NEW YORK, US – PricewaterhouseCoopers agreed to pay $7.9 million to settle charges with the Securities and Exchange Commission for violations of auditor independence rules and engaging in improper professional conduct on 19 engagements with 15 audit clients, the SEC said Monday.
The SEC also charged PwC partner Brandon Sprankle, who specializes in Oracle security controls, with causing PwC’s independence violations. Both he and the firm have agreed to settle the charges, with PwC paying over $7.9 million.
“PwC takes independence and its important role in the capital markets seriously,” the firm said in a statement Monday. “PwC is pleased to have resolved this matter and remains committed to continuous improvement. Through our ongoing efforts, we have and continue to add additional processes and controls to maintain independence.”
Sprankle did not immediately respond to a request for comment.
PwC violated auditor independence rules by doing prohibited non-audit services during an audit engagement, according to the SEC’s order, including exercising decision-making authority in the design and implementation of software relating to an audit client’s financial reporting, and engaging in management functions. The firm also didn’t fully inform the audit committees at 15 of its clients about the work it was doing and the potential impact on independence. The SEC blamed the firm for breakdowns in its independence-related quality controls, leading to a failure to properly review and monitor whether non-audit services for audit clients were permissible and approved by clients’ audit committees.
“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,” said Anita B. Bandy, associate director of the SEC’s Division of Enforcement, in a statement. “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.”
PwC and Sprankle agreed to the SEC’s order without admitting or denying the charges and they agreed to cease and desist from further violations. PwC also agreed to disgorge $3,830,213, and pay prejudgment interest of $613,842 and a civil money penalty of $3.5 million, and to be censured. Sprankle agreed to pay a civil penalty of $25,000, and to be suspended from appearing or practicing before the SEC, with the right to reapply for reinstatement after four years. PwC also agreed to go through a detailed set of undertakings requiring the firm to review its current quality controls for complying with auditor independence requirements for non-audit services and for evaluating the provision of non-audit services.
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