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PwC in trouble with PCAOB

Level 15

From Monday April 1, 2024 Tax Notes Today

The Public Company Accounting Oversight Board (PCAOB) has fined PwC Australia $600,000 for failure to timely report proceedings involving the alleged disclosure of confidential Australian Treasury tax briefings.

In a March 28 release, the PCAOB determined that PwC Australia failed to file the relevant forms to inform the board about the initiation and conclusion of hearings conducted by Australia's Tax Practitioners Board. Form 3 is used for the required disclosure of reportable events brought against a public company and requires the disclosure no later than 30 days after the investigation concludes.

“Failure to disclose required information is not acceptable, and the PCAOB will hold firms accountable,” PCAOB Chair Erica Y. Williams said in the release.

In November 2023 Chartered Accountants Australia and New Zealand fined PwC AUD 50,000 (about $33,000) — the maximum monetary penalty — for violating the professional organization’s rules by disclosing confidential government tax briefings.

In January 2023 a former PwC tax partner was deregistered for providing information from confidential government consultations to his firm's partners and staff, who then used that information to assist existing and potential clients. An independent report commissioned by PwC Australia on the disclosures was released in September 2023 and found that an aggressive growth agenda and a “whatever-it-takes” focus contributed to integrity failures at the firm. The fallout from the scandal has damaged PwC Australia's reputation and led to hundreds of cut jobs. On March 27 an Australian Senate committee said that the firm has failed to cooperate with its inquiry and has engaged in a coverup.

PwC Australia consented to the PCAOB's settled disciplinary order and the fine without admitting or denying the PCAOB’s findings, according to the release. The order requires the firm to revise and supplement some existing policies to ensure that personnel comply with the PCAOB's reporting requirements.

The PCAOB also announced in a separate March 28 release that it fined PwC $2.75 million for failure to maintain proper control standards involving auditor independence. According to the release, in 2018 PwC leadership and partners did not consult PwC's Independent Office on whether it could terminate its auditor relationship with a client and instead initiate a joint business relationship.

An internal document circulated by a PwC tax group showed that PwC would generate substantially more revenue through a joint business relationship than it made from auditing the unnamed client, according to the release. PwC continued to provide auditing services to the company while the two pursued a joint business relationship that could be worth tens of millions of dollars, the release said.

After receiving an information request from the PCAOB's Division of Enforcement and Investigation, PwC's Independent Office determined that a reasonable investor could conclude that PwC was not independent from the company it was auditing.

“Auditor independence is essential to maintaining trust in our capital market system,” Williams said in the release. “Firms must have effective guardrails in place to enforce independence and uphold the integrity of their audits.”

PwC consented to the fine without admitting or denying the PCAOB's findings. It must review and revise its independence-related procedures, and all current PwC employees and new employees hired in the next five years must complete additional professional training.


1 Comment 1
Level 15

There are rules that all of us small minions must follow and the big boys always believe they can make their own rules.  It’s always nice to read little stories when they do get caught with their fingers in the cookie jar.

Slava Ukraini!