Wall Street has learned the hard way that black-box models can wreck balance sheets. Enron’s off-ledger special-purpose entities fooled analysts because auditors lacked the tools, or the will, to probe opaque structures. 

Two decades later, AI presents an even thornier transparency challenge, yet the accounting profession already owns the mindset to fix it. We can turn the audit playbook into an AI assurance framework that policymakers have been groping for.

A year ago, the Center for Audit Quality surveyed partners across industries and found that one in three companies has already embedded generative AI in core financial processes. That wave is cresting before governance rules are in place. The CAQ warned that model drift, undetected bias and hallucinated explanations could all distort financial statements if engagement teams rely on AI without documented controls.

The National Institute of Standards and Technology released the AI Risk Management Framework 1.0 in January 2023 after input from more than 240 organizations. A generative-AI profile, added in July 2024, provides detailed guidance for managing risks like prompt logging, hallucination and bias in generative models. Big adopters, including Microsoft and Workday, have already mapped their internal controls to the NIST RMF.

Regulators are starting to echo that warning. The Public Company Accounting Oversight Board issued a spotlight last July that could not be clearer. Humans remain responsible for any work product produced with AI assistance, and auditors must document how they evaluated the tool. It is accounting’s Sarbanes-Oxley moment for neural nets. If we seize it, we can shape a pragmatic oversight regime.

What would that look like? Start with the three legs every auditor knows: evidence, materiality and independence. Evidence means logging every prompt and output so reviewers can replicate the conclusion. Materiality means setting quantifiable tolerances for algorithmic error, not hand-waving about “low risk.” Independence means assigning a separate team, ideally with data scientists who hold no stake in the model’s success, to challenge assumptions. None of these ideas requires a new federal agency. They require extending time-tested audit standards to predictive code.

Europe has fired the opening shot. The EU AI Act classifies AI used in finance and education as “high risk” and mandates conformity assessments before deployment. U.S. firms operating in both markets will soon discover that the cost of exporting software can dwarf the cost of exporting widgets if documentation is sloppy. American regulators need not mimic the EU AI Act clause for clause, but they should embrace the Act’s insight: riskier models deserve stricter audits.

The National Telecommunications and Information Administration agrees. Its March 2024 report sketches an AI accountability ecosystem built on third-party audits, incident registries, and benchmark datasets. That is music to accountants’ ears; it sounds like GAAP for algorithms. Auditors have spent a century refining peer review, work-paper retention, and inspection cycles; they can transplant those muscles to model assurance with minimal retooling.

Skeptics worry about talent shortages, yet firms once trained auditors in statistical sampling when that was new. Tomorrow’s audit associate will need R or Python alongside pivots, but the pedagogy remains: test controls, document exceptions and issue an opinion. The pipeline problem is solvable if higher education integrates AI ethics and assurance modules into accounting curricula now.

A second objection is competitive secrecy. Companies say revealing model internals will hand over trade secrets to rivals. Audit protocols offer a compromise: confidentiality agreements for reviewers plus public summaries of findings, akin to key audit matters. Investors care less about the recipe than about the assurance that the chef followed food-safety rules.

History offers a precedent. When Congress created the Securities and Exchange Commission in 1934, financial statements suddenly had to meet public standards. Far from stifling growth, transparency fueled the longest bull run in history by lowering information risk. AI assurance can do the same. Markets crave clarity more than ever as algorithms move from back-office helpers to decision makers that allocate credit, price insurance and flag Suspicious Activity Reports.

The next 12 months are decisive. The PCAOB is weighing whether to update its audit standards explicitly for AI. Instead of waiting, firms should pilot voluntary algorithm audits and publish the results. The first mover will earn reputational capital that no marketing budget can buy, and the blueprint will help regulators draft proportionate rules.

Trust has always been accounting’s export. In the AI era, the ledger expands from debits and credits to tokens and weights. The discipline that once tamed creative bookkeeping can now tame creative code, and that, more than any flashy demo, is what will keep capital flowing. Audit survived spreadsheets; it will thrive on silicon.

President Donald Trump on Tuesday pushed back on demands from Republicans who have threatened to sink his giant tax bill if the legislation does not significantly boost the state and local tax deduction, said Representative Mark Amodei of Nevada. 

In a private meeting with House Republicans, Trump singled out the lawmakers from New York, New Jersey and California who have rejected the $30,000 deduction limit — three times the current cap — contained in the legislation moving through the House.

“He wants to leave it where it is, that’s basically what he said,” Representative Bruce Westerman of Arkansas said of the SALT provision in the bill after the meeting. 

The confrontation came moments after Trump told reporters the SALT deduction benefits Democratic states and politicians, signaling that the tax break, which predominantly benefits high-tax states like New York, New Jersey and California, isn’t a central concern of Republicans.

“It’s not a question of holdouts. We have a tremendously unified party,” Trump said Tuesday before meeting with lawmakers. “There’s some people that want a couple of things that maybe I don’t like or that they’re not going to get.”

Still, Trump has repeatedly pledged bigger SALT deductions, which were limited in his first-term tax cut bill. A faction of Republicans from high-tax states have threatened to sink Trump’s agenda over SALT. Trump, however, shrugged off those concerns. 

“There are one or two points some people feel strongly about, but maybe not so strongly,” Trump said ahead of the meeting. 

House Speaker Mike Johnson met with those SALT holdouts late Monday, but left without an agreement.

Representative Nick LaLota, a New York Republican, said House leaders offered a SALT proposal that would temporarily raise the cap higher than the $30,000 in the draft bill, before reverting back to the lower level. 

“Any proposal that has the cap falling off a cliff is unacceptable to me,” LaLota told reporters Tuesday morning. “Now is the time to get it right.”

Another New York Republican, Mike Lawler, told reporters there is no SALT deal and a vote on the bill — planned for as soon as Wednesday — will fail without one.

Johnson was more positive about the chances for a deal. He still plans for the House to vote on the package by the end of the week. 

“We’re going to get an agreement on everything necessary to get this over the line,” he said Tuesday.

The bill approved last week by the House tax committee sets a $30,000 cap for individuals and couples. That draft called for phasing down the deduction for those earning $400,000 or more, a plan quickly rejected by several lawmakers who called it insultingly low. The current writeoff is capped at $10,000.

Stephen Miran, who chairs the White House Council of Economic Advisors, said he was confident Trump would be able to quickly reach a deal on SALT with House Republicans.

“The president will deliver SALT relief to American households. I don’t know exactly what the number will shake out,” Miran told Bloomberg Television on Tuesday. “The president is one of the best negotiators in history and he’s shown over a career spanning decades that he can forge hundreds of deals and I think he’ll forge another one right in front of us now.”

The holdout lawmakers — who also include New York’s Andrew Garbarino and Elise Stefanik, New Jersey’s Tom Kean and Young Kim of California — have threatened to reject any tax package that does not raise the SALT cap sufficiently.

Garbarino said Johnson made the group several offers and that they’re awaiting more analysis Tuesday morning. 

“I’m just happy we’re having the discussion and they’re working with us,” Garbarino said.

Republicans are also squabbling over spending reductions in the bill, including weighing cuts to Medicaid health coverage and nutritional programs for low-income households.

They are trying to keep revenue losses from their tax-cut package down to a self-imposed limit of $4.5 trillion over 10 years. The current package has a $3.8- trillion revenue loss.

— With assistance from Jamie Tarabay, Jonathan Ferro, Skylar Woodhouse, Catherine Lucey, Jack Fitzpatrick, Steven T. Dennis and Ari Natter.

A Republican proposal to tax remittances would deliver an economic blow to some of the U.S.’s poorest neighbors, including a close ally of President Donald Trump. 

The bill, presented to the House of Representatives last week, would levy a 5% tax on remittances for noncitizens and foreign nationals. That’s on top of a roughly 5% to 10% fee already charged on the payments by senders like Western Union Co. and MoneyGram International Inc., services migrants in the U.S. use to send money to family members back home.

The tax would directly hit payments that represent about one-fifth of the gross domestic product of El Salvador, where President Nayib Bukele has formed a strong alliance with the Trump administration by accepting deportees to be imprisoned. Honduras, which hosts a U.S. military base that has facilitated deportations to Venezuela, gets a similar proportion of remittances to the size of its economy, and Guatemala isn’t far behind.

A MoneyGram transfer location in San Salvador, El Salvador.

“It’s not good news for those who receive remittances,” said Carlos Acevedo, former central bank chief for El Salvador. “It might have a negative impact on economic growth.” 

Migrants from El Salvador, Guatemala and Honduras sent home record amounts of remittances last year, helping drive economic growth across Central America. Remittance flows have surged since Trump took office in January as migrants increase the amount of money they send home in anticipation of being deported. 

The funds are used largely for consumption by poorer families who often have few other sources of income. Mexico and Central America are the world’s most dependent areas for remittances sent from the U.S.  

“The effect isn’t just macroeconomic, it’s at a microeconomic level too, affecting families,” Guatemala Central Bank chief Alvaro Gonzalez Ricci said in a written response to questions. “The importance of remittances to the Guatemalan economy is growing, not just as a proportion of GDP, but also because the flows of millions of dollars boosts family consumption.” 

Gonzalez Ricci said migrants in the U.S. would likely absorb the additional tax, minimizing disruption to the inflows to Guatemala. Some states, especially those with sanctuary cities, will likely oppose the measure, he said. 

However, Manuel Orozco, who researches remittances at the Inter-American Dialogue, a Washington-based think tank, estimates that the proposed tax could lead to a 10% decline in volume of remittances sent and number of transactions.

“That’s very conservative — in other words, it’s your best-case scenario,” he said. “If this were to happen, I can see lots of people going crypto and other people relying on relatives that are U.S. citizens to send money for them.”

Mexican Foreign Affairs Minister Juan Ramon de la Fuente said the government would mount a legal and political defense to stop the plan, while the country’s Ambassador to the U.S. Esteban Moctezuma Barragan urged House representatives to reject the bill in a letter sent May 13. The proposal would mean double taxation of migrant workers who already pay income taxes in the U.S. Mexicans living and working in the U.S. paid $121 billion in taxes in 2021, the ambassador said. 

“Imposing a tax on these transfers would disproportionately affect those with the least, without accounting for their ability to pay,” Barragan wrote. “The workers referenced in this bill migrated out of necessity and now contribute substantially to the U.S. economy. We respectfully urge you to reconsider.” 

Representatives for the governments of El Salvador and Honduras didn’t reply to requests for comment on the tax proposal.

A trade group of digital payment firms — the Electronic Transactions Association — also urged lawmakers to rethink the proposal. The tax would affect unbanked populations who rely on cross-border transfers as lifelines and could force consumers to send money through unregulated channels, they wrote in a letter on May 8.  

“These services are not luxuries — they are essential tools for paying bills, supporting family members abroad and managing daily finances,” the group wrote. “A tax on remittances effectively penalizes those who can least afford it.” 

It’s not the first time Trump has taken aim at remittances. During his first term, his administration proposed a similar tax, but it was never implemented because of legal and technical difficulties to discriminate between trade-related and worker outflows, Barclays analysts Gabriel Casillas and Nestor Rodriguez wrote in a note on May 14.

Oklahoma is the sole state in the U.S. that has implemented a similar policy: a $5 fee on any wire transfer under $500 and 1% on any amount in excess of $500, passed in 2009. In the first year after it was put in place, the state brought in $5.7 million via the rule; that’s climbed to $13.2 million in the most recent fiscal year.

The renewed push for the tax, if approved, could lead to currency depreciations in countries like Guatemala, Honduras and Mexico. But remittances have been resilient even amid recent threats like the COVID-19 pandemic and “such a tax would be a one-time hit rather than a structural change on remittances,” the Barclays analysts wrote.