This article is an updated and expanded version of one written by this author seven years ago (“Can Professionalism and Commercialism Coexist in CPA Firms? Putting the Public Interest before Increased Profits,” The CPA Journal, February 2015). It focuses on the auditor independence issues that have resulted from the accounting profession’s ever-increasing movement into the delivery of consulting and other non-attest services. The continuing acquisition and expansion of consulting practices has intensified the profession’s need to evaluate the impact of providing consulting services on the ethical behavior of firms that also provide attest services to the same clients. Two letters by prominent practitioners and my replies, appearing in the March, April, and May 2015 editions of the Journal after my earlier article, explore ways to accomplish the task of providing the client with excellent consulting services while maintaining the independence and integrity required to also provide attest services to that same client.

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Independence—Myths and Biases

The recent news concerning EisnerAmper’s restructuring following a “significant” investment from TowerBrook Capital Partners has once more highlighted the continuing structural and commercial changes in the accounting profession that continue to give rise to ethical concerns surrounding the delivery of diverse consulting services by firms that also provide attest services to those clients. To address these issues, Eisner is reorganizing the firm. The result will be a bifurcated structure similar to that used by American Express when it acquired Goldstein Golub Kessler in 1998. EisnerAmper LLP will provide attest services with Eisner Advisory Group LLC providing consulting and other non-attest services. However, this may not completely alleviate threats to independence.

A pair of articles in the CPA Journal addressed the issues involved with independence in this changing environment. “The Myth of Auditor Independence, Waking Up to Unconscious Bias,” by J. Edward Ketz (March 2020), presents one view of these issues; a response, “Revisiting ‘The Myth of Independence,’” by Jim Peterson (June/July 2021), presents an opposing view. This dialogue within the profession is a necessary step in resolving the dichotomy of providing excellent consulting services while retaining the independence required to deliver attest services to the same client. This resolution is important, because it will affect the public’s acceptance of the profession as the sole provider of attestation reports on an entity’s financial statements and related data.

Ketz expresses concern for “unconscious bias” when providing both services for the same client that could undermine a firm’s independence. He addresses six proposals to deal with the problem, finding some fault with all of them, and ends by stating:

This author views the problem of independence violations mostly as one of unconscious biases arising from a patronage system that rewards cozy relationships between auditors and clients and discourages strict adherence to GAAP.


Peterson, on the other hand, disagrees; he states that Ketz’s premise that most independence violations arise from unconscious bias is flawed and that his suggested recommendations were long in circulation but were “short in uptake, feasibility, or relevance.”

This author’s experience leads to the belief that Katz is correct when he proffers that the independence violations are mostly those of “unconscious bias.” There are extremely few cases of CPAs being knowingly involved in a financial fraud. Most cases involve CPAs unwittingly believing the clients’ assertions or failing to do enough to fully satisfy auditing standards because they became “too close” to the client. When such failures occur, however, they are highlighted in the press and become perceived by the public to occur more often than they actually do.

Add to the mix another psychological factor, arrogance on the part of the audit partner, and you have an atmosphere that can precipitate audit failures. The audit partner (or senior professional) may allow ego to get in the way of sound auditing principles. They get to know the client well and may believe the client’s representations because they are “the partner” and have the knowledge and judgment to make the “right” decision and, as a consequence, fail to appropriately question those client representations and follow auditing standards. This also is an unconscious factor—it is not a deliberate acceptance of a representation known to be false.

The future role of the CPA profession in the financial world could eventually be at stake, because the erosion of the CPA’s control of the entity making business decisions can indirectly affect the delivery of assurance services. This erosion can occur even when using an alternative practice structure wherein assurance-related decisions are made only by the CPA-controlled component of firm management. The concern revolves around who makes the broader economic decisions, such as the allocation of human and financial resources.

Given that a CPA firm serving an attest client is in an ideal position to quickly understand and resolve operating issues, especially in the case of smaller businesses and their outside auditors, it is important for firms to address these “state-of-mind” independence issues.

The Current Circumstances

Exhibit 1 displays U.S. gross revenues for each of the top 4 firms and net revenues for the remainder of the top 10. The amounts should be evaluated as reasonably accurate, but not exact. They are presented for illustrative purposes to show the general source of revenue from the three main segments of each firm. The advisory services portion of the revenue has been increasing over time and the contribution of the accounting and auditing practice (A&A) is now generally less than 50%. The A&A services include accounting-related services such as bookkeeping. Other analyses show differing amounts depending upon how the information was collected and the organizational structure of the firm being analyzed (i.e., whether the organization segregates its attest work into a distinctly different sub-organization). The data demonstrate that the large CPA firms are no longer auditing firms, and the consulting and other practices are economically the bigger contributors to operations and profits.

Exhibit 1

2012 Accounting Today Top 10 Firms

Rank; Firm; Y/E; Revenue $ Million; Fee Split (%) A&A; Tax; MAS; Other 1; Deloitte; June; 23,157.00; 27; 17; 52; 4 2; PwC; June; 18,000.00; 36; 27; 37; 0 3; Ernst & Young; June; 15,820.00; 28; 29; 33; 10 4; KPMG; Sept; 9,570.00; 30; 29; 41; 0 5; RSM USA; Dec; 2,788.77; 31; 35; 33; 1 6; Grant Thornton; Dec; 1,918.50; 33; 26; 41; 0 7; BDO USA; April; 1,800.00; 46; 31; 23; 0 8; CLA; Dec; 1,188.00; 32; 35; 5; 28 9; Crowe; Dec; 933.20; 32; 30; 38; 0 10; CBIZ & MHM; Dec; 824.70; 30; 26; 44; 0 Source: Accounting Today, 2021 Top 100 Firms A&A =Accounting and Auditing MAS =Management Advisory Services

Smaller firms have historically provided consulting advice to their attest clients, often not billing separately for such services. The advice they give their clients, however, is very important to these smaller entities.

The obvious threats to independence-in-fact related to the non-attest services are clear; they can, in many instances, be addressed with appropriate safeguards (as stated in my previous article). The AICPA’s conceptual framework on independence includes the identification of risks and the development of safeguards for the purpose of preventing firms from losing their independence when performing advisory or other services for an attest client. First and foremost, independence is a state of mind; nevertheless, although threats can be mitigated, “unconscious bias” or “arrogance” cannot always be effectively neutralized. The importance of a client and the revenue generated by serving that client may unconsciously affect objectivity, especially when coupled with undue belief in the honesty and integrity of that client. As CPAs become closer to a client, they can become more accepting of representations from management regarding operational and accounting details. Each situation has a unique set of facts and circumstances. It is important to analyze and evaluate each instance before concluding that there were avoidable mental lapses that lead to the attest failure.

Large CPA firms have well-thought-out systems to reduce to a very low risk the possibility of entering an advisory services engagement with an attest client that would impair their independence. They often have third-party committees that monitor their quality assurance programs. But no system is fail-safe; usually, it is not at the firm level but at the engagement partner level where the specter of unconscious bias, and arrogance, comes into play. Moreover, can small firms with less administrative resources develop safeguards that are comparable to those at the larger firms? Add to the mix the fact that smaller firms’ clients are those most often in greater need of assistance to develop controls, oversee financial and electronic data processing systems and budgets, perform bookkeeping functions, establish accounting policy, analyze enterprise risk, and so on. If CPA firms are not permitted to provide advisory services to their clients, many of these small enterprises that depended upon their CPAs for business advice may be handicapped and find their growth adversely affected. Hence the question is: How can CPA firms provide high-quality, needed advisory services while maintaining independence and objectivity?

If the public losses its confidence in CPAs’ independence and objectivity because of improper relationships with those clients for which an assurance opinion is rendered, the whole purpose for having a CPA render an opinion will be thwarted. The few cases where a CPA has been too close to a client and a financial fraud resulting in misleading financial statements have been given prominence in the financial press. This erodes the public’s trust in the profession and its raison d’être. Indeed, the profession is no longer at the top of the list of “trusted professionals.”

Another question to be addressed is whether investors and lenders rely on a CPA’s report and underlying audit as much today as they did in the past. More and more data about an entity is being required or made available today, than ever before. If the public trust in a CPA’s work is being undermined by a CPA’s unconscious bias, such a trend needs to be dammed at the source. If not, it will surely lead to a decline in the trust placed in CPAs.


CPAs should act with professionalism, yet they are human and may be swayed unconsciously by the commercial aspects of assurance service-related decisions.

One should focus on the business decisions made within a firm that renders audit opinions and has a significant consulting component. How are the firm’s personnel and financial resources allocated? Where resources are shared, does the audit and assurance component get the best and the brightest staff, or does the advisory component have the staffing edge? Who makes the hard decisions in a firm composed of CPAs and other experts? The same concern exists in determining the budget allocation for education and other professional development programs. These commercial business considerations can seriously affect the application of due professional care when rendering assurance services.

A professional’s goal during an audit is to provide the public with the best assurance service that reduces to a very low level the possibility that material errors, or fraud, exist in the data on which the CPA is reporting. When the assurance segment of a firm becomes a less significant contributor to a firm’s profits, others in the organization may control its operations and make decisions with an eye on the bottom line that may not support delivering the best assurance service possible. There are acceptable business reasons to increasing profits, but they may not be in the spirit of delivering the most proficient assurance services.

Management’s leadership and commitment to integrity and ethical behavior or “tone at the top” must be evident in its interrelationships throughout the firm. This is a major control on unconscious bias or arrogance in the delivery of assurance services.

Sometimes even well-intended individuals, while not doing anything overtly to lessen the quality of the assurance service, can have their decision-making process biased by economic and egotistical personal issues. The same conditions and responses have led the profession to lose sight of its responsibility to the public in the past. It is time to focus on these issues again, even if it means completely separating the accounting and assurance services into a stand-alone firm with no sharing of profits and no oversight of the assurance services by those not practicing in the assurance component of the firm.

CPA firms that provide assurance services should not have to divest all of their advisory services. They do, however, need to recognize the potential for losing their independence, objectivity, and integrity when advisory services become the predominant business of the enterprise. To safeguard against the threat of unconsciously biased decision making, CPA firms should consider controls focused on the assurance teams’ delivery of services, such as internal quality reviews that lead to significant penalties for instances of state-of-mind lapses uncovered in a review. Currently, only a licensed CPA may render an assurance report on an enterprise’s financial statements and other related data. If the accounting profession fails in the eyes of the public, other means of delivering this needed service will come into existence.

Professionalism needs to be nurtured and preserved for the good of the accounting profession and the benefit of the public interest.

Preserving Professionalism

CPA firms have traditionally provided quality assurance, accounting, tax, and related advisory services to their clients. Historically, these services were controlled by CPAs; however, this is changing. The need for advisory services by a CPA firm’s assurance clients will not disappear, particularly for smaller enterprises. The need will likely increase as a result of new technology and the ever-increasing complexity of business transactions. Simply precluding CPAs and their firms from performing these services for assurance clients is not a viable solution.

There are threats to independence and due care involved, however, in the expanded delivery of services beyond the traditional expertise of a CPA. If the profession continues its current course of expanding into other areas of advisory services, it will need to develop greater safeguards related to the “appearance” of the lack of independence. A sincere, rigorous analysis of the risks to professionalism and the exercise of due professional care caused by the expanding nature of the practice, or firm, with the attendant erosion of control by CPAs needs to be performed. This includes taking into consideration unconscious bias and arrogance. Once the risk is recognized, the practice or firm should establish an additional set of safeguards to address those risks and a monitoring system that measures the continuing efficacy of those safeguards

No system is fail-safe, particularly when the human element is involved. Here, the human element gives rise to unconscious bias and arrogance. The accounting profession should focus on the fact that most of the public are not familiar with the safeguards established in the profession to minimize the risk of losing independence, objectivity, and integrity when CPAs deliver both audit and assurance services to the same client.

Professionalism needs to be nurtured and preserved for the good of the accounting profession and the benefit of the public interest. The tone at the top is an extremely important aspect of CPA management to ensure quality and professionalism. The public interest should always be foremost in a professional’s mind when providing attest services.

Vincent J. Love, CPA/CFF, CFE is the chairman of VJL Consulting, LLC, Bradenton, Fla., and a member of The CPA Journal Editorial Advisory Board.