• Register
Return to: Home > News > PwC US charged with violating auditor independence rules

PwC US charged with violating auditor independence rules

The US’ Securities and Exchange Commission (SEC) has charged PwC US with improper professional conduct and violating auditor independence rules. PwC has agreed to settle the charges and will pay over $7.9m in monetary relief.

The SEC also charged PwC partner Brandon Sprankle with causing the firm’s independence violations. He has also agreed to settle the charges.

The SEC’s order finds that PwC violated the SEC’s auditor independence rules by performing prohibited non-audit services during an audit engagement, including exercising decision-making authority in the design and implementation of software relating to an audit client’s financial reporting, and engaging in management functions.

The SEC’s order found that PwC violated the Public Company Accounting Oversight Board (PCAOB) Rule 3525, which requires an auditor to describe in writing to the audit committee the scope of work, discuss with the audit committee the potential effects of the work on independence, and document the substance of the independence discussion.

According to the order, PwC’s actions deprived numerous issuers’ audit committees of information necessary to assess PwC’s independence. As further detailed in the order, the violations occurred due to breakdowns in PwC’s independence-related quality controls, which resulted in the firm’s failure to properly review and monitor whether non-audit services for audit clients were permissible and approved by clients’ audit committees.

The SEC’s Division of Enforcement associate director Anita Brandy said: “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. 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.” 

The SEC’s order found PwC and Sprankle violated the auditor independence provisions of the federal securities laws and caused one audit client to violate its obligation to have its financial statements audited by independent public accountants.

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

PwC agreed to pay disgorgement of $3,830,213, plus prejudgment interest of $613,842 and a civil money penalty of $3.5m, and to be censured. Sprankle agreed to pay a civil money penalty of $25,000, and to be suspended from appearing or practicing before the Commission, with a right to reapply for reinstatement after four years.

PwC also agreed to perform a detailed set of undertakings requiring the firm to review its current quality controls for complying with auditor independence requirements for non-audit services and for evaluating its provision of non-audit services.

Top Content

    Brazil: regulation and technology form basis for recovery

    Opportunities in the capital markets and the ever-growing influence of technology are expected to have a significant impact on the Brazilian accounting profession over the next 12 months, writes Paul Golden.

    read more

    Mentoring support and the opportunity to delegate

    Jon Lisby will be known to many from his former role as CEO of Kreston International. Here, he explains the background to his new venture, Global Alliance Advisory Services (GAAS), and how he aims to offer support to alliance CEOs.

    read more

    Global by name, global by nature

    Stephen Heathcote became chief executive officer of PrimeGlobal on 1 June 2019. Robin Amlôt met him to discuss the various new challenges that he has taken on, and his ambitions for the association.

    read more

    ARGA team, assemble!

    The new top team has been named that will see in root-and-branch reform at the Financial Reporting Council (FRC) as it transforms into the Audit, Reporting and Governance Authority (ARGA). Will the new duo be as dynamic as some are hoping? Robin Amlôt reports.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.