PwC Violated Independence Rules

The conflict, involving cash-handling services related to tax withholding, was disclosed by the Big Four firm and by one of its audit clients; ''it...
Stephen TaubFebruary 8, 2005

PricewaterhouseCoopers LLP has acknowledged violating auditor-independence rules, according to The Wall Street Journal.

PwC spokesman David Nestor told the newspaper that the auditing firm discovered the issues as part of a broad-based internal review of its independence policies. Nestor added that the firm reported the violations to the Securities and Exchange Commission and the Public Company Accounting Oversight Board.

In an SEC filing last week, added the Journal, the conflict was confirmed by PwC client Parker Hannifin Corp. The maker of motion and control technologies and systems reported that it was recently advised by the Big Four firm that certain expatriate cash-handling services related to tax withholding — performed for a Parker Hannifin subsidiary by a PwC affiliate in China — “have raised questions regarding PwC’s independence with respect to its performance of audit services.”

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

Parker Hannifin’s filing noted that the services were provided in 2002 and 2003 and that the fees were insignificant. Spokeswoman Jennifer Eaton told the Journal that the company has concluded that the issue “doesn’t at all impair [PwC’s] independence or judgment.” In Parker Hannifin’s filing, the company noted that it had been informed by PwC that the audit firm had also concluded that “its impartiality and objectivity were unaffected” and that “PwC’s independence with respect to performance of its audit services” had not been impaired.

“It’s likely that there will be more companies disclosing this,” Nestor told the paper, although he would not say how many PricewaterhouseCoopers clients received the cash-handling services.

PwC’s compliance with auditor-independence rules was also raised in January, according to the Journal, by Apollo Group Inc., which operates the largely online University of Phoenix. In a regulatory filing, Apollo Group disclosed a fee arrangement that “potentially raises questions regarding PwC’s independence” — namely, that in 2002 and 2003, the auditor had provided “certain non-audit services related to property taxes on a ‘success-based’ fee arrangement to Peter V. Sperling,” an Apollo board member and senior vice president.