Should firms both audit and consult?
Arthur Andersen's role in the Enron debacle is giving new urgency to a push by shareholders at some corporations to bar accounting firms from consulting for a company while also auditing its books. Overseers of union pension funds have launched a nationwide campaign to put the issue on shareholder agendas, and votes on the issue have already been proposed at some companies.
Disclosure rules addressing such concerns have been on the books since 2000, when the Securities and Exchange Commission first required companies to give a breakdown of how much they paid their accountants for auditing and other services. But some contend that the rules don't go far enough. A study by the Investor Responsibility Research Center revealed that as much as 75 percent of fees paid to accounting firms in 2000 went to consulting services.
Companies with some of the highest ratios of consulting fees to auditing fees paid to the same accounting firm in 2000:
- Motorola Inc. 16:1
- Gap Inc. 13.5:1
- Apple Computer Inc. 12.6:1
- Kmart Corp. 10.4:1
- John Hancock Financial Services Inc. 9.75:1