Consulting Services and CPA Firms

By Read, William J. | The CPA Journal, February 1993 | Go to article overview
Save to active project

Consulting Services and CPA Firms


Read, William J., The CPA Journal


CPA consulting services have become an increasingly important component of public practice. Historically, these services are generally known as management consulting services, management advisory services, business advisory services, or management services. To assist CPAs in identifying what functions make up consulting services, the AICPA recently issued the first Statement on Standards for Consulting Services (SSCS), Definitions and Standards. The SSCS, which superseded the statement on standards for management advisory services (SSMAS) on January 1, 1992, provides guidance concerning CPA responsibilities when they are involved in consulting engagements.

The new statement also discusses auditor independence and the performing of consulting services for attest clients--an issue that has concerned CPAs and observers of the accounting Profession for some time. The SSCS states that the AICPA's independence standards relate exclusively to the performance of attestation services and that consulting for an attest client does not, in and of itself, impair independence. However, the standard does advise CPAs that there may be some cases where professional and regulatory agencies disallow supplying consulting services to attest clients.

THE INDEPENDENCE ISSUE

Independence is a hallmark of the public accounting profession and an important component of the professional relationship between CPAs and their clients. It is one of the primary reasons why users of financial statements value the opinions of independent accountants concerning the proper application of GAAP to client financial statements.

While the phrase "auditor independence" has been difficult for professional and regulatory bodies to define precisely, the AICPA's Professional Standards state that "independence has traditionally been defined by the profession as the ability to act with integrity and objectivity." They refer to objectivity as the CPAs' ability to maintain an impartial attitude on all matters which come under his or her review," while integrity is defined as "an element of character which is fundamental to reliance on the CPA." The standards require CPAs to "retain their integrity and objectivity in all phases of their practice and, when expressing opinions on financial statements, avoid involvement in situations that would impair the credibility of their independence."

On several occasions during the past two decades, congressional legislators have raised questions about whether CPAs can remain independent when they perform consulting services for attest clients. The Metcalf and Moss subcommittees in the late 1970s and the Dingell subcommittee in the mid-1980s conducted hearings on the issue, but found no instances where auditor independence had been impaired following the rendition of consulting services.

For its part, the accounting profession also initiated several inquiries into the impact of CPA consulting services on auditor independence. The matter was investigated by the Cohen Commission in 1978, by the Public Oversight Board (POB) of the AICPA's SEC Practice Section (SECPS) in 1978, 1979 and 1986, by the Special Committee on Standards of Professional Conduct for CPAs (Anderson Committee) in 1986, and by the National Commission on Fraudulent Financial Reporting (Treadway Commission) in 1987. None of these studies found any instances where independence had been diminished as a result of performing consulting services. However, CPAs were urged to be aware that consulting for attest clients may be perceived by some as an impairment of auditor independence.

One of the concerns some critics raise about CPA consulting services and their impact on the appearance of auditor independence relates to the magnitude of such services as measured by the fees received. If CPA consulting services are provided in extensive amounts to attest clients, critics argue that auditor independence might be jeopardized. However, in cases where CPAs supply their audit clients with minimal consulting services, such concerns are not raised.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Consulting Services and CPA Firms
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?