PWC Considers 3-Way Split
A series of negative factors influencing the firm has led PWC to consider the possibility of splitting into three units. The world's largest accountancy firm did confirm late Thursday that it would split consultancy and some corporate finance work from its core audit, accountancy and tax services wing.
The proposed split would provide separate units for auditing, consulting and human resources. The largest Big 5 firm even is considering going public with two of the three units.
The discussion of whether to split comes on the heels of the announcement of a number of high profile Big 5 reorganizations, as well as a number of negative PWC reports which have stung the firm recently. These include the announcement that cost savings from the 20-month old merger have not materialized, that 1000 US employees were fired last year, that increased scrutiny on consulting and auditor independence may inhibit growth, and that the SEC came down hard on PWC last month reporting that over 1900 partners had jeopardized the firm's independence standards through improper financial ties to clients.
"E-business is changing our world fundamentally, creating an environment where agility, speed to market, and new and different ways to partner are keys to success," said PwC chief executive officer Jim Shiro.
"It also has created a need to apply assurance skills to the emerging information and decision-making requirements of the new economy. At the same time, heightened demand for an even more fully independent audit profession, growing regulatory and legislative scrutiny, and movement toward global financial transparency demand that we vigorously focus on the basics that built the accounting profession."
Like Arthur Andersen before it, PwC has opted to sever the links between consulting and audit/assurance to comply with
the SEC's tough rules.
Calling the restructuring plan "a bold response to the market and regulatory environments", Schiro said that the audit and tax advisory firm will retain the PricewaterhouseCoopers name, while management consulting, business process outsourcing, corporate finance, and human resource operations are likely to evolve into separate entities that will then be free of regulatory constraint.
"These businesses will be able to seek the financial partners, strategic alliances and joint ventures, and access to capital markets on which their future success will depend – all of which are now largely prohibited by auditor independence requirements," said Schiro.