According to the findings of the O’Malley panel, that’s a situation that already exists for a Delaware installment loans majority of publicly-held firms.
And that’s not to say that firms shouldn’t have consulting practices but just that their consulting practices should be independent of their audit clients. Rather than trying to embroider a set of rules that permit the erosion of the appearance of independence, I would prefer that the Commission start with a clean sheet of paper.
As long as we construct exceptions for non-auditservices provided to audit clients, the appearance of independence will be impaired. That concludes my opening remarks. I’ll be glad to take your questions.
COMMISSIONER UNGER: The issue of disclosure came up this morning, and what impact, if any, disclosure could have on, sort of, remedying the appearance issue?
In other words, if accountants were required to disclose the amount of revenues they obtained from consulting, as opposed to auditing, could that help address the appearance issue?
COMMISSIONER UNGER: I don’t know if you’re the right person to ask this question, but I know that you analysts have a lot of background, economic information, et cetera
MR. CIESIELSKI: I think it would help address the issue but maybe not the appearance issue. Certainly, if you have minimal or no consulting fees from an audit client, if you wind up seeing 100 percent of the audit fees coming –excuse me, 100 percent of the fees coming from the audit side and none from the consulting, there’s no appearance of –there’s no questioning of the appearance of independence.
And I don’t see why you couldn’t haul in 16 or 18 or whatever the job takes of consultants who are not working on the consulting engagement for your audit client to work on your audit
MR. CIESIELSKI: Right. No need for a cure. I think having that information publicly disclosed would improve the audit process even if they continue to do consulting engagements, because I don’t think you would want to risk having an audit blow up and then having it show up in the proxy later that 75 percent of your total fees from thataudit client were really for consulting engagements.
I think then you would really have — then you’d certainly have evidence that there might have been impairment. You would certainly have the question much more poignantly stated.
And I think having that information in there would be a good, I guess, sword of Damocles over the auditor to perform well on the audit side so as to not be in that tricky situation.
COMMISSIONER UNGER: We have to clarify that with every witness today, apparently. How important is the audit function of a firm to the consulting service? I was glad at the last panel to clarify, sort of, how the consulting practice grew out of the auditing service, but were you to take away that auditing component and have just consulting, really, how successful, how much would that change the dynamics of the marketplace?
MR. CIESIELSKI: Good question. Being on the outside of the auditing firm, I can only surmise. I’d qualify my answer with that statement first.
If you’re barred from doing consulting work for your audit clients, it seems to me that still leaves an awful lot of potential clients out there to go get for your consultants.
I don’t see why you would have to have the firm split up or be torn asunder just because you couldn’t offer some services to your audit clients. You can still develop knowledge and technical ability by servicing all the other publicly-held companies that aren’t your clients.