New Report May Reopen Auditor Independence Debate

An ongoing battle between the accounting profession and the SEC over the last year has led to a compromise on the question of auditor independence. But some numbers are now in which could re-open that discussion and cause the SEC to again scrutinize the line between auditing and consulting work.

According to a recent article in the Washington Post, audit fees of public companies make up only about a quarter of total fees paid to an accounting firm by public companies. The numbers come as a surprise to Lynn Turner, Chief Accountant of the SEC.

The new disclosures again raise concerns among regulators and investors alike about the ability of public accounting firms to be independent and jeopardize their consulting revenue by being too tough in an audit.

Audit firms were paid an average of $2.2 million for each corporate audit, and $5.9 million for selling other services to the audit client, the study found. It was based on 563 corporate proxy reports filed with the SEC by Fortune 1000 companies as of April 30.

Among the findings:

Company Auditor Audit Fees Consulting Fees
JP Morgan PWC $21.3M $84.2M
General Motors Deloitte & Touche $17M $79M
Motorola KPMG $3.9M $62.3M
Sprint E&Y $2.5M $63.8M
Pugent Sound Energy PWC $543,000 $15.6M
IBM PWC $12.2M $51M

"Had the data been available months ago, the outcome of the fracas between the SEC and the accounting industry might have been different," said Lynn E. Turner, the SEC's chief accountant, who advocated tougher restrictions and issued the recent report. "It certainly would have provided, I think, some information that was very supportive of where the commission was headed," Turner said.

You may like these other stories...

The US Securities and Exchange Commission (SEC) has chosen a former partner and vice chairman with Deloitte LLP as its new chief accountant.James Schnurr, who specialized in financial and SEC reporting for public companies...
Summer is a time for kicking back and playing a few round of golf with friends, for example. But if you're on the green, you'd better be careful: The SEC may be looking over your shoulder.In July, the SEC announced...
An examination initiative launched by the US Securities and Exchange Commission (SEC) earlier this week will enable the agency to evaluate whether municipal advisors are complying with new SEC rules that went into effect...

Already a member? log in here.

Upcoming CPE Webinars

Oct 30Many Excel users have a love-hate relationship with workbook links.
Nov 5Join CPA thought leader and peer reviewer Rob Cameron and learn ways to improve the outcome of your peer reviews while maximizing the value of your engagement workflow.
Nov 12This webcast presents basic principles of revenue recognition, including new ASU 2014-09 for the contract method. Also, CPAs in industries who want a refresher on revenue accounting standards will benefit.
Nov 18In this session Excel expert David Ringstrom, CPA tackles what to do when bad things happen to good spreadsheets.