Long Island University Accountancy Study Cited on Forbes.com

Brookville, N.Y. – When researching an article on corporate accounting ethics, Forbes.com recently turned to a study conducted by two professors at the C.W. Post Campus of Long Island University, who found that reforms had reduced but not eliminated a controversial practice.

The story looked at companies or executives who hire auditors for consulting work such as tax preparation – the same auditors who are supposed to impartially examine and report on the companies’ finances. Accountancy Professors Charles Barragato and Ariel Markelevich, writing in The CPA Journal, concluded that although auditors were paid less for consulting work for audit clients than before the WorldCom and Enron scandals, total fees received after the scandals remained virtually unchanged. This trend suggests that auditors were still doing plenty – which may call the auditors’ independence into question under an economic dependency theory.

Barragato, a professor of accounting and taxation and his department’s director, and Markelevich, assistant professor of accounting, conducted a study of auditors’ fees in more than 2,500 public companies between 2000 and 2003. Rani Hoitash, an assistant professor at the Sawyer School of Management of Suffolk University in Boston, also conducted the study, which was first published in an article titled "The Nature and Disclosure of Fees Paid to Auditors: An Analysis Before and After the Sarbanes-Oxley Act." It appeared in the New York State Society of CPA's The CPA Journal, in November 2005.           

Drawing on the study, Forbes.com’s Elizabeth MacDonald reported that “auditors are still heavily relying on tax-consulting fees as a critical part of their business – an ongoing auditor independence problem the accounting oversight board must continue to struggle with.”

Posted: January 3, 2007