Adrian JohnsonTLDR:
- PwC was fined $2.75 million by the PCAOB for violating independence rules.
- The firm failed to consult with its Independence Office and conduct appropriate analysis when considering terminating an audit relationship with a client.
The Public Company Accounting Oversight Board (PCAOB) fined PwC US $2.75 million for violating quality-control violations related to auditor independence. The firm’s quality-control policies were found to be deficient in providing timely consultation and reference to authoritative literature when dealing with complex independence issues. The firm’s Independence Office, established to address independence risks, did not intervene when numerous leaders and partners failed to consult with them while considering terminating an audit relationship with a client.
Members of PwC’s tax group prepared a “business case” document showing increased revenue potential with a joint business relationship (JBR) with the client. PwC partners met with the client’s CEO to discuss business opportunities, resulting in the exploration of transitioning the audit to another firm while still continuing with the audit for the year ending Dec. 31, 2018. The firm’s existing policies did not require consultation with the Independence Office in these circumstances.
PwC agreed to the PCAOB’s order, which includes a civil money penalty, censure of the firm, and remedial undertakings such as reviewing and revising its independence-related quality-control policies, making certain communications to professionals, and providing additional training on independence rules and firm quality-control procedures. The PCAOB stressed the importance of maintaining independence in audits and holding firms accountable for failures in their policies and procedures.
Overall, the case highlights the significance of auditor independence, the need for timely consultation with authoritative sources, and the consequences of violating independence rules in the accounting industry.
