The Big Five continue to seek structural solutions to the SEC's concern about the possible negative influence of large consulting revenues on their audit practices while at the same time seeking new sources of capital to operate their businesses. First, KPMG sold a portion of its consulting business to Cisco Systems, Inc. Then came the announcement that PricewaterhouseCoopers was reorganizing its practice areas into two or more separate lines of business. Then, in late February, Ernst & Young detailed its plans to sell a substantial portion of its sizable consulting practice to European consulting giant Cap Gemini for $3.5 billion. The Cisco transaction was basically a cash deal, whereas a substantial portion of Ernst & Young's compensation will be stock in Cap Gemini. The stock received by audit partners must be sold over a five-year period. Lurking in the background is the ultimate resolution of the separation of Andersen Consulting and Arthur Andersen LLP. Conceivably that breakup could lead to a sizable capital infusion or payoff to partners at the LLP.
On top of this are announcements of alliances and joint ventures among the various players in this game of spinoffs and buyouts. Also the movement has begun drifting down to the next level, as evidenced by the announcement that Grant Thornton is spinning off its e-commerce business.
Meanwhile, the SEC waits for the Independence Standards Board to issue standards for maintaining auditor independence in these new and evolving forms of practice. That guidance would bring some sense of stability back to what has traditionally been thought of as a conservative profession. *
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