The Debate – Choosing consultancy services

It makes commercial sense

By Sarah Taylor

The Management Consultancies Association requires all its member firms to demonstrate transparency to their clients with regard to their commercial relationships.

This could include alliances with IT vendors or links with audit firms.

The MCA code of conduct states that member firms should ‘disclose, at the earliest opportunity, any special relationships, circumstances or business interests which might influence or impair, or could be seen by the client or others to influence or impair, the member’s judgement or objectivity on a particular assignment’.

Post-Enron, the US has introduced legislation in the form of Sarbanes Oxley, that seeks to clarify which services are appropriate for an audit firm to provide to its audit clients, and which services might impair an audit firm’s ability to be objective.

In addition, audit firms working for UK-registered companies are covered by accounting rules ensuring they maintain their independence. Many client organisations have instructed their audit committees to monitor the activities of their auditors and professional service providers generally.

Many of the big audit firms are providing consultancy and advisory services, which are either unrestricted by the legislation or have been approved by their clients’ audit committees.

There are no such restrictions on the services that they can provide to their non-audit clients. The audit firms are ideally placed to offer a range of consultancy services with their knowledge and experience of business functions and different sectors.

MCA does not have jurisdiction over the audit services of its member firms but it does concern itself with the professional conduct of their consulting operations.

We believe that clients need to be able to make an informed choice about their consulting partners. They need to be able to assess potential conflicts of interest and to make a judgement as to whether these present a risk.

This is why we require our member firms to disclose any such relationships and to always consider the best interests of their client.

li>Sarah Taylor is director of the Management Consultancies Association.

Clear the muddied waters
Transparency is key in all forms of business. If you aren’t transparent in your dealings then murmurs of unethical enterprise will whisper around the corridors of companies across the land. So should the industry be that concerned about rumours of Ernst & Young re-entering the consultancy fray? The answer is, less than the industry is.

Arch-rival Deloitte and its chairman John Connolly stated recently that it was just a matter of time before other firms were forced to be more transparent about their services.

The Big Four, with the exception of Deloitte, have disjointed themselves from consultancy work – but still utter the word ‘consulting’ in much they do. Last week, a PricewaterhouseCoopers’ employee emailed me to ask why the ‘accountancy’ firm wasn’t included in the Management Consultancy Top 75 league table.

This proves how confusing and non-transparent many of the larger firms that have disenfranchised themselves from consulting are.

Is the work they do advice-driven consulting work, IT implementation and delivery? Under what category should the work be labelled? The transparency is pretty murky.

The difficult task of staring into a gloomy river, trying to see what lies beneath figures provided for league tables like Accountancy Age’s Top 50 firms will continue unless firms, such as E&Y, provide a breakdown of consultancy-related revenue.

On a more positive note, surely E&Y’s return to the consulting arena will bolster a sector dominated by a handful of big players, who have struggled to deliver the returns they promised in the heady days of rising fee incomes.

Over the past few years, larger consulting firms may have hit the big time with a couple of long-term, lucrative money deals. However, they have lost their foothold in the marketplace.

As long as ethics are not breached, firms’ major consulting work doesn’t clash with that of their audit clients and a code of transparency is imposed, it could be a positive step for an industry that is slowly beginning to recover.

  • James Bennett is editor of Management Consultancy.

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