In its continued crackdown of the auditing profession, the Securities and Exchange Commission today announced the results of an independent review, citing the partners at PricewaterhouseCoopers with over 8,000 violations of the auditor-independence rules.
The majority of the violations occurred in cases where partners or their family members owned stock or mutual funds from companies that PwC was auditing, and a percentage of the problem stemmed from the recent merger of Price Waterhouse and Coopers & Lybrand.
But the SEC goes on to state that ". . . the numbers of violations alone, as PwC acknowledges, reflect serious structural and cultural problems that were rooted in both its legacy firms [Price Waterhouse and Coopers & Lybrand]. Although a large percentage of the reported and unreported violations is attributable solely to the Merger, an even larger portion is not."
In four out of five cases, the violations occurred at the partner level.
"This system failed," says the SEC.
The SEC began this independent review last year after it determined that the self-regulatory initiatives were not working properly. Similar independent reviews of other CPA firms who provide services to publicly held companies will likely commence this year.