It’s not hard to imagine an economic environment where firms may be more prone to pushing the envelope of reliable accounting and reporting, and that’s when you would want an auditing profession possessing unquestionable independence
That argument invites one to believe, then, that the auditor is relying on the work of the consulting side of the business or is auditing its firm’s own work.
Such an argument does not support the existence of independence in such situations either in appearance or in fact. I believe that the auditing function is enhanced when it stands alone from the consulting practice where there is no opportunity for it to be used as a loss leader to gain entry into more lucrative consulting opportunities for clients.
Cutting audit services free from consulting services might permit a stable pricing structure to emerge in the whole auditing business, one that would allow firms to hire talented professionals and give them the necessary resources to perform more thorough audits.
I believe that the accounting firms have difficulty in attracting professionals to be auditors at a time when staggering financial rewards are available in other fields such as finance or technology.
I have heard the argument that the existence of consulting practices in accounting firms assures that the best and brightest talent can be recruited. That may be so, but such talent is attracted to the consulting side and not the auditing practice.
Perhaps such recruits might be required to spend a minimum number of years on the audit side before graduating to the consulting practice as a stepping stone or a learning curve. That doesn’t encourage one to believe that the auditing side is the real attraction or that their best efforts are being directed at their short auditing careers.
I think the real problem in attracting talent in the auditing profession is the share ownership restriction placed on auditors. The Commission’s independence proposal is a move in the right direction toward making accounting firms more competitive in the labor markets.
Entrants to the audit profession shouldn’t have to presume that they must take a vow of poverty during a bull market to comply with independence rules. The relaxation of share ownership constraints that are proposed in this document should allay most of the fears of future auditors.
I’m in favor of the Commission’s proposal for proxy disclosure of the amount of non-audit services provided by auditors to their clients. As I’ve said before, I believe the existence of such relationships damages the appearance of independence.
It would help investors channel their skepticism more constructively if they had hard facts about the dollars involved in such relationships. I find it ironic that such a disclosure existed when the non-audit services provided by auditors was insignificant compared to the audit services.
Let me https://installmentloansvirginia.net/cities/fishersville/ conclude my remarks with the following observation. In providing consulting services, the accountant is acting as an advocate for the client counter to the principles of independence. Take note that much of thegrowth and consulting services has occurred during a period of terrific economic prosperity, a condition that’s certainly never guaranteed to be permanent.
If there is truly a benefit to the audit process to having a consulting practice work with the client, then firms should not object to the disclosure of such information in the proxy or other parts of the financial reporting package
If we’re asking hard questions about independence and the appearance of independence now, won’t our concerns be magnified during times of economic distress?