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by hbharadwaj 3326 days ago
I currently work in Tech Strategy at a Big 4 - the reason why Big 4s want to roll it back is because over the last few years, their revenue in audit is steadily decreasing. Especially with automated tools, outsourcing, RPA taking over and making a lot of the grunt work significantly cheaper. At the same time, the consulting revenues are significantly going up. SOX limits the scope of work the Big 4 can execute at firms they audit (nothing related to financially significant systems etc.). The best client relationships are with the firms the Big 4 audit! Hence, the push!
1 comments
oblio 3326 days ago
The good ol' "channel 1" versus "channel 2" conflict, or whatever it's called nowadays.

Basically Big 4 "have to" audit but what they really want is to offer consulting services. There's a huge conflict of interest regarding these two parts and every few decades the Big 4 are forced to spin off consulting divisions. Not that stops them from trying again :)

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ubernewb 3326 days ago
This. I'm a former Big Four auditor, and I can tell you that the consulting-auditing dichotomy is very clear in the industry. Auditing is on the downswing revenue-wise, and consulting will always rake in the dough. My issue is that the consulting relationships (and the big money they bring in) will necessarily impact the independence of the auditors, which is one of the main reasons there is the whole 'Channel 1' - 'Channel 2' split in the first place, and the major reason SOx passed. The Enron debacle was almost entirely because of the fact that Arthur Andersen didn't want to lose out on the major consulting revenue they made from Enron, but were pressured to fudge audit findings or they would lose that client for everything. SOx was an absolute b*h to implement and deal with on the audit and client side, but it made perfect sense from a regulatory perspective. Still, when the clients are paying for their own audits, that's its own ethical issue.

tldr; It's complicated.

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blawson 3326 days ago
Isn't this why Sarbanes-Oxley was introduced to begin with? Auditors getting too cozy with the companies they are meant to be impartially auditing, because most of their revenue actually comes from consulting.

The book The Number talks about this quite a bit: https://www.amazon.com/Number-Quarterly-Earnings-Corrupted-C...

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