Case 4 10 Independence Violations At PwC 3E
Case 4-10
Independence Violations at PricewaterhouseCoopers
PricewaterhouseCoopers (PwC) was involved in a series of independence violations in the late 1990s and early 2000s that resulted in strengthening the independence rules for auditors We discuss these situations in two parts.
Part I
On January 6, 2000, the SEC made public the report by independent consultant Jess Fardella, who was appointed by the commission in March 1999 to conduct a review of possible independence rule violations by PwC arising from ownership of client-issued securities. The report found significant violations of the firm’s, the profession’s, and the SEC’s auditor independence rules.
Background
On January 14, 1999, the commission issued an Opinion and Order Pursuant to Rule 102(e) of the Commission’s Rules of Practice, In the Matter of PricewaterhouseCoopers LLP (Securities Exchange Act of 1934, Release No. 40945) (“Order”), which censured PwC for violating auditor independence rules and improper professional conduct. Pursuant to the settlement reached with the commission, PwC agreed to, among other things, complete an internal review by Fardella to identify instances in which the firm’s partners or professionals owned securities of public audit clients of PwC in contravention of applicable rules and regulations concerning independence.
The independent consultant’s report discloses that a substantial number of PwC professionals, particularly partners, had violations of the independence rules, and that many had multiple violations. The review found excusable mistakes, but also attributed the violations to laxity and insensitivity to the importance of independence compliance. According to Fardella’s report, PwC acknowledged that the review disclosed widespread independence noncompliance that reflected serious structural and cultural problems in the firm.
Results of the Independent Consultant’s Report
The report summarizes results of the internal review at PwC, which included two key parts:
Independence Violations at PricewaterhouseCoopers
PricewaterhouseCoopers (PwC) was involved in a series of independence violations in the late 1990s and early 2000s that resulted in strengthening the independence rules for auditors We discuss these situations in two parts.
Part I
On January 6, 2000, the SEC made public the report by independent consultant Jess Fardella, who was appointed by the commission in March 1999 to conduct a review of possible independence rule violations by PwC arising from ownership of client-issued securities. The report found significant violations of the firm’s, the profession’s, and the SEC’s auditor independence rules.
Background
On January 14, 1999, the commission issued an Opinion and Order Pursuant to Rule 102(e) of the Commission’s Rules of Practice, In the Matter of PricewaterhouseCoopers LLP (Securities Exchange Act of 1934, Release No. 40945) (“Order”), which censured PwC for violating auditor independence rules and improper professional conduct. Pursuant to the settlement reached with the commission, PwC agreed to, among other things, complete an internal review by Fardella to identify instances in which the firm’s partners or professionals owned securities of public audit clients of PwC in contravention of applicable rules and regulations concerning independence.
The independent consultant’s report discloses that a substantial number of PwC professionals, particularly partners, had violations of the independence rules, and that many had multiple violations. The review found excusable mistakes, but also attributed the violations to laxity and insensitivity to the importance of independence compliance. According to Fardella’s report, PwC acknowledged that the review disclosed widespread independence noncompliance that reflected serious structural and cultural problems in the firm.
Results of the Independent Consultant’s Report
The report summarizes results of the internal review at PwC, which included two key parts: