By Nick Stride
Friday 19th July 2002 |
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The US Securities and Exchange Commission said the violations spanned a five-year period from 1996 to 2001 and involved 16 audit clients.
The SEC charged PWC with using prohibited contingent fee arrangements with 14 clients, and with complicity with two other audit clients in improperly accounting for costs that included PWC's own consulting fees.
The case was the first prosecution of an audit firm since Arthur Andersen was charged over the Enron book-cooking scandal.
The SEC said PWC had agreed to pay the fine and to comply with "significant remedial undertakings."
These included the appointment of an "independent reviewing partner" to oversee fee agreements, reviews of the auditing arrangements of other PWC clients and the provision of annual training for all PWC professionals on auditor independence issues.
"This case demonstrates the heightened risk of an audit failure when an accounting firm assists in and approves the accounting treatment of its own consulting fees," Stephen Cutler, the SEC's enforcement division director, said.
"Faced with that situation here, PWC lacked the objectivity and impartiality required of an independent auditor."
The contingent fee arrangements involved audit clients hiring PWC's investment banking subsidiaries, PWC Securities or Coopers & Lybrand Securities, to perform financial advisory services for a fee that depended on the success of the transaction the client was pursuing.
But the commission found the arrangements violated accounting profession and SEC rules.
The charges of participating in and approving the improper accounting of its own non-audit fees related to Pinnacle Holdings and Avon Products.
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