Deloitte splits auditing from consulting

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Deloitte splits auditing from consulting

Deloitte Touche Tohmatsu has become the latest accounting firm to separate its core financial auditing services from its consulting services.

The company said it made the decision to separate Deloitte Consulting "reluctantly". The company remains convinced that, in its case, the conflict of interest concerns are purely a matter of perception. It said it would never compromise its audit services in order to protect its consulting contracts.

"I believe that, for our firm at least, the independence issue related to providing both auditing and consulting services is one of perception only," the company's chief executive, James Copeland Jr said.

In the aftermath of the Enron bankruptcy questions are being raised over whether it is appropriate for an accounting firm to sell so-called "non-audit" services to clients it audits.

In the Enron case Arthur Andersen had the dual role of auditor and consultant. The concern is that the accounting firm would choose to be less strict and stringent during the auditing process to avoid upsetting the client and losing non-audit consulting contracts. These non-audit services include IT services, such as IT consulting and systems integration, which have become a big source of revenue for accounting firms in recent years.

This concern over conflict of interests became a hot issue during the Enron debacle - questions about sub-standard accounting and auditing on the part of Arthur Andersen have been raised. Arthur Andersen also provided non-audit consulting services to Enron.

Andersen issued a statement, saying it will "no longer accept assignments from publicly traded US audit clients for the design and implementation of financial information systems". An Andersen spokeswoman could not clarify whether this means that Andersen would stop providing IT services altogether or whether it would continue to provide IT services to some clients and not others, depending on each case.

Last week, PricewaterhouseCoopers issued a statement announcing its plans to separate its IT consulting and services division, PwC Consulting, via an initial public offering (IPO). The company plans to file an IPO registration statement in the second quarter of this year.

Ernst & Young sold its IT consulting services unit to Cap Gemini in 2000. The other Big Five accounting firm, KPMG, spun off its consulting business into an independent company called KPMG Consulting.

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This was first published in February 2002

 

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