SEC Charges PwC With Violating Independence Rules

This is the second time the U.S. Securities and Exchange Commission has charged an auditing firm in recent months.

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Bigstock photo

The U.S. Securities and Exchange Commission has charged auditing giant PricewaterhouseCoopers and one of its employees with allegedly violating auditor independence rules and engaging in improper professional conduct.

The SEC announced Monday that PwC had agreed to pay over $7.9 million to settle the charges.

Just months ago, the regulatory body fined another auditing firm, KPMG, for allegedly using stolen data and cheating on internal exams, the SEC said in June. KPMG paid $50 million in that case.

[II Deep Dive: SEC Says KPMG Employees Used Stolen Data, Cheated on Exams]

At issue in the PwC case is an agreement that the firm, along with PwC partner Brandon Sprankle, made with a publicly-traded multinational technology company, according to the SEC order.


The firm and Sprankle allegedly agreed to design and implement governance, risk, and compliance software for the publicly traded company while Sprankle was a member of the audit team, the SEC said. According to the SEC statement, this violated auditor independence rules.

The SEC’s independence rules prohibit independent auditors from designing and implementing software systems that aggregate source data or generate information that is relevant to clients’ financial statements or systems.

“Auditors play a fundamental role in protecting the reliability and integrity of financial reporting and must ensure that non-audit services do not come at the cost of their independence on audits of public companies,” Anita Bandy, associate director of the SEC’s enforcement division, said in a statement.

According to the SEC, PwC’s violations caused the technology company to violate its obligation to have its financial statements audited by independent public accountants. The SEC alleged that the violations were the result of breakdowns in PwC’s quality controls, claiming that the firm would have caught the violation had it reviewed whether designing and implementing the software was permissible.

“PwC repeatedly provided non-audit services without having effective quality controls in place for monitoring whether the services impaired its independence on audit engagements and were properly disclosed to audit committees,” Bandy said in a statement.

PwC said in a statement to II that the firm takes “independence and its important role in the capital markets seriously.”

“PwC is pleased to have resolved this matter and remains committed to continuous improvement,” the statement continued. “Through our ongoing efforts, we have and continue to add additional processes and controls to maintain independence.”