Abstract The article comments on the compatibility of auditing and management services. Compatibility advocates admit that the performance of management services may create pressures which threaten independence, but quickly point out that pressure exists whether or not the CPA functions as a consultant. Economic pressure is felt by the CPA to retain a client in auditing as well as in consulting. Advocates of compatibility fear that if the CPA were forbidden to perform management and auditing services for the same client this would add substantially to the cost of providing business with all the professional accounting service it needs. In other words, the cost associated with a restriction on services to ensure independence outweighs the cost resulting from a possible decrease in the utility of audited financial statements caused by an impairment of independence. Advocates of compatibility counter that no matter how influential advice is, neither the offering of it nor the acceptance of it gives the adviser the authority or the responsibility of management. No matter how much strength is accorded to either argument, the distinction between advising and decision-making is obviously a debatable one.
Carmichael et al. (Tue,) studied this question.