Do High Consulting Fees Compromise the Independence of CPA Firms?
For countless investors, professionals and amateurs alike, certified public accountants serve as curators of confidence, cops on the beat called Wall Street, passing judgement on the accuracy of the financial results reported by businesses. But key components of the audit process—the independence and objectivity of auditors—may be eroding, according to some industry observers. For example, Thomas Dunfee, director of Wharton’s Zicklin Center for Business Ethics Research, says that huge fees paid to accounting firms by their audit clients for non-audit services can entice CPAs to overlook improper activity for fear of jeopardizing a lucrative business relationship. “Look what happened with Andersen,” says Dunfee, referring to a recent case in which the Securities and Exchange Commission leveled charges of fraud against Arthur Andersen and fined the Big Five firm $7 million in connection with its audits of Waste Management Inc. (Although Andersen paid the fine to settle the case, it did n
For countless investors, professionals and amateurs alike, certified public accountants serve as curators of confidence, cops on the beat called Wall Street, passing judgement on the accuracy of the financial results reported by businesses. But key components of the audit process—the independence and objectivity of auditors—may be eroding, according to some industry observers. For example, Thomas Dunfee, director of Wharton’s Zicklin Center for Business Ethics Research, says that huge fees paid to accounting firms by their audit clients for non-audit services can entice CPAs to overlook improper activity for fear of jeopardizing a lucrative business relationship. “Look what happened with Andersen,” says Dunfee, referring to a recent case in which the Securities and Exchange Commission leveled charges of fraud against Arthur Andersen and fined the Big Five firm $7 million in connection with its audits of Waste Management Inc. (Although Andersen paid the fine to settle the case, it did n
