(January 7 – 09:30 ET) – PricewaterhouseCoopers LLP has committed several violations of auditor independence rules, says the U.S. Securities and Exchange Commission. It has released a report of its findings.
The SEC-appointed independent consultant ,Jess Fardella of Lankler Siffert & Wohl LLP foundsignificant violations of the firm, professional, and the SEC auditor independence rules.
In January 1999, the SEC censured PwC for violating auditor independence rules and improper professional conduct based on the findings of its own investigation. That investigation is still ongoing.
Fardella found “a substantial number of PwC professionals, particularly partners, had violations of the independence rules, and that many had multiple violations.” While some of the violations were innocent the SEC says that PwC that the review reveals ” serious structural and cultural problems in the firm.”
The SEC says that almost half of the partners – 1,301 out of 2,698 – admitted to at least one violation. The average was five violations. 81.3% of the violations were reported by partners and 17.4% by managers. 45.2% of the violations were reported by partners who perform audits. Six out of 11 partners at the senior management level who oversee PwC’s independence program admitted to violations. Each of the 12 regional partners who help administer PwC’s independence program reported at least one violation. 31 of the 43-member Board of Partners admitted at least one violation.
Despite these admissions, the SEC found that PwC professionals vastly under-reported their violations. Random tests of their reports indicated that 77.5% of PwC partners failed to self-report at least one independence violation. Ultimately it concludes that approximately 86.5% of PwC partners and 10.5% of all other PwC professionals had independence violations.
“This report is a sobering reminder that accounting professionals need to renew their commitment to thefundamental principle of auditor independence,” said SEC chief accountant Lynn Turner. The SEC says it will sponsor similar independent reviews at other firms to help improve the situation.
-IE Staff