SEC fines PwC over reporting and independence

SEC fines PwC over reporting and independence

Accounting giant PricewaterhouseCoopers has been slapped with a $7.9m penalty for violating the Securities and Exchange Commission’s (SEC) financial reporting and auditor independence rules.

The regulator found PwC had engaged in ‘improper professional conduct’ by performing prohibited non-audit services and breaching the independence rules in connection with 15 SEC-registered audit clients.

PwC partner Brandon Sprankle, who has been with the firm for over 20 years, has also been charged for causing the firm’s independence violations.

Both PwC and Sprankle consented to the SEC’s order without admitting or denying the findings and agreed to cease and desist from future violations.

They also agreed to settle the charges of over $7.9m in monetary relief, which includes disgorgement of $3.8m, prejudgment interest of $613,842 and a civil money penalty of $3.5m.

Sprankle, who must pay a penalty of $25,000, agreed to be suspended from appearing or practicing before the Commission, with a right to reapply in four years.

The SEC penalty is the latest in a number of charges against the accounting company.

Last year it was hit with a £6.5m fine by UK regulator the Financial Reporting Council (FRC) over its audit of now-defunct retail chain BHS.

In 2017, the firm was also fined a record £5.1m by the FRC for ‘extensive misconduct’ in relation to its audit of RSM Tenon, which went into administration in 2013.

The SEC’s order found PwC violated its auditor independence rules by exercising “decision-making authority in the design and implementation of software” relating to a client’s financial reporting, and engaging in management functions.

In performing non-audit services, PwC violated the Public Company Accounting Oversight Board (PCAOB) rule which requires an auditor to state in writing the scope of work and its potential effects on independence.

SEC said the violations occurred due to breakdowns in PwC’s independence-related quality controls, resulting in the failure to properly review and monitor whether non-audit services for clients were permissible and approved by clients’ audit committees.

“Auditors play a fundamental role in protecting the reliability and integrity of financial reporting and must ensure that non-audit services do not come at the cost of their independence on audits of public companies,” Anita Bandy, associate director of the SEC’s division of enforcement said.

“PwC repeatedly provided non-audit services without having effective quality controls in place for monitoring whether the services impaired its independence on audit engagements and were properly disclosed to audit committees,” Bandy stated.

Last Updated: 28 September 2019
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