Many agencies are doing this, mostly freelancers, becouse they donot have extra budget to hire a content writer.
Previously, before AI, a developer who was supposed to build a website with dummy content, is now using AI to fill the website with actual content, including the homepage, about page, other necessary pages, and few additional blogs as a gesture to make the client happy.
From this POV, even companies are doing the same thing. They are using AI to fill websites with content, most of the time without properly reviewing it or fully understanding what it says.
However, I think there is a difference between using AI to speed up content creation and blindly publishing whatever AI generates. AI can be a great assistant, but someone still needs to review the content, check the facts, and make sure it aligns with the client's business, services, and expertise.
The real test is exactly what you mentioned: can they explain the content during a discovery call? If a client asks questions about a blog post or any claim made on their website, they should be able to explain it in their own words instead of relying on AI to generate another answer.
Using AI isn't the problem. Publishing content without understanding it or taking responsibility for it is.