There is a good article in this months cfoeurope.com on the future of the audit firms re-awoken consulting business. The basic thesis seems to be that although their consulting (or advisory services arms) are growing apace, that they are likely to be constrained when the next big Enron / Worldcom scandal comes along. Does any one agree ?

Thanks Julian, that's an interesting article. I agree with the basic principal, and am a little unsettled by the lack of enforcement that seems to have gone into the new rules. I think there is probably a big enough pie that everyone can get a slice, but if another Enron comes along (and it surely will), maybe then the regulators will start getting serious. Either way, 2006 is going to be very interesting!

Julian,I couldn't locate the article in cfoeurope.com. can you please post the direct link to it or just share the author info etc?Thanx in advanceartum

It's smack bang on the front page. Couldn't be more obvious.http://www.cfoeurope.com/displayStory.cfm/4481597

Good article, and very valid concerns about the risk this development poses to our industry. Little in the world has changed in the few years when there was a huge panic to offload the consulting businesses, and now they're slowly re-opening again. Also, from the table at the end of the article, it seems that many of them are still tied into non-compete arrangements. How can they square this with their new strategy? Any decent corporate lawyer wouldn’t be fooled by the wheeze of calling your consulting business an “advisory service”. Will be interesting to see what happens over the next few years. It could all yet end in tears again for them.

I was recently at a business breakfast hosted by Judge Mervyn King of KingII fame. A very interesting comment he made was that even if Sab-Ox or KingII was followed to the letter at Enron, it would not have stopped what happened, and the governance processes would not have been able to pick anything up until it was too late anyway. What his main point was was that governance processes cannot replace good old fashioned culture of honesty and respect, and we will continue to see Enron/Worldcom disasters even with Sab-Ox etc. being followed. Nothing can work as effectively as good ethics, honesty and respect for your employees and shareholders.

Well spotted Julian - an interesting read. The Big firms have been constrained to some extent by the new rules and the issue of auditor independence (Sarbanes-Oxley, firm wide carve-outs of historic proportions etc.). It is a well written article, but it is not a complete list of empirical cases. By that I mean that whilst Enron and WorldCom were scandals of significant size and had repercussions on investor confidence world-wide, they are often a focus in articles because of their scale rather than simply because they represent cases of non-compliance. There is however surely the potential for other similar cases to occur, ceteris paribus, in the future. Of course the regulatory environment has changed since those days and there are new rules. Others would argue, I think quite rightly, that there are questions to be asked over the enforcement of these rules. However it is not difficult to imagine that the pressure on compliance systems might continue to increase too, further into this business cycle. From the career perspective it is good advice for individuals to ask the question ‘Will a future role involve both auditing and consulting/financial advisory work for the same client?’ and if so avoid a career path where their independence would be at risk. When deciding on firms to join, the question might be along the lines of ‘Is the system of corporate governance and the culture of responsibility at this firm (along with the necessary processes and internal controls) sufficient to maintain auditor independence from any consulting/financial advisory that is provided to clients?’ Afterall who wants to join the next Andersen’s? On a positive note if a consulting/advisory firm does not offer auditing, then the problem of auditor independence should not arise at that firm.

What I think of modern consultancy job in general and big 4 in particular that all this is a big crap. Historically and submentally, when one is seeking advice from someone, it's supposed that the advising one has more knowledge and experience than the advice seeker. By superabmitious MBA yougsters without practical experience and knowledge of life, all nowadays "consultants" and "advisors", including big 4, made this profession a complete crap by turning it just in another money laundering vehicle for such big crappers as Enron, Worldcom, Vivendi, Refco and many others, alos headed by the same type of irresponsible fucking youngsters.

oh dear, get rejected at interview, did you? ;-)

surely, I did and not once.