SEC Blasted For Allowing IBM to Retain PwC as Auditor
Rep. Markey faulted the decision for being inconsistent with a decision previously made by the SEC that PwC's independence would be impaired if it continued to audit Hewlett-Packard after it was acquired by H-P. He said this inconsistency raises questions about the SEC's intention to aggressively monitor the accounting profession.
SEC Chief Accountant Robert Herdman defended the apparent change of position, saying the Commission agreed to permit the deal provided IBM and its auditor met 11 conditions. These conditions include prohibitions on sharing revenues or profits and engaging in joint marketing or advertising. In addition, the SEC required IBM to hire a different accounting firm to audit the transaction and said any business unit containing the former PwC consulting practice cannot be audited by PwC for the next three years. ("SEC Accountants Defend Stance On IBM Auditor," Wall Street Journal, August 2, 2002.)
Only weeks before the deal with IBM was announced, PwC agreed to pay a $5 million fine to settle previous independence  violations involving contingent fees and improper accounting of its consulting fees.
View  IBM's presentation on the acquisition, and listen to the answers provided by IBM and PwC Consulting as securities analysts challenge other potential problems involved in the transaction.