Nigeria Needs Auditing-Only Firms (No Consulting Permitted) To Improve Audit Independence

Nigeria Needs Auditing-Only Firms (No Consulting Permitted) To Improve Audit Independence

According to Quartz, the Big Four accounting firms (PwC, EY, KPMG & Deloitte) now get the majority of their revenue from consulting, not their core auditing businesses. But can an auditor remain independent when it’s competing for lucrative consulting contracts? The constellation is that these firms are wired separately internally with big walls, theoretically making conflicts impossible. But with the level of impunity in Nigeria, believing that any wall would have a strong foundation would be dangerous. My suggestion (as articulated here) remains: Nigeria needs auditing-only companies. Yes, if you do auditing, you cannot do consulting or advisory services. This will help reduce corporate catastrophes which were enabled by auditing paralyses which are everywhere, reducing trusts on financial documents. 

At the big accounting firms, consulting is the tail that wags the dog.

It’s an open secret in the accounting industry that the biggest audit firms no longer get the bulk of their business from auditing. At Deloitte Touche Tohmatsu, for instance, only 22% of global revenues came from audits in fiscal 2019, compared with 60% from consulting and other advisory services. That’s a reversal from a decade ago, when it was 46% auditing versus 33% consulting. Deloitte’s global consulting revenue rose 13% in 2019; auditing revenue was flat.

Deloitte and the other Big Four firms—PricewaterhouseCoopers, KPMG, and Ernst & Young—have all increasingly emphasized and invested heavily in consulting in recent years. It’s easy to understand why: It’s lucrative, virtually unregulated, and offers greater potential for growth than the more-mature audit field. Advising companies on digital transformation and management is less structured and offers

(Remember: I am not against your job. Please accept that I have the rights to share my perspectives on things that affect Nigeria).

Nigeria Needs Auditing-Only Firms To Reduce Conflicts And Boost Independence

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