loser from the investment performance perspective. Because they're highly interested in what happens once the retail investors and once it gets on the exchange. They're interested in the deal making process and taking the money off the table and moving money around between ultra wealthy and private equity and VCs and Chinese investors and all kinds of obscure actors in this process.

Greg: I love it. So, here's the thing. At first, because you first said cryptos is a way for me to commit my fraud, so I was like, right on, I'm creating mechanic coin right now. But then, I think you effectively sold me on the SPAC where I just get to go, “Hey, give me all your money because I'm a smart guy.” And they go, “What are you going to do with it?” And I go, “Leave that up to me.” And then I just buy some crappy company and go, “This is my big idea and I'm getting a big commission later. It's off to you guys now.” I love it. That's perfect. This is my official resignation from the Oh My Fraud Podcast because I got other stuff to do. So hopefully down the road, I will be featured on an episode of Oh My Fraud for the Kyte SPAC case. That's what I'm looking for now. I love it.

Caleb: So, I know we're running short in time. So, I want to bring this home with two questions, Francine.

Greg: You don't think I brought it home?

Caleb: No, you brought it home fine. But if I don't ask these questions, then it's going to feel incomplete to me.

Greg: Okay. All right.

Caleb: Okay. I accept your resignation, Greg.

[01:05:36] Are there market solutions to the auditor and Fraud Problems? And is this the hill you die on?

Caleb: Okay. Number one, quickly, is do you think there are market solutions to the auditor and fraud question? So, like blockchain or their proprietary technology, could that make a difference this area? And the second question, and you can answer them both, is this the hill you die on, Francine?

Francine: In what regard? Do I give up?

Caleb: The auditor and fraud question, is this the hill that you die on?

Francine: So, the quirky thing about the technology approach, a lot of the firms are talking about how they're continuing to improve technology around the audit process. They're going to use all kinds of new AI and analytics and all kinds of things that they're going to do to try to make things more efficient. But the ultimate goal or the ultimate result of that would be 100% sampling. If you were to take the technology approach to the limits, which they're all talking about, they're saying they're doing it. But the ultimate result of that is that they could get to 100% sampling. None of the large accounting firms want to get to a 100% sampling. Why? Because then they have no excuse for not detecting any fraud.

Caleb: No cover.

Francine: And secondly, the partners, the people in charge of the fraud at the firms, they want to maintain a certain level of judgment and discretion. They do not want to have the answer be, the data says this is or isn't the way it is. They want judgment and discretion because that is how they manage the relationship with the client. That is what they hold back. That is what they have to offer. They are the arbiter. They are the ones that sign the audit opinion. It's a necessary evil. So, they have that they can hold over the client in the end. And if the answer is in the data, if they have no judgment and discretion left, then they have nothing to sell. You don't need a partner showing up at the meeting and saying, “Well, in my experience and according in my interpretation of the standards,” blah, blah, blah.

Greg: So, to sum up, you say you're thinking that technology could make a huge difference, but there's going to because-

Francine: They'll only go so far.

Greg: Because egos and dollars are going to prevent it going into where it should go.

Francine: Of course. It would defy or violate the ultimate sort of thing that they've got left, which is they do not want to have fraud steering them in the face that they have to answer and react to. They want to maintain a certain wiggle room to interpret or decide.

Greg: Right. There's no plausible deniability if you're omniscient.

Francine: Right. Exactly. And the second thing is, is this a hill I'm going to die in? Well, the thing is that I feel like there's no point in constantly reminding because, to me, it's all there. There's been litigation, there's been lawsuits like colonial bank where the judge said it, the standard setters and the regulators say it, and actually some people are repeating it. So, at the PCAOB and the SEC, I've heard it in speeches. The auditors have an obligation to assess and plan for and detect fraud. It's in the standards. The problem I'm having right now is that I used to think that we could reign in the bad actors in the audit industry with more enforcement, with more jail sentences. So fine sanctions sort of letting some people stay at the firms, kind of giving people a pass, firms settling litigation, secretly allows it to keep going on.

And I thought, if we get somebody like Gerber Grewal saying like he did the other day, we're going to really up the fines and we're going to really look at the bad actors who are recidivists and we're going to, kind of start amping up our reaction to this. I used to think that that might put the fear of God. However, what we've seen and what I've seen in the 15 years that I've been writing is instead you have an atmosphere of impunity, an atmosphere of moral hazard that's been created. The ultimate problem is that the firms, the largest global accounting firms, feel that they are too few to fail. That no one is going to take out one more of them for any reason whatsoever. Not any reason. And we've seen almost everything. And the worst case was the KPMG fraud recently where you had the whole top of the audit practice having to be completely taken out like a gang greenness limb. And yet it just regenerates like a high drop. There are plenty of guys to take over and you just go on and KPMG is still auditing the fed and still auditing the IRS and still auditing Puerto Rico and still there.

And in the KPMG case, another thing that came up is that they had another fraud, another scandal hidden by the one that the guys got arrested for. And we found out about the fact that they were cheating like crazy, throughout the whole practice, thousands of people, probably, on standards and ethics tests that they were ordered to do because of a previous SEC enforcement action. We found out about that because they were investigating the other stealing the regulators' data case. And they actually did do enforcement actions against a couple of partners. And the dates of the activity that they highlighted with these other partners happened after their colleagues were arrested.

So, the partners in KPMG at the top of the firm, the top of the audit firm, got arrested for criminal activity. They were going to go on trial, potentially be sentenced to jail. And yet the SEC, when they finally called out this other fraud that was going on, realized that these guys were doing this stuff and then started doing some of this stuff after their colleagues were arrested. And they'd been doing stuff like that, even though colleagues have been arrested for insider trading and going to jail at KPMG, Scott London, at Deloitte, a guy named Tom Flanagan, another guy named Gunsman. I mean, you name it, over and over and over again and more and more. I'm seeing the younger folks being net for insider trading from the accounting firms. So, nobody is deterred by people getting arrested and going to jail.

So, what is it going to take? What is it going to take for the firms to be fearful of the implications? KPMG did not lose any clients in any big numbers because of the big scandal, the fraud that sent their partners to jail. The market did not react negatively to its clients. Why do I know that? Because I'm involved in academic research with some other professors who are doing this research and looking at the data of the actual clients that were impacted by the scandal. The market said, “Whatever.” The partners and the people within the firm said, “Whatever, we're going to keep criming.” What is it going to take? Because the ultimate problem is the firms feel that they can act with impunity. They feel that they're protected and that no one in any government is going to take them out. The only potential is that you'll have another big private litigation situation that somehow will impose an enormous fine or sanction on a firm. It might not happen here in the US; it might be outside of the US in one of the big entities. Let's say if EY Germany got taken out because of a Wirecard, would that throw EY global into the toilet? I don't know. They might do what PwC in Japan did, which is just create a new firm.

Caleb: Yeah. Shut the firm down and create a new one.

Francine: So, what's the hill that I'm going to die on. I'm going out and I'm teaching and I'm talking to students and I'm trying to be optimistic that if we have more good people who are grounded in ethics and professionalism, who understand the stakes for the market, going into the firms out of the schools, if I can tell them what's at stake, if I can show them that it doesn't pay to be involved or associated with these kind of people, that they're going to get their name for the wrong reasons in an SEC enforcement action, they're going to ruin all the 4.0 great average that they got. If I can get more people in the firms, then we can do loop to impact of this issue. That's my only hope. That's the hope I have to keep going with. That's the flame I have to keep burning because otherwise, Caleb, you're right, you just have to just cash in your chips.

[01:15:13] Thank you so much for your time, Francine.

Greg: Well, dang, Francine, thank you so much for your time and for all the knowledge that you just gave to us on all this stuff. I appreciate it. And it was great to meet you after all these years of knowing you.

Francine: Thank you.

Greg: Fantastic. So, just on the off chance that there are people who are listening to the podcast who this is their first introduction to you, what's the best place that they can learn more about you or read more about your stuff right now?

Francine: So, I'm writing for my newsletter “The Dig” on Substake, thedig.substake.com. That's the best place to find me right now, and on Twitter @retheauditors. Re: The Auditors is where I am 24/7.

Greg: Cool. Right on.

Caleb: Thanks Francine.

Greg: Well, very good. Thanks again so much for doing this. We appreciate it so much. You don’t even know.

Francine: You're welcome.