Top Ten Business Deals of 2013: PricewaterhouseCoopers and Booz & Company

By — on / Dealmaking

On October 30, the news came that Big 4 accounting firm PricewaterhouseCoopers had reached a deal to purchase the consulting firm Booz & Company with the goal of beefing up its management consulting business.

The acquisition is attracting scrutiny from regulatory agencies worldwide. In the United States, the Sarbanes-Oxley Act of 2002, instituted following the collapse of Enron and its auditor Arthur Andersen, bars audit firms from engaging in certain types of consulting for their U.S. audit clients.
The rapid growth of consulting arms within traditional U.S. auditing firms threatens to distract the firms from their primary responsibility of ensuring the veracity of their auditing clients’ financial statements, write Max H. Bazerman and Ann E. Tenbrunsel in their book Blind Spots: Why We Fail to Do What’s Right and What to Do about It (Princeton University Press, 2012). The authors say Sarbanes-Oxley does not go nearly far enough in addressing such potential conflicts of interest.

Former SEC Chairman Arthur Levitt, who lobbied unsuccessfully for systemic changes to the auditing industry before the fall of Enron, expressed concern about the PricewaterhouseCoopers—Booz deal in an interview with Bloomberg News. “As the accounting profession becomes more committed to consulting, their audit activities have got to be questioned,” said Levitt.

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