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The Analyst Magazine:
The `Big 5' :Accountable to whom?
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The fact that same companies provide both auditing and consulting services has led to concerns over the resulting of conflicts of interest. These conflicts of interest came under severe criticism after the burst of the Internet bubble. Regulators too are of the opinion that conflicts of interests did exist and separated the functions of auditing and management consultancy.

A recent trend among large accounting / consulting firms has been that of the separation of these two arms of these firms into separate organisations. In considering why this has happened it could be considered that this is merely another manifestation of corporate disaggregation into smaller more focused units. For the `Big 5' however, there are more important imperatives that make this separation not merely and advantageous way of conducting business, but absolutely imperative for several reasons.

Although the `Big 5' accounting and consultancy firms were initially established as firms of accountants in order to carry out the duties of auditors in protecting the interests of shareholders in limited liability companies, the last quarter of the twentieth century has seen a considerable change in the emphasis of the work of these firms. Thus from the late 1970s these firms increased their focus upon the provision of consultancy services to such an extent that the revenue generated by consulting far outstripped that generated by their traditional auditing activities. Moreover, consulting is considerably more profitable that auditing and generates higher profitability from the same revenue levels.

 
 

auditing, conflicts, accounting, consultancy, companies, interests, corporate, emphasis, imperatives, management, liability, organisations, business, Regulators, shareholders, traditional