SEC probing Big Four accounting firms over conflict-of-interest concerns: report

The Hill
·2 min read


The Securities and Exchange Commission (SEC) has launched a probe into conflict-of-interest concerns within the financial sector that includes the Big Four accounting firms - Deloitte , Ernst & Young, KPMG, and PricewaterhouseCoopers.

Sources told The Wall Street Journal on Tuesday that the probe will focus on whether accounting firms undermined their ability to conduct independent audits by offering other consulting or non-audit services to clients.

The move is in line with the agency's recent focus on financial-market gatekeepers such as accountants, bankers, and lawyers, the Journal noted.

The SEC's Miami office reportedly sent letters to the big four companies and smaller accounting firms last year seeking information about client work that would cause auditors to violate rules requiring them to be independent of clients whose finances they inspect.

At a national conference of auditors last December, the commission's Enforcement Director Gurbir Grewal said "You will see that we will have a firm commitment moving forward to continue to target deficient auditing by auditors, auditor independence cases, cases around earnings management."

All four of the biggest firms have paid fines to the agency since 2014 to settle regulatory investigations of audit independence violations, the Journal reported.

The SEC has also asked audit firms to disclose instances to regulators when they provided non-audit services such as consulting, tax advice, and lobbying to audit clients - and instances in which their financial outcomes depended on those ties, such as making fees contingent on a particular result.

The commission has existing rules that prohibit accounting firms from doing other work for an adult client which could impair their objectivity and impartiality as auditors, The Journal noted.

The SEC, KPMG, and PricewaterhouseCoopers declined to comment.

The Hill has also reached out to Deloitte and Ernst & Young for additional information and comment.

Updated March 16 at 1:06 p.m.