Friday Footnotes: OMB Says Audits Aren’t Working As Intended; Deloitte Predicts Our Economic Future | 6.27.25
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Audit
Big accounting firms fail to track AI impact on audit quality, says regulator [Financial Times]
The Financial Reporting Council on Thursday published its first AI guide alongside a review of the way firms were using automated tools and technology, which found “no formal monitoring performed by the firms to quantify the audit quality impact of using” them. The watchdog found that audit teams in the Big Four firms — Deloitte, EY, KPMG and PwC — as well as BDO and Forvis Mazars were increasingly using this technology to perform risk assessments and obtain evidence.
OMB seeks ‘strategic reset’ of financial statement audits [Federal News Network]
“Audits were once a tool for accountability and improvement. Now they have become, in many places, rote exercises that do not ensure sound financial management and instead contribute to the $36 trillion of debt the federal government currently carries. While some agencies use audit findings to strengthen internal controls, others receive clean audit opinions for years despite squandering hundreds of millions of dollars in wasted, improper payments,” OMB director Russ Vought wrote in the memo issued internally on Monday. “In short, audits are not working as intended. Independent reviews and oversight bodies have highlighted that we are spending heavily on audits, but still failing to prevent large-scale fraud, waste and abuse.”
Japan’s Big Four Hire to Meet New Sustainability Audit Mandate [Bloomberg Tax]
The Big Four accounting firms’ Japanese affiliates are staffing up in anticipation of new sustainability disclosure and assurance requirements that are still nearly two years off, but they face hiring challenges including uncertainty over the details of the mandate and a limited pool of qualified CPAs.
New audit flags more than $200,000 in spending by former LAFD union president [Los Angeles Times]
The parent organization of the Los Angeles Fire Department’s labor union has doubled down on allegations that the union’s top official failed to properly document hundreds of thousands of dollars in credit card transactions. The International Assn. of Fire Fighters, which oversees the United Firefighters of Los Angeles City, suspended President Freddy Escobar and two other union officials last month over “serious problems” with missing receipts identified in a wide-ranging audit going back to 2018.
IRS Spending Cuts Jeopardize Partnership Audits [CBIZ]
IRS budget uncertainty offers no carte blanche, as partnership scrutiny clearly remains top priority for the IRS. Instead, it creates a window to tighten controls before scrutiny resumes.
Technology
A.I. Is Homogenizing Our Thoughts [The New Yorker]
A.I. is a technology of averages: large language models are trained to spot patterns across vast tracts of data; the answers they produce tend toward consensus, both in the quality of the writing, which is often riddled with clichés and banalities, and in the calibre of the ideas. Other, older technologies have aided and perhaps enfeebled writers, of course—one could say the same about, say, SparkNotes or a computer keyboard. But with A.I. we’re so thoroughly able to outsource our thinking that it makes us more average, too.
AI valuations are verging on the unhinged [The Economist]
Vibe coding, or the ability to spin up a piece of software using generative artificial intelligence (AI) rather than old-school programming skills, is all the rage in Silicon Valley. But it has a step-sibling. Call it vibe valuing. This is the ability of venture capitalists to conjure up vast valuations for AI startups with scant regard for old-school spreadsheet measures.
Grant Thornton releases first Digital Transformation survey [Business Wire]
According to the survey, just 27% of respondents report that their technology is fully aligned with their business objectives.
Talent
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CFOs
Google Nabs Oracle’s Cloud CFO to Lead Cloud Finance [Bloomberg]
Alphabet Inc. has plucked its new cloud finance chief from Oracle Corp., deepening a potential rivalry in the industry. Kobi Bar-Nathan became the chief financial officer of Google Cloud this month, according to his LinkedIn profile. Previously, he held a similar role at Oracle, and prior to that a cloud finance role at Microsoft Corp.
Failed insurer’s CFO held personally liable with million plus fine [Insurance Business Mag]
The case is the first time a New Zealand court has imposed personal liability on a chief financial officer as an accessory to a company’s breach of continuous disclosure obligations. Industry observers suggest the decision will likely resonate beyond New Zealand, especially in jurisdictions such as the UK, where regulators have increasingly emphasised individual accountability within senior management.
Florida A&M University’s CFO blasted by state board over systemic audit failures [CFO.com]
Rebecca Brown, the CFO of Florida A&M University, was on the receiving end of harsh remarks from the state’s Board of Governors last week after audit findings revealed multiple delayed reconciliations, poor internal controls and the continuation of financial issues the state university system has failed to address for over a decade.
Analysis
United States Economic Forecast [Deloitte]
Since our last forecast was published in March, we have continued to see a relatively rapid change in economic policies. We recognize that the policy environment remains very fluid, so none of our scenario forecasts are meant to be a precise estimate of where the US economy ends up in the future. Instead, we have developed three scenarios to provide a guide as to where the economy might go from here based on explicit assumptions. Our baseline forecast incorporates assumptions that reflect our best guess of how different economic policies will evolve. Our downside and upside scenarios reflect plausible outcomes for the US economy should our assumptions prove to be overly optimistic or pessimistic, respectively.1
