Public companies look to auditors on regulatory changes, AI disclosures

More public companies are getting proactive on regulatory changes that could impact capital markets and are more focused on AI-related risks, according to the Center for Audit Quality’s (CAQ) latest Audit Partner Pulse survey released on Wednesday.

The spring survey, fielded in May, garnered 589 responses from audit partners. It found that nearly two in five (39%) respondents said their clients were “seeking guidance on expected regulatory changes,” compared with less than a quarter (23%) of respondents in the fall survey.

These public company auditors indicated their clients were also responding to expected legislative and regulatory changes through M&A or other capital investments (26%), expanding or pivoting their investments to new opportunities (22%), and freezing or limiting hiring (20%). More than a quarter (27%) said their clients aren’t doing anything in response to expected changes.

Indeed, regulatory change is afoot. The SEC is busily working to roll back various reporting requirements, as CFO Brew recently detailed. While the reforms could mean less work for reporting teams, they can also introduce new risks.

The CAQ survey findings showed “a shift from holding steady to moving forward with greater intent” among public companies, “even as uncertainty remains,” Amy O’Connor, CAQ’s VP of public affairs, said in a statement.

A recent PwC survey of 633 executives published in April similarly found that 69% viewed regulatory complexity as a moderate to severe risk for their organizations. Regulation was one component of what PwC describes as “a wide risk landscape” that includes cybersecurity threats, macroeconomic uncertainty, and more. Those external risks are “are driving strategic business changes,” PwC noted in its survey report.

Robot takeover. Beyond regulatory changes, AI had its robotic grip all over the CAQ survey.

More than half (51%) of respondents said data analytics and AI is a top priority for their clients this year.

Companies also plan to increase their AI-related disclosures and are scrutinizing AI risks. Two-thirds (66%) of respondents said clients plan to voluntarily increase disclosures around use of AI in company operations. AI governance topped the list of biggest challenges for clients’ audit committees, at 57%.