Deloitte in consultancy u-turn
In a last minute u-turn, Deloitte & Touche has decided to scrap plans to split off its consultancy arm due to 'economic uncertainty exacerbated by the war in Iraq'.
Link: Deloitte announces imminent LLP status
Deloitte announced plans to spin off its consulting arm in February 2002 through a buy-out of the practice by the consulting group’s partners, and had gone as far as to name the consulting arm ‘Braxton’.
But the decision to scrap the split, made on Friday last week, will see the Big Four firm bucking the trend that has seen rivals PricewaterhouseCoopers, KPMG and Ernst & Young all hive off their consulting arms.
Deloitte is also likely to face harsh criticism over its u-turn due to perceived conflicts of interest, as outlined in the Sarbanes-Oxley Act.
Regulators, lawmakers and shareholders activists have alleged that a firm offering both consultancy and audit services to the same client could lead to questionable accounting practices.
But the firm insists it ‘will continue to fully comply with the form and substance of the Sarbanes-Oxley Act and the Securities Exchange Commission’s independence rules in the United States and with all regulatory and legislative requirements in other countries’.
James Copeland, chief executive of the Deloitte Touche Tohmatsu, said: ‘We really already have focused our Deloitte Consulting pracice on the 75% of the market that we don’t already audit.’