A complete, detailed disclosure would give investors the opportunity to decide for themselves whether or not accompanying commercial relations were impacting the purity of the audit. Requiring disclosure would serve to force public companies and auditors to earn the trust of the investing community. If a public company maintained a consulting relationship with its auditor, disclosed it fully, and the financial statements were never brought into question, either by a government body or a private lawsuit, then I would see no reason to be any more or less distrustful of the validity of the financial statements. Likewise, if another public company extended commercial relations with an auditor, disclosed it, and then the financial statements proved inaccurate, this could permanently damage, even destroy, the reputation of both company and auditor. Total and continuous disclosure might well introduce risks substantial enough to deter unhealthy, conflicted business relationships between public corporation and independent auditor.
Disclosure is also consistent with free market thinking.
Confidence in or skepticism of a company's financial statements will be factored into the market's valuation of that business. When companies and their auditors want to pursue ancillary business relationships, requisite disclosure will help insure the integrity of the audited financial statements but it will also become a factor in company valuation. The most important point of a disclosure-based approach is that investors be given the opportunity to receive, digest, and analyze all information material to their investment decision. A second and more severe form of regulation is to restrict certain relationships between auditors and public companies. This approach seeks to protect investors by upholding the United States Supreme Court's position that auditors be watchdogs for investors with a duty of independently certifying the financial statements of a public company.