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I think the side consultancy businesses are a big problem. Accounting firms should be banned from providing any services other than accounting. This is currentl

I think the side consultancy businesses are a big problem. Accounting firms should be banned from providing any services other than accounting. This is currently the case in the US for law firms and it is widely accepted that this rule limits conflicts of interest. It is just far too easy to make a bribe with consulting services. There is no good way to measure the real value of consulting services, and their cost can be massive. If a crooked CEO gives his accountant bags of cash to cook the books, he may be caught and both the CEO and the accountant can be sent off to jail. If a smarter crooked CEO instead hires his accountant's accounting company to a 100 million dollar consulting contract, in exchange for cooking the books, good luck proving a bribe took place. The accounting firm will surely put in a hundred of consultants on the contract and they will surely produce long reports with stacks of technobabble and graphs. Who is to say how much that is worth.

srhngpr 8y ago
In the US, the Sarbanes-Oxley Act [0] is in place to prevent just that and maintain independence between conducting an audit or providing consulting services. Similar other regulations exist in Canada [1] and other nations. The Big Four and other firms that are subject to these regulations often do one or the other with clients. It is not common for a firm to be the financial auditors and the provider of consulting services to the clients. [0] https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act [1] https://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Strong_Economy_Act_(Budget_Measures),_2002 https://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Stro...
chaseha 8y ago
FWIW I don't think companies are allowed to purchase consulting services from their auditor, specifically because of this conflict of interest. In my experience, companies will have one of the big four as their primary auditor, than use some combination of the other three for consulting (in addition to MBB or any other firms). In no way defending the value of these services though - their primary function is to shift culpability off of the executives IMO
- srhngpr 8y ago
  Currently at a Big 4 on the consulting side, this has been my experience as well. We cannot touch our audit clients as the rules are very strict.
  - 121789 8y ago
    Also my experience - there are pretty significant safeguards against this stuff. It can be really annoying on the consulting side.
bradgessler 8y ago
Yeah this basically never happens. I worked at a Big 4 firm almost 10 years ago and I remember the rules being so strict that our firm had to choose if consulting or audit engagements were more valuable to a particular firm because they could only choose one. Also, when you hit Manager level at a firm, you would have to enter all of your public stock holdings into a system so they could make sure you don’t get stuck on a project with a client where you hold your stock. On top of all that there was very extensive annual compliance certification every year that everybody at all levels had to complete. The Big 4 doesn’t joke around with this stuff. If an employee or partner went anywhere near the conflict of interest you suggested, they’d promptly be shown the door and probably face other repercussions.
deleted 8y ago
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srhngpr 8y ago

In the US, the Sarbanes-Oxley Act [0] is in place to prevent just that and maintain independence between conducting an audit or providing consulting services. Similar other regulations exist in Canada [1] and other nations. The Big Four and other firms that are subject to these regulations often do one or the other with clients. It is not common for a firm to be the financial auditors and the provider of consulting services to the clients. [0] https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act [1] https://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Strong_Economy_Act_(Budget_Measures),_2002 https://en.wikipedia.org/wiki/Keeping_the_Promise_for_a_Stro...

chaseha 8y ago

FWIW I don't think companies are allowed to purchase consulting services from their auditor, specifically because of this conflict of interest. In my experience, companies will have one of the big four as their primary auditor, than use some combination of the other three for consulting (in addition to MBB or any other firms). In no way defending the value of these services though - their primary function is to shift culpability off of the executives IMO

srhngpr 8y ago
Currently at a Big 4 on the consulting side, this has been my experience as well. We cannot touch our audit clients as the rules are very strict.
- 121789 8y ago
  Also my experience - there are pretty significant safeguards against this stuff. It can be really annoying on the consulting side.

bradgessler 8y ago

Yeah this basically never happens. I worked at a Big 4 firm almost 10 years ago and I remember the rules being so strict that our firm had to choose if consulting or audit engagements were more valuable to a particular firm because they could only choose one. Also, when you hit Manager level at a firm, you would have to enter all of your public stock holdings into a system so they could make sure you don’t get stuck on a project with a client where you hold your stock. On top of all that there was very extensive annual compliance certification every year that everybody at all levels had to complete. The Big 4 doesn’t joke around with this stuff. If an employee or partner went anywhere near the conflict of interest you suggested, they’d promptly be shown the door and probably face other repercussions.

deleted 8y ago

[deleted]