Do Accountants Who Act as Consultants Take Greater Care or Cut Corners? [Archive.org URL]

In the wake of accounting scandals at companies like WorldCom, Tyco and Enron, Congress and regulators focused on the apparent conflict between accountants who were doing audits while earning high-margin consulting fees at the troubled firms. In a burst of reform, most accounting firms were forced to separate their auditing and consulting businesses. A new Wharton paper, however, challenges the idea that lucrative consulting contracts routinely lead auditors to look the other way when preparing financial audits. The paper, by Wharton accounting professors David Larcker and Scott Richardson, is titled “Fees Paid to Audit Firms, Accrual Choices and Corporate Governance.”

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