Auditors of funds face scrutiny over conflicts (IGNITES)

These days audit independence rules are posing even greater challenges for fund accounting firms. With only a few large firms handling the majority of fund audits, maintaining full independence can be tripped up when other services occur at the same time. One firm, PwC, was recently fined by the Public Company Accounting Oversight Board (PCAOB) for violating independence rules by auditing a technology company while also seeking a joint venture with it. With exclusive comments, FrontLine Compliance Founder and President Amy Lynch discusses how audits with a conflict of interest can harm shareholders with misleading financial disclosures. She also explains that these types of cases serve to remind the industry why the rules exist, and take on greater importance when a firm such as PwC is auditing two-thirds of US mutual funds and three-quarters of US ETF assets (as of July 2023). Ms. Lynch states that the large auditing and consulting firms seek an expansive reach into multiple areas of revenue, and there are not sufficient auditing corporate firewalls that exist. As a result, it becomes difficult to adhere to the independence rules, so she recommends that fund managers have their own checklist of independence criteria for any potential auditor. See IGNITES (subscription required), “PwC Faces $2.75M Fine for Audit Conflicts”