San Carlos, Calif. (Sept. 23, 2003) -- In a scenario that's bound to play out across the country over the next few years, a medical products company announced that it's dropping Deloitte & Touche as its outside auditor to avoid a possible conflict of interest.

In June, the company, Natus Medical Inc., acquired privately held data systems supplier, Neometrics Inc., that had once worked as a subcontractor for Deloitte Consulting, helping it acquire a government contract that began this month.

"Deloitte & Touche agrees with Natus that if the Neometrics division initiates negotiation of a material subcontract with Deloitte Consulting, the independence of Deloitte & Touche could be impaired," Natus stated in a press release announcing the change in auditor.

"Deloitte & Touche has served as our outside auditor for more than 10 years and we have appreciated their professionalism and competency, said Steven Murphy, Natus vice president for finance. "We believe this is the correct decision based on our current circumstances and we are excited about the opportunity to work with Deloitte Consulting on a major consulting project."

Since the passage of the historic Sarbanes-Oxley Act last year, publicly held companies have been closely scrutinizing their business relationships with their outside auditors. The Act forbids auditors from providing many services to its audit clients to avoid any independence issues.

"These days you've got to separate consulting from auditing and most companies are adhering to it stringently," noted Jeffrey Weiner, managing partner of Long Island CPA firm Marcum & Kliegman, which has beefed up its SEC practice since Sarbanes-Oxley was passed. "Still there's a certain amount of work that's got to get done, and those firms that still have an SEC practice will benefit, while others won't," he added.

"I would imagine with all of this shifting that's taking place with clients, national firms are being forced to make tough choices," added New Mexico-based industry consultant Steve Erickson. "What I've been noticing is that more often these days there are national firms refusing to stand for reappointment as auditors to companies, partly because there's this weighing of relationships and type of work they're doing. I imagine if they have consulting work that's seen as more beneficial than attest work, they might choose that path," he added..

-- Tracey Miller-Segarra

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