Final answer:
SOX legislation has drastically altered how public accounting firms operate, introducing stringent auditing standards and greater oversight with the creation of the PCAOB, thereby reshaping their consulting practices to avoid conflicts of interest.
Step-by-step explanation:
The Sarbanes-Oxley Act (SOX) legislation has significantly impacted the consulting practices of public accounting firms. Triggered by major accounting scandals involving corporations like Enron and WorldCom, SOX was implemented in 2002 to restore investor trust and ensure the accuracy of financial information. Since then, public accounting firms have had to navigate an environment with stricter auditing standards, increased transparency requirements, and a clear division between auditing and non-auditing services to prevent conflicts of interest.
Under SOX, public accounting firms are subject to regular inspections by the Public Company Accounting Oversight Board (PCAOB), which was also established by the act. These regulations have led public accounting firms to enhance their internal controls, invest heavily in professional education and compliance training, and avoid providing certain types of consulting services to their audit clients to maintain independence.