PwC Probed on Auditor Independence

Inquiry concerns PwC's resignation as one of the auditors for Royal Bank of Canada.
Stephen TaubJune 2, 2004

The Securities and Exchange Commission is investigating PricewaterhouseCoopers for a possible violation of auditor independence rules.

In a press release announcing its quarterly results, the Royal Bank of Canada said it has received a subpoena from the U.S. securities regulator regarding PwC, which resigned as one of the bank’s auditors in September.

According to the bank, the inquiry concerns PwC’s resignation, its compliance with auditor-independence rules, and the non-audit services provided by its auditors. Royal Bank of Canada must comply with U.S. securities rules because it is listed on the New York Stock Exchange, noted Bloomberg.

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Last week PwC agreed to pay $50 million to settle charges that it helped Raytheon Co. hide cost overruns five years ago, according to the Boston Globe. A securities fraud class action had alleged that PwC’s independence was “compromised by a lucrative contract for non-audit consulting work that it was seeking from Raytheon shortly before the issuance of the clean audit opinion.”

In April, a judge ruled that Ernst & Young cannot accept new audit clients in the United States for six months because it violated SEC rules on auditor independence.