Fake SOC 2 Reports Expose AI-Driven Compliance Fraud in Accounting

There may be errors in spelling, grammar, and accuracy in this machine-generated transcript. David Leary: [00:00:04] Is it like working at an accounting firm during the busy season? Just the escape room already. Like you have to solve all these puzzles or you don't get to go home, like, right? Like, yeah, right. What's the difference between an escape room and busy season at a firm coming to you weekly from the OnPay Recording Studio? Blake Oliver: [00:00:25] Hello and welcome to the accounting podcast, your weekly roundup of news in the profession. I'm Blake Oliver. David Leary: [00:00:31] I'm David Leary. Blake, you got me with your headline today. I'm so interested in this fake Soc2 report story. Blake Oliver: [00:00:38] Oh, this is wild. Thank you to Jacob Schroeder for sending this my way. There's this compliance startup called delve that does Soc2 reports, and there's allegations that they have sold hundreds of companies, fake Soc2 reports, certifications. This is something CPA firms do by generating auditor conclusions, fabricating board meeting notes and using Indian certification Mills operating through empty US shell companies. It is wild and we are going to dig into that. But first I want to talk about what happened this morning at LaGuardia airport, because we've got basically follow up on the story we've been covering about FAA budget cuts, and it ties into this whole TSA thing and the federal government budget impasse and shutdown. But first, David, let's thank our sponsors who are the sponsors for this episode? David Leary: [00:01:32] Sponsors. This week, we have Digits Cloud Accountants, staffing on Pei and UNC Kenan-flagler Business School. Blake Oliver: [00:01:39] Let's thank digits first. Let's be honest, accounting software hasn't changed much in decades except for rising costs and declining service. Now there's finally a reason to switch and never look back. You can now do your bookkeeping on digits. 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And now, David, let's talk about this breaking news. Welcome to our livestream viewers. We are recording now on Monday. And this morning there was a crash at LaGuardia airport. Why are we talking about this on the show? Because it's something that we've talked about in the past. It's f a, a staffing, which is directly related to the federal government and the operation of it, which includes, uh, budget cuts and reporting from The New York Times says that even though this is a breaking story and we're just getting information about this air traffic audio appears to show that the LaGuardia tower was dealing with an incident before the crash. And a controller, an air traffic controller appeared to be distracted when the Air Canada jet struck a Port Authority fire truck, killing two pilots. Uh. A flight attendant was ejected from the plane. Dozens of people were taken to the hospital, many seriously injured. What happened? David Leary: [00:03:58] Several minutes on the ground. So obviously fire trucks on the ground, the planes taxiing either just landed or just about to take off. Blake Oliver: [00:04:05] Yeah, it was, uh, I can't I don't know if it was landing or taking off, but there was traffic on the runway and the plane collided with the fire truck. And several minutes after the collision. This is according to the New York Times. A controller at the airport told the pilot of a frontier jet that the airport was closed until further notice. And that, quote, we were dealing with an emergency earlier, unquote. It's unclear what emergency the controller was referring to. The executive director of the Port Authority, Kathryn Garcia, said that air traffic controllers were responding to an aircraft whose pilot, after multiple attempts at takeoff, had requested help before the Air Canada crash. And it's not clear how many controllers were in the tower. This was at 11:37 p.m. local time on Sunday night when the crash occurred on the audio stream, there was confusion. The controller was yelling stop! Truck one stop to the fire truck just seconds after giving it clearance to cross runway four, where the Air Canada plane had just landed. So it had just landed and it was slowing down, but it couldn't stop the FAA. The Federal Aviation Administration is trying to determine how many controllers were in the tower on Sunday night. That will be part of the NTSB investigation. According to The Times, aviation experts said the tower likely had fewer controllers on duty than they would have had hours earlier, when the airport had more flight traffic scheduled. And I brought this up today because we've talked about this in the past, the when it comes to the federal budget, the FAA's own workforce plan says that controller staffing had been harmed by repeated disruptions, including the 35 day 2019 shutdown, and that interruptions to hiring and training can have, quote, significant long term impacts, unquote, on staffing levels. Blake Oliver: [00:06:00] The Government Accountability Office says that the number of or the Gao is that accountability or accounting. I don't I don't remember they said that the number of US controllers has fallen about 6% over the last decade, even as flights rose 10%, leaving shortages at critical facilities. We talked about this when it was in the news about the air traffic controllers not getting paid during government shutdowns. It's had a it's been a problem. And I, I, I have been thinking as somebody who flies a lot and I know many in our audience travel around a lot. Hey, you know, if you're an auditor, you're going all over the country. I'm worried about this. And I thought, when is this going to have a real world impact? When are we going to have when are lives going to be lost? And there's not any evidence directly now that this is tied to the the shortage. But it seems to be looking that way from the early reporting. And it's just it's a, it's proof. It's it's proof that or it's a story that shows how the numbers have real world impact. And I would hope that like Washington could get its act together because the impasse, you know, all this stuff, it's not just politics. It has lives at stake, especially when it comes to federal aviation and aviation in general. David Leary: [00:07:26] This time, they're not paying the TSA people, so they're calling in sick, not going to work. But if I remember correctly, years ago when you covered the story, the air traffic controllers were just not going to work because they weren't being paid or they were being forced to work for free. Maybe that was it, I think. Blake Oliver: [00:07:40] Yeah, they, they're required to work by law, but they're not getting paid. And the same thing happens with TSA, right? But what happens is people call in sick, right? They protest this like, who's going to go to work and not get paid? David Leary: [00:07:52] Exactly right. Whatever kind of effort are you going to put in? Yeah. Blake Oliver: [00:07:55] I mean, it's just it's just outrageous. Welcome to our livestream viewers. We've got boring accountant. Hey, how are you doing for coffee emojis there. Welcome, Oswego shark says morning, guys. Terrible news about the airplane crash. Yes, I agree, Tate made the live stream. Great to see you Tate. And we've got Sharif here as well. Great to see you. Um, please put your comments in the chat. Let us know what stories you are following, what we should be paying attention to, what you think about what we're talking about today. And don't forget, you can earn free continuing professional education for watching this episode and listening to episodes of the Accounting Podcast. Get the free earmark app, go to earmark app in your web browser, or get the free app from the Apple App Store or Google Play Store. It's free to create an account and free to earn one CPE Every week. All right. Let's talk about this compliance startup the SoC two reports delve. This is wild. Thanks, Jacob Schroeder for sending this my way. And I want to before I dig into it, just say that these are allegations. I have not independently verified any of this. This is a Substack report very in depth by an anonymous poster. So we should take this with a grain of salt. David Leary: [00:09:14] And so to rewind, I remember, you know, three, four years ago we started seeing these companies. If I have a startup, I need to be SoC two compliant. I could either go find some accounting firm, do this for me. But then these disruptive startups started to show up on market. And I could, you know, for a third of the cost or a 10th of the cost, probably I could use the SaaS product and get my SoC two without ever having to actually hire an accounting firm and paying extra for this. Blake Oliver: [00:09:41] And theoretically, they're still the same thing, right? You're just wrapping these, these startups are wrapping the product that a CPA firm, a traditional CPA firm, would provide into something that's more like a product that you can buy and that you can do online and you can do quickly, sometimes in as little as two weeks. Some of