5. Discussion
The data presented support the concern that Big 4 audit practices are not immune to the presence of large consulting practices within the same firm. This is not a trivial matter, as previously noted recent PCAOB inspection reports find significant audit quality issues at each Big 4 firm (PCAOB, 2013a, 2013b). Although the bulk of consulting-revenue growth comes from companies that are not audit clients, Lynn Turner, a former SEC chief accountant, reports concerns with the Big 4 consulting growth, “I think that this is an indication they’re more focused on the bottom line than they are on their audits” (Rapoport, 2014). It is clear that the clients, regulators and the public have an ongoing cause for unease.
Auditing is not a high-growth business. And, audit practice margins are eroded by litigation costs that may increase with expanding disclosure requirements, i.e. publishing the audit partner’s name. Non-audit services can be readily marketed and rendered by accounting firms with relatively little risk. So, the Big 4 naturally expand their businesses into higher growth and more profitable consulting practices to the point that they eclipse the scale and profitability of their audit operations (Cohen, 2016). Yet, running a consulting practice consumes management attention and firm resources; frequently new practices siphon off existing talented staff who may perceive enhanced career opportunities in a nascent venture. And, as an audit firm’s consulting practice grows, it typically recruits additional employees with different education and work experiences. New business models are introduced by consulting practices, including joint ventures, outsourcing contracts, software marketing agreements, etc. This disruption to the firm’s homogeneity may have a deleterious impact by distorting the firm culture, reducing professional focus and exacerbating internal competition. The result, following Wyatt’s and Zeff’s narratives, is commercial concerns subsuming professional values.
