Stay informed with free updates
Simply sign up to the US financial regulation myFT Digest — delivered directly to your inbox.
The US Securities and Exchange Commission was considering revising conflict-of-interest rules for the Big Four accounting firms to give large technology companies more choices of auditor, the agency’s chief accountant said on Thursday.
Independence rules that prevent accounting firms auditing companies with which they have a business relationship might not be “fit for purpose” because of the increasingly complex interactions between technology providers, Kurt Hohl, who joined the SEC earlier this year to oversee audit regulation, told a conference in New York.
Hohl, a former partner at Big Four accounting firm EY, said the emergence of large AI companies had made enforcing independence rules more difficult.
The Big Four and other large accounting firms have technology consulting arms that offer products from AI and software companies but are barred from auditing the companies behind those products.
“Where it gets challenging in the current environment is, what happens if SAP hooks up with Microsoft or OpenAI or somebody else and there’s components within their offering now that involve a lot of different companies?” Hohl said at Baruch College’s annual auditing standards conference.
“If we interpret our independence rules exactly the way they are, we could get into a situation where some of these large companies don’t have an auditor choice, so we are going to take a look at that,” he added.
AI companies have been inking deals with chipmakers, data centre providers, software companies and other resellers of their services, including Big Four firms, at a whirlwind pace this year.
EY and KPMG both sell products that use Microsoft Azure OpenAI tools, while PwC this year became OpenAI’s biggest enterprise user and sells ChatGPT alongside its audit and tax services. FT Alphaville confirmed on Thursday that the remaining Big Four firm, Deloitte, is OpenAI’s auditor, a fact that had not previously been reported.
In comments on the sidelines of the Baruch event, Hohl said: “I want public companies to have a good choice of who their auditor is going to be. And if they have a choice of one, that’s not really a choice.”
Executives at the Big Four have sometimes chafed at independence rules that they say prohibit taking on audit clients with which they have only distant or tangential relationships. There are also tough requirements on staff to ensure they do not have a financial interest in any audit clients.
EY, which audits most of the Big Tech companies, including Amazon, Alphabet and Oracle, planned to spin off its entire consulting business so that it could develop a wider range of partnerships, although that plan ultimately failed.
Hohl was appointed chief accountant in July by SEC chair Paul Atkins, who has vowed to implement a deregulatory agenda. The commission has responsibility for the Public Company Accounting Oversight Board, which regulates the audit profession and enforces standards, including independence rules.
Credit: Source link
