PriceWaterhouseCoopers LLP Auditors? Independence Issues & Violations :: essays research papers fc

SEC Concerned with Changes in the Public Accounting Profession The SEC and the former Chairman Arthur Levitt Jr. were extremely concerned that the public invoice firms were violating the hearers independence rules addressed through the Securities Exchange Acts. Auditing firms now had dual citizenship in public companies (1) they issued opinions on audited financial statements and (2) they participated in various consulting engagements for those same companies. Levitts solution was to resolve auditing and consulting. The former Chairman was concerned that the public would lose confidence in the financial markets and the whole system would be jeopardized. Public Accounting Revenues vs. Consulting Revenues by 1999By 1976, audit fees accounted for around 70% of total revenue earned by any accounting firm in general. According to the Public Accounting Report, an battle of Atlanta newsletter, the auditing and assurance services revenues dropped to 30% and tax services business accou nted for 19% of the total revenues earned in 1999. Mathematically speaking, this means management consulting services accounted for approximately 51% of the total revenue being earned in 1999 by public accounting firms. Fact According to The Business Journals Book of Lists, PwC had $75 billion in South Florida billings in 1998 to place third among accounting firms. SEC Auditors Independence RuleThe independence rules require that auditors refrain from investing in companies that they audit, to correspond objective, truthful reporting and opinion. The rule applies to all auditors, their relatives, spouses, dependents, non-dependents, and, in some cases, associates must disclose all holdings. On the September 25, 2002 issue of BusinessWeekOnline.com, the Accounting Wars Powerful auditor-consultants ar the target of Arthur Levitts crusade articles defined Independence to mean, CPAs cannot audit their own or their partners work...clear and honest information is dependent on the CPAs independencean auditor must not have any financial stake in the health, or even survival, of a client company. There are those in the traffic that believe this rule is archaic and does not hold any value in todays financial world. Barry Melancon, President and CEO of the American demonstrate of Certified Public Accountants stated, The SEC has a right to expect the profession to adhere to the rules however, the profession has a right to expect the regulatory environment to breathe modern. Fact In 1933, when Congress first required public financial reports, lawmakers debated whether audit fees would taint auditors independence. PriceWaterhouseCoopers LLPPriceWaterhouseCoopers LLP is a public accounting firm formed through a merger between Coopers & Lybrand LLP and Price Waterhouse LLP, which was consummated on or about July 1, 1998.