The big accounting firm of Deloitte Touche has decided to fly in the face of the industry trend and retain both its audit and consulting businesses. If so, one can safely predict that this is a decision that current management will live to regret. The business is not about selling accounting services, but rather, selling faith.
The purpose of an audit is to essentially check over the accounting department's work to make sure all the money shareholders believe is there really exists. It is the financial equivalent of a second medical opinion -- if the second guy agrees with the first, then one can rely on the information provided. If not . . . .
Deloitte, though, seems intent on misunderstanding its own business. That its audit and its tax consulting practices are both profitable is beyond doubt, and no one is saying Deloitte is committing any act of impropriety. But the conflict of interest is there, and it is substantial enough for their to be an appearance in some cases of mixed motives.
That appearance, though, is the poison in the golden-egg laying goose. Deloitte and its competitors sell a service based on trust. Trust is undermined when the clients' objectives and its accounting firm's objectives are not identical. After Enron, et. al., sacrificing the 30% of revenues that comes from consulting may be good business in that it keeps the remaining 70% from evaporating entirely from suspicions of unethical action. Deloitte may prove this argument wrong, but its competitors will benefit if it's right.