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SEC Charges PwC With Violating Auditor Independence Rules

The SEC charged accounting firm PwC LLP with improper professional conduct in connection with 19 engagements on behalf of 15 firms and violating auditor independence rules in connection with engagements for one issuer where PwC performed prohibited non-audit services. The SEC also charged a PwC partner with causing independence violations. Both respondents have agreed to settle the charges and PwC will pay over $7.9 million in monetary relief. 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. In connection with performing non-audit services for 15 SEC-registered audit clients, the order states that PwC violated a PCAOB rule, 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. 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 wrote. The SEC’s orders find that PwC and the partner 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 the partner consented to the SEC’s order without admitting or denying the findings and agreed to cease and desist from future violations. 

 
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