The accounting industry defeated the curbs proposed by Levitt, who won one concession: Auditors of public companies had to outline the potential conflict of interest by disclosing how much they earned from auditing their client and how much they were paid for consulting. Subsequently, the Sarbanes-Oxley Act in 2002 adopted much of Levitt's original proposal.

Some accounting firms “see their future in consulting rather than auditing, and that's unfortunate for America's markets,” said Levitt, who is now a senior adviser to private-equity firm Carlyle Group LP.

Booz was created after Carlyle bought Booz Allen Hamilton Inc.'s government-consulting unit in 2008. Carlyle completed an initial public offering of that business, Booz Allen Hamilton Holding Corp., in 2010.

PwC and Booz will identify overlapping clients, review the services provided by each firm, and eliminate conflicts before the transaction is completed, said a person with direct knowledge of the matter, who requested anonymity because the information wasn't public. The deal will help PwC diversify its revenue to reinvest in its businesses, the person said.

Vote Pending

PwC will acquire Booz through a subsidiary in which the individual member firms have an equity investment, the person said.

PwC employs more than 184,000 people in 157 countries and had about $32 billion in revenue in fiscal 2013, according to its website. Its U.S. operations are based in New York. The closely held firm's competitors include KPMG LLP, Ernst & Young LLP, and Deloitte LLP.

Until the results of the Booz vote in December, “it will be business as usual, with both organizations staying fully focused on serving their stakeholders,” the firms said in the statement.

Kathryn Oliver, a PwC spokeswoman, declined to comment beyond the statement, as did Margaret Kashmir, a spokeswoman for New York-based Booz.

Enron used Arthur Andersen LLP as its auditor for 16 years. The accounting firm earned more from consulting than it did from auditing Enron's books, which regulators say may have led it to ignore accounting violations.

New Code

Deloitte agreed to pay $10 million to New York state's Department of Financial Services and halt consulting services for state-regulated financial institutions for one year after officials found “misconduct, violations of law, and lack of autonomy” in Deloitte's consulting work for London-based Standard Chartered Plc, the state said in a June statement. The lender hired Deloitte in 2004 to review its anti-money laundering controls, according to the regulator.

The state regulator didn't find evidence that Deloitte concealed or was aware of any alleged violations of the law by Standard Chartered, Deloitte said in an e-mailed statement.

New York will require all consulting firms and the financial institutions that hire them to follow new conduct codes, including disclosing any past work that could create conflicts of interest, the regulator said.

The European Commission published plans in 2011 for the top four auditing companies to spin off consulting divisions and for banks and listed companies to rotate the auditors they use. The European Union proposals followed the 2008 collapse of Lehman Brothers Holdings Inc., which the commission said raised questions about the quality of audits.

“Mergers like this do raise a serious question: Are the auditors going to serve management, or are they going to serve the best interests of the investing public?” Lynn Turner, the former chief accountant at the SEC, said in an interview.

If the combined firm agrees not to do consulting for companies it audits, “then you eliminate the conflict,” Turner said, adding that he doubts that will occur. “Do you honestly think Booz partners would turn around and vote for this deal if they gave up all of their clients that PwC audits?”

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