Accounting industry gearing up for a fight

The Securities and Exchange Commission wants to address increasing concern over conflict of interest situations that can arise when accounting firms offer their consulting services to corporate audit clients. The SEC is expected to draw a sharp line between the services that accounting forms can offer publicly traded businesses, without imposing separation of auditing and consulting functions. For example, auditing and tax advice could still go hand in hand.

While the new rules may cause firms to restructure their businesses, it could backfire. At present, consulting services offered by the auditing firms are regulated by the SEC. But if they split off into independent companies, the SEC won’t have any power over them. Furthermore, there would be nothing to prevent the auditing firms from hiring their former colleagues.

“Even though the SEC hasn’t made its proposals public yet, the industry has already started a campaign to get its message out,” the Wall Street Journal is reporting. The accounting firms have begun to line up support on Capitol Hill, says the newspaper, and are expected to swamp the SEC with letters opposing new restrictions.

“The Big Five spokesmen argue that the SEC campaign is misguided, pointing to studies by industry-oversight panels that show audits haven’t been compromised by conflicts within accounting firms interested in expanding services to public companies. The SEC’s concern is that auditors might be willing to allow aggressive accounting in exchange for a corporate client contracting for additional consulting services.”