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Conflict of Interest: Audit Firms and Clients

Do you believe that a public accounting company can be truly independent if they are being paid by the client to audit the financial statements? Or is there an inherent conflict of interest in such an arrangement? Is there a better way to pay the auditors?

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Good question, and the truth is that anyone expecting to be paid for a service is probably not independent from the person making the payment. That might include dentists, carpenters, roofers, lawyers, etc. but it is our accepted mode of doing business.

The real question then is how do purchasers of any service insure that they will be treated fairly. Depending on the type of service, there are licensed sellers, there are local, state and federal agencies ...

Solution Summary

The 300 word solution discusses audit conflicts and independence with regard to fees charged for audited financial statements.