And about time too, many will say at the news that KPMG Peat Marwick LLP has resigned as auditor of Redwood Shores, California-based Communication Intelligence Corp after the US Securities & Exchange Commission raised a bristling eyebrow over the potential conflict of interest since Peat Marwick and KPMG BayMark Capital LLC have been providing consulting services to Communication Intelligence. The pen-driven operating software developer said its relationship with KPMG BayMark will continue. The Commission is taking the potential conflict of interest extremely seriously, and is putting a hold on passing – declaring effective – Communication Intelligence’s pending registration statement for sale of securities until it is completely satisfied that there was nothing untoward in Peat Marwick’s audit of the 1995 financial statements. The company said that in connection with the audit of its 1995 fiscal – calendar – year and during subsequent periods to August 2 that there were no disagreements with Peat Marwick on any matter of accounting principles or practices, financial statement disclosure, auditing scope or procedures – but that is precisely the problem: was Peat Marwick going easy on a favored client of its consultancy side? There will be plenty of cheering if the Securities & Exchange Commission does finally make it impossible for the big accountancy firms to combine glamor businesses like consultancy and investment banking with their core auditing: too often, it is feared, the experienced senior partners go off to the glamor side of the business, leaving duller – but exceedingly well-paid – auditing to wet-behind-the-ears juniors.The accountancy firms answer such criticisms by saying that organizations like KPMG BayMark and Andersen Consulting are independent of KPMG and Arthur Andersen & Co, but on closer inspection, it turns out that the partners on the auditing side have a very real financial interest in the unrelated consultancy side doing well.
