Consultant Says Audit Firms Need More Integrity
“Question: A recent Seattle Post-Intelligencer article suggests that separating auditing duties from internal consulting duties and requiring that teams from different firms perform the different functions doesn’t work — especially given that the same teams often work together on several different assignments. Do you agree?
McKenna: …It is unfortunately an unavoidable situation, only alleviated by the necessity and the willingness of some companies to go outside the Big 4 and also hire next-tier firms or independent service providers for some assignments.
Question: Is it a conflict of interest?
McKenna: It is not strictly a conflict of interest per Sarbanes and other rules. It is an independence issue if the firm does not maintain independence and objectivity when they are working on multiple projects in some of the more troubled companies …Incentives are such to encourage “penetration and radiation” in an account, but should not be at the expense of objectivity and independence in action or perception.
Question: What do you think gives rise to the misconception that it does present a conflict of interest?
McKenna: There is an underlying concern that the firms could negotiate, “You don’t call me out on this issue and I won’t call you out on the issue at our other mutual client…” at the expense of their clients’ interests and shareholders’ interests…”