Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Focus is again on Big 4 consulting and independence

leave a comment »

More attention is coming to bear on the growing amount of consulting in the Big 4. The HP – Autonomy fiasco has called attention to the issue again.

The volume of consulting work is growing fast.

If you occasionally check in to see what the huge firms are doing, here are four five articles you can browse.

Michael Rapoport writing Eyebrows Go up as Auditors Branch Out in the WSJ says:

In 2010, Deloitte received $1.2 million from Autonomy for nonaudit work, close to the $1.5 million the firm was paid for the audit itself.

I’m starting to appreciate why people outside the CPA profession get irritated with the big firms. Check out this logic:  For Deloitte UK to do a lot of consulting in England that would invalidate the independence of Deloitte US if done in the US is okay because UK rules allow what US rules prohibit. 

Those consulting services don’t violate anyone’s intellectual independence. They merely violate the rules that the regulators felt like setting up.  It’s not really a matter of independence, it’s just a matter of traffic laws, like driving on the left or right side of the road.

Fellow CPAs, set aside your logic and your understanding of the profession and your awareness that each country has unique laws that must be complied with while not violating the laws of other countries.  Think for a moment how that arrangement looks to non-CPAs.

An article in The Economist discusses all 4 have some involvement in the Autonomy mess and all are tangled up with their affiliates in China not cooperating with the PCAOB. 

Back story there in one sentence: Chinese regulators claim sharing workpapers with regulators from other countries would reveal Chinese state secrets which means their government could give jail time to firm partners. 

Read Accountable – two controversies ensnare the Big Four

Francine McKenna has two posts on point:

Jim Peterson has a great discussion on the independence issue at HP –Autonomy: How Might the Auditors Survive the Fall-Out?

If the accounting profession is to survive what will otherwise be another generation under this radioactive rhetorical cloud, fundamental adjustments are in order.

The first would be a robust defense of the “client-pays” model: however much criticized, it dates to the invention of independent assurance in the 1850’s, and is the only approach ever to stand the test of actual adoption and use.

The second idea, which is really intriguing, is to give up on the entire concept of independence in exchange for a full disclosure of every relationship between the auditor and client. The market can sort out whether those relationships mean the report can or cannot be trusted.  A very cool idea.  I need to think about that a while.

Written by Jim Ulvog

December 8, 2012, 7:52 am at 7:52 am

Posted in Audits

Tagged with

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 58 other followers

%d bloggers like this: