Over the decades I have worked with the Big Four Accounting firms in a variety of roles. Heck, some folks in the firms used to refer me to their audit clients that needed eDiscovery/IG process and system consulting.  The line between auditor, accountant and other professional services was simpler before the firms started buying or building eDiscovery service bureaus.  Given the volume based industry pricing models (i.e. $/GB costs) you cannot blame them for acquiring the people and technology to conduct their own investigations during audits or on request.  They ran into the same eDiscovery service bureay trap that AmLaw 200 firms fell into twenty years back.  Once you build sufficient burst capacity to meet client’s emergency requirements your teams sit around twiddling their thumbs most of the time.  Companies and independent departments follow the First Rule of Nature just like people.  To justify their teams, eDiscovery Managers start to sell services outside of active audits.  I have not problem with KPMG competing for new service customers in the broader eDiscovery market.  I draw a careful line when the customer is an audit or attestation client.

For services required to conduct their audit, a client should have the right to use their services or bid out the work to a mutually agreeable provider.  That seems pretty straight forward as long as the audit client is a savvy buyer and has full disclosure on internal/captive service bureaus.  But should a firm sell legal services to their audit clients that are not related to the audit process?  Can their smart consultants design the very financial information systems that are relevant to audits?  Since legal response systems are part of the company’s risk management infrastructure, they do seem to fall under the audit scope as well.

I pose these questions to validate or challenge my own non-attorney, non-CPA opinion that this is that ‘careful line’ that distinguishes conflict of interest vs. fair competitive services.  Although there are lots of articles on the Big Four getting too cozy with their clients or involved in politics, I did not find any that explored this area.  Instead, I will invite your comments and opinions with the SEC’s rules that seem to cover this.

Specific Prohibited Non-audit Services

The auditor is prohibited from providing the following non-audit services to an audit client including its affiliates:

    • Bookkeeping
    • Financial information systems design and implementation
    • Appraisal or valuation services, fairness opinions, or contribution-in-kind reports
    • Actuarial services
    • Internal audit outsourcing services
    • Management functions or human resources
    • Broker-dealer, investment adviser, or investment banking services
    • Legal services and expert services unrelated to the audit

In addition to the specific prohibited services, audit committees should consider whether any service provided by the audit firm may impair the firm’s independence in fact or appearance.

Greg Buckles wants your feedback, questions or project inquiries at Greg@eDJGroupInc.com. Contact him directly for a free 15 minute ‘Good Karma’ call. He solves problems and creates eDiscovery solutions for enterprise and law firm clients.

Greg’s blog perspectives are personal opinions and should not be interpreted as a professional judgment or advice. Greg is no longer a journalist and all perspectives are based on best public information. Blog content is neither approved nor reviewed by any providers prior to being posted. Do you want to share your own perspective? Greg is looking for practical, professional informative perspectives free of marketing fluff, hidden agendas or personal/product bias. Outside blogs will clearly indicate the author, company and any relevant affiliations. 

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