October 23, 2018

PwC Toeing Thin Line Between Independent Auditor and Client Lobbyist for Tax Reform

Francine McKenna of MarketWatch reported on July 30 that PwC has earned $10.74 million since 2013 as the exclusive registered lobbyist on tax reform for a coalition that includes several audit clients, which some say is a conflict of interest.

Members of the Alliance for Competitive Taxation—which calls itself “a group of America’s leading companies who believe it is time for comprehensive tax reform”—include big-name PwC clients like Bank of America, JPMorgan Chase, Caterpillar, and IBM, according to McKenna.

All told, 16 of the coalition’s 37 members use PwC to produce their financial audit opinion, while 11 are EY audit clients and the rest either engage KPMG or Deloitte.

In case you needed a reminder, McKenna noted:

Federal securities laws require auditors to be independent of, including prohibiting auditors from serving in an “advocacy role” for audit clients. Regulation S-X of the Exchange Act states “an accountant is not independent whenever, during the audit and professional engagement period, the accountant … acts as an advocate for the audit client.”

Former Securities and Exchange Commission Chief Accountant Lynn Turner called PwC’s tax reform advocacy efforts “a clear-cut violation of auditor independence.”

He told MarketWatch:

“Investor confidence in the reliability of a corporation’s financial statements depends upon the public’s perception of the outside auditor as an independent professional. If they see the auditor advocating for the client, the value of the audit itself could be lost.”

PwC declined to comment on the firm’s contract with the coalition, according to McKenna.

And as the MarketWatch article mentions, EY got in a little trouble—$4 million worth—with the SEC in July 2014, after the SEC found that an EY subsidiary, Washington Council Ernst & Young, lobbied congressional staff on behalf of two audit clients. Despite providing these forbidden lobbying services, EY repeatedly maintained that it was “independent” in audit reports issued on the clients’ financial statements.

This caused Adrienne to write at the time:

Everyone lobbies. If you think the Big 4 don’t lobby their asses off for their own clients, therefore themselves, I have a bridge to sell you.

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Illustration: iStock/aklionka

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In Case You Need Another Reason to Hate the French

french flag.jpgWalking around the PwC office in Midtown Manhattan, our blogospondent in the field happened across a couple of young ladies having the picture taken in front of the P Dubya sign out front, proudly posing as if it was their names on the building at 300 Madison.
Said blogospondent approached the young ladies and asked if they worked at the P Dub and they responded in heavily French accents, “yes”. As result of further prying, it was revealed that the ladies do work a lot during “busy times”, sometimes between 50 and 60 hours a week!
This compared to an American tax associate who we spoke to just a couple days before who, in the last fifteen days, had worked 185 hours.
Let’s recap: America – 185 hours in 15 days in the middle of June vs. France – 50-60 hours in one week during the “busy time”.
American vitriol towards the French may now ensue.

PwC Needs a Lesson or Two in Spin

240px-PricewaterhouseCoopers.svg.pngIn, lets talk about anything but Satyam, PwC news, the largest Big 4 firm was rated highest among professional service providers on brand recognition in the Brand Finance Top 50 ranking of Best Brands of British Origin.
“Chairman of PwC [in the UK] Ian Powell said the recognition was ‘testament to the strength and reach of our clients, the talents of our people, and the contribution that we make to the wider community.'”
We won’t take anything away from PwC but sometimes bad news is the best news for brand recognition. So this whole Satyam thing is probably not getting the credit it deserves. Come on P. Dubs! Lemons into lemonade!

PwC most recognised professional services brand
[Accountancy Age]