Deloitte to separate accounting from consulting

Deloitte Touche Tohmatsu has become the latest accounting firm to separate its core financial auditing services from its consulting services, to avoid conflict of interest concerns raised by Enron's bankruptcy and the dual role of auditor and consultant played by Arthur Andersen.

For years, it has been questioned whether it is appropriate for an accounting firm to sell so-called "non- audit" services to clients that it audits. The concern is that the accounting firm would choose to be less stringent during the auditing process to avoid upsetting the client and losing the non-audit consulting contracts. These non-audit services include IT services, such as IT consulting and systems integration, which have become a considerable source of revenue for accounting firms in recent years.

This conflict of interest concern became a hot issue after the Enron debacle; questions about sub-par accounting and auditing on the part of Arthur Andersen have been raised. Arthur Andersen also provided non-audit consulting services to Enron.

Deloitte Touche made the decision to separate Deloitte Consulting "reluctantly" because the company remains convinced that, in its case, the conflict of interest concerns are purely a matter of perception, since it would never compromise its audit services in order to protect its consulting contracts, the company said on Wednesday in a statement.

"I believe that, for our firm at least, the independence issue related to providing both auditing and consulting services is one of perception only," said the company's CEO, James Copeland, in the statement.

Deloitte Touche has a range of options for carrying out the Deloitte Consulting separation, and it hasn't yet decided on one, a spokesman said on Wednesday.

Last week, PricewaterhouseCoopers issued a brief statement announcing its plans to divest its management consulting business, PwC Consulting, through an initial public offering.

Andersen itself on Sunday addressed this issue in a statement, saying it will "no longer accept assignments from publicly traded US audit clients for the design and implementation of financial information systems".

Meanwhile, Ernst & Young sold its IT consulting services unit to Cap Gemini in 2000, and the company hasn't provided these types of services since then, a spokesman said on Tuesday. The other one of the so-called Big Five accounting firms, KPMG, spun off its consulting business into an independent company, KPMG Consulting.

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