Choose to be an auditor or a consultant!

Abstract

The paper looks at the evolving role of a Certified Public Accountant (CPA) as a result of the new guidelines and legislation being drawn out due to the recent litany of financial mismanagement cases in the corporate world. After Enron, WorldCom and Parmalat, the practice of employing an audit firm to perform auditing services as well as other consulting services for the same year has come under immense criticism, close scrutiny and review. This came about as it emerged that most of the accounting misdeeds were due to poor, lenient and condescending auditing practices by the firms that gained lucrative consulting work. This has been substantiated by an analysis done on the companies listed under the first board of BURSA MALAYSIA (KUALA LUMPUR STOCK EXCHANGE). The analysis contains a comparison of the fees paid by the companies towards audit as well as non audit services to the same audit firm. This paper, thus, looks at the resultant effect and how an individual or corporation may proceed under the new accounting environment. It has been concluded that, while the law is a bit flexible towards the auditors accepting non audit work along side audit work, it is the duty of the professional bodies to implement compelling codes of conduct. One of the ways identified is by ensuring that the accounting or management consultant of a company shall not accept to act as a statutory auditor for the same company in the immediate five years following the year in which the firm had acted as a consultant. A similar clause was imposed and is being implemented only by two countries around the world; Hong Kong and Singapore.