Big Four auditors EY, KPMG, Deloitte and PwC face SEC probe over conflicts-of-interest
The US watchdog tasked with regulating financial markets has launched an investigation into potential conflicts of interest in the Big Four accountancy companies.
The US Securities and Exchange Commission (SEC) has set up a probe into whether the Big Four’s businesses selling consulting and non-audit services undermine their ability to provide objective and independent audits, according to sources speaking to the Wall Street Journal.
The SEC probe comes after UK regulators last year told PwC, Deloitte, EY and KPMG to separate out their audit businesses by 2024, following a series of major scandals.
The UK’s Financial Reporting Council (FRC) ordered the Big Four accountancy firms to draw up their plans to make a series of sweeping changes, in response to the collapse of UK construction contractor Carillion in 2018.
The SEC’s investigation into the Big Four comes at the regulator – which was set up in the wake of the Wall Street Crash of 1929 to tackle market manipulation – turns its eye towards the accountants, lawyers, and bankers who gatekeep financial markets.
The investigation is set to see the SEC ask audit firms to disclose instances in which they provided non-audit services to their audit clients.
SEC rules currently prohibit accounting firms for carrying out non-audit work for clients they audit, if carrying out that work could threaten their impartiality. The Big Four currently audits two-thirds (66.7 per cent) of all US listed companies, according to figures from Audit Analytics.