PwC Takes Responsibility for Auditor Independence Violations
PricewaterhouseCoopers is publicly stating that it violated certain auditor independence rules. The announcement comes on the tails of the issuance of quarterly reports by multi-billion dollar engineering firm Parker Hannifin Corp. The report issued by Parker Hannifin last week disclosed irregularities in cash-handling services performed by a PwC affiliate in China.
The next day, PwC spokesman David Nestor announced that the issue had come to light in an internal review at the Big Four firm, and that a number of other clients besides Parker Hannifin are affected. "It's likely that there will be more companies disclosing this," said Mr. Nestor in a Wall Street Journal article.
Parker Hannifin described the issue as "certain expatriate cash handling services related to tax withholding," and indicated that PwC's fees associated with the services were "insignificant." The services in question occurred during 2002 and 2003.
PwC has voluntarily reported the violations to the Securities and Exchange Commission and the Public Company Accounting Oversight Board.
Last year, Ernst & Young made a similar disclosure regarding tax calculation and withholding services performed for Marriott International Inc. employees working in Beijing.
PwC was involved in another independence controversy early in 2004 when its client Apollo Group Inc. described in a statement filed with the SEC that PwC has performed non-audit services during 2002 and 2003 that raised questions about PwC's independence. Apollo's audit committee concluded that the auditor independence status was not violated.
Neither the SEC nor the PCAOB has commented on PwC self-report of independence violations, and there is no information available at this time regarding the potential for an investigation by either agency into PwC's cash handing practices.