GoodWork Paper 35: Compromised Work in the Public Accounting Profession: The Issue of Independence

Author(s): Debbie Freier

Editor(s): Jeff Solomon, Series Editor

Media: Paper

Description: Good work in the public accounting profession requires an accountant to maintain independence from his audit client so as to provide to the public an objective assessment of the financial statements. Independence has been defined by members of the profession and interested stakeholders (the SEC, Congressional committees, academics) in terms of various threats that could serve to compromise independence on two levels: independence in fact and independence in appearance. This paper traces the development of the notion of independence, from its origins in the late nineteenth century to the late twentieth century. In particular, it focuses on the issue of non-audit consulting services performed for an audit client, an issue that has dominated discussions of auditor independence since the 1950s. One hypothesis for the crisis in the profession has been that the accountants were trying to wear two hats: the hat of an accountant and the hat of a consultant. Did the consultant‘s hat interfere with the accountant‘s responsibilities to maintain independence from his client, and thus, compromise the profession?