The SEC investigation highlights the agency’s new focus on financial market gatekeepers.
Photo: Alyssa Shukar for The Wall Street Journal Updated March 15, 2022 1:41 pm ET.
WASHINGTON. Regulators are conducting a wide-ranging investigation into conflicts of interest at the country’s largest audit firms to see if the consulting and other non-audit services they sell undermine their ability to conduct independent reviews of public company financial statements, according to people familiar with the matter.
The SEC investigation highlights the agency’s new focus on financial market gatekeepers such as accountants, bankers and lawyers. These firms help companies raise capital and communicate with shareholders, but also have responsibilities under federal investor protection laws. Auditors are the shareholder’s first line of defense against sloppy or questionable accounting.
Speaking at the National Auditors Conference in December, SEC Director of Enforcement Gurbir Grewal said, “You will see that we will be determined to move forward to continue to fight against auditor deficient audits, auditor independence cases, profit management cases.”
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The Miami SEC office sent out letters last year asking for information about client work that could lead auditors to violate rules requiring them to be independent of the clients whose finances they audit, People said. They say the letters were sent to some of the smaller accounting firms as well as the Big Four: Deloitte & Touche LLP, Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP.
Representatives of the SEC, KPMG and PwC declined to comment. An Ernst & Young spokesperson and a Deloitte spokesperson did not respond to requests for comment.
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