PricewaterhouseCoopers LLP (PwC), the world’s largest accounting firm, is being audited by the Internal Revenue Service (IRS), Bloomberg News reported Friday. Officials at PwC initially refused to comment on the Bloomberg report, which was based on company documents and IRS documents provided to Bloomberg. Late in the day, PwC confirmed that a review was underway but would not comment on the nature of the review, Reuters reports.
|Thousands of executives with financial reporting responsibilities use the Comperio on-line library to access the type of information and interpretive guidance PricewaterhouseCoopers' own professional audit staff use around the world. Key content areas include guidance from the FASB, EITF, PCAOB, SEC, and others as well as PwC's interpretive guidance. Get more information and sign up for a complimentary 30-day trial.|
PwC spokesman Steven Silber said, “PricewaterhouseCoopers’ tax matters are confidential and we don’t discuss them publicly," according to Reuters. “However, PricewaterhouseCoopers is a large organization and like any other large entity, is under constant review by various taxing jurisdictions, including the IRS,” he added. PwC expects the exam to be concluded “satisfactorily” before the end of the calendar year.
The IRS notified tax partner Samuel Starr in a letter in June 2005 that it would be auditing the firm. Starr told his partners in a letter on June 15, 2006, that the audit covered the firm’s fiscal years ending September 2002 and September 2003. Bloomberg has been given copies of both letters.
The IRS is said to be examining PwC’s cash-balance pension plan, the timing of tax deductions and the transfer of profits among the firm’s international units, Reuters says. The Financial Times reports that the IRS is specifically looking at the $3.5 billion sale of PwC’s consulting practice to IBM, which took place in 2003.
The giant accounting firm’s 2,000 partners would be liable for any additional taxes or penalties that the firm is required to pay. PwC employs 138,000 people, worldwide.
It is unusual for an accounting firm to be audited by the IRS, according to Tom Ochsensschlager, vice president of taxation at the American Institute of Certified Public Accountants (AICPA). He said that accounting firms are the experts and would likely avoid questionable deductions. “Between saving a few dollars and being squeaky clean, I think they’d want to be squeaky clean,” he told Bloomberg.
Mark Iverson, Commissioner of the IRS, commented in a letter to Congress in May 2006 on the complexities of transactions that can occur within large international organizations. “With multiple domestic and global tiered entities, it is often difficult to determine the full scope and resulting tax impact of a single transaction or a series of transactions.” he wrote, according to the Financial Times.