An examination of the effects of type of engagement, materiality and structure on CPA consulting engagements with audit clients

CPA firms position themselves as providers of comprehensive professional services. In some cases, they have found it necessary to co-contract with non-CPA firms in order to provide these specialized services. The increase in such arrangements raises new questions and concerns regarding their propriety when performed with audit clients. Although a large research contingent has focused on consulting-related independence problems, research efforts have neglected an area rapidly growing in importance - the propriety of CPA firms performing 3rd party consulting engagements with their audit clients. A study assesses financial statement users' perceptions of auditor independence and financial statement reliability, as well as investment decisions when a CPA firm has performed consulting engagements with that audit client, as contrasted for that client.