The Audit Oversight Board is the single most important line of defense for the shareholders and the general public against accounting shenanigans. Is this line solid like a brick wall, or full of holes like swiss cheese?
From Wikipedia - PwC page
Criticisms
[edit] Willie Nelson
In 1990, the Internal Revenue Service seized most of the assets of Willie Nelson, claiming he owed $32 million in back taxes, including penalties and interest. He sued Price Waterhouse, contending that they put him into tax shelters that were later disallowed by the IRS.[39] The lawsuit was settled for an undisclosed amount.[40][edit] ChuoAoyama Suspension
From 2000 to 2006, PwC's affiliate of assurance service in Japan was ChuoAoyama Audit Corporation (中央青山監査法人 Chūō-Aoyama Kansa Hōjin). In May 2006, the Financial Services Agency suspended ChuoAoyama following a suspicious audit of cosmetics company Kanebo in which three of the firm's partners allegedly assisted with accounting fraud and boosted earnings for the company by about $1.9 billion over the course of five years. The accountants involved were reprimanded by the Tokyo District Court but escaped prison time after a judge deemed them to have played a "passive role" in the crime.[41]Shortly after the suspension of ChuoAoyama (中央青山監査法人), PwC acted quickly to stem any possible client attrition as a result of the scandal. It set up the PricewaterhouseCoopers Aarata, and some of ChuoAoyama's accountants (but most of the international divisions) moved to the new firm. ChuoAoyama resumed operations on September 1 under the Misuzu name. However, by this point the two firms combined had 30% fewer clients than did ChuoAoyama prior to its suspension.[42] Misuzu was dissolved in July, 2007.[43]
[edit] Tyco settlement
In July 2007, PwC agreed to pay $229 million to settle a class-action lawsuit brought by shareholders of Tyco International Ltd. over a multibillion-dollar accounting fraud.[44][edit] Satyam case
In January 2009 PwC was criticised,[45][46][47][48][49][50] along with the promoters of Satyam, an Indian IT firm listed on the NASDAQ, in a $1.5 billion fraud.[51] PwC has written a letter to the board of directors of Satyam that its audit may be rendered "inaccurate and unreliable" due to the disclosures made by Satyam's (ex) Chairman.[52] PwC's U.S. arm "was the reviewer for the U.S. filings for Satyam."[53] Consequently, lawsuits have been filed in the U.S. with PwC as a defendant.[54] Two partners of PricewaterhouseCoopers, Srinivas Talluri and Subramani Gopalakrishnan, have been charged by India’s Central Bureau of Investigation in connection with the Satyam scandal. Since the scandal broke out, Subramani Gopalakrishnan retired from the firm after reaching mandatory retirement age; while Talluri remains on suspension from the firm.[55][edit] Apparent involvement in controversial court proceedings in Russia
In November 2010 The New York Times reported that PwC had been assisting the Russian Government with prosecutions in relation to alledged tax evasion at Yukos stating "...Then, in 2007, with the prospect of parole on the horizon, the same prosecutors — with what appears to be the complicity of PricewaterhouseCoopers, Yukos’s longtime accounting firm — indicted the two men (Mikhail B. Khodorkovsky and Platon Lebedev), again, bringing a new round of Kafkaesque charges."[56][edit] Other punishments and criticisms
India's accounting standards agency ICAI is investigating partners of PwC for professional negligence[46] in the now-defunct Global Trust Bank Ltd. case of 2007. Like Satyam, Global Trust Bank was also based in Hyderabad. This led to Reserve Bank of India banning PwC from auditing any financial company for over a year.[57][58][59] PwC was also associated with the accounting scandal at DSQ Software[60] in India. In July 2006, PwC’s Japanese affiliate Chuo Aoyama was handed a two-month ban.[46] Following the Satyam scandal, the Mumbai-based Small Investor Grievances Association (SIGA) has requested the Indian stock market regulator SEBI to ban PwC permanently and seize its assets in India alleging few more scandals like "Ketan Parekh stock manipulations."[61] The Accountancy and Actuarial Discipline Board, which regulates the profession in the UK, announced an inquiry in July 2009 into PwC's auditing of Cattles, the struggling sub-prime lender that failed to keep track of its bad debts.[62]- ^ "Willie Nelson Hopes for a Hit; So Does the I.R.S". New York Times. September 2, 1991. http://query.nytimes.com/gst/fullpage.html?res=9D0CEFD7113FF931A3575AC0A967958260&sec=&spon=&pagewanted=all. "$32 million bill for delinquent taxes ... pay for the $45 million lawsuit Mr. Nelson filed last year against his former accountants at Price Waterhouse, who he contends put him into ill-advised tax shelters. The Government ruled against many of the tax shelters, and the I.R.S. later disallowed many of the tax benefits that Mr. Nelson claimed."
- ^ "Tax Shelter of Rich and Famous Has Final Date in Court". The New York Times. November 4, 1995. http://query.nytimes.com/gst/fullpage.html?res=9D04E6DF1739F937A35752C1A963958260.
- ^ CPAs in Kanebo fraud avoid prison, The Japan Times (registration required), Aug. 10, 2006.
- ^ Rocky road for new accounting firm, The Daily Yomiuri, Sep. 2, 2006.
- ^ New Japanese Internal Controls Framework Fraud Magazine, November/December 2007
- ^ Pricewaterhouse to pay $225 mln in Tyco settlement
- ^ Satyam scandal rattles confidence in accounting Big Four
- ^ a b c PwC's fate Hangs in Balance
- ^ ICAI to seek explanation from Satyam’s auditor PwC
- ^ Satyam auditor says examining chairman's statement
- ^ What happens to PWC, The Auditor For Satyam?
- ^ Satyam: Auditors' body to pull up PwC ICAI to seek explanation from Satyam’s auditor PwC
- ^ Satyam: A Rs 7,000cr Lie
- ^ PWC says Satyam audit opinions may be unreliable
- ^ Satyam Said to Draw SEC Scrutiny in Accounting Case
- ^ Pomerantz Law Firm Charges Satyam's Auditors With Securities Law Violations
- ^ Raghavendra Verma, Keith Nuthall (2009-04-08). "PwC partners charged over Satyam". Accountancy Age. http://www.accountancyage.com/accountancyage/news/2240046/styam-partners-charged. Retrieved 2010-03-01.
- ^ New York Times issue of November 6, 2010, business columnist Joe Nocera
- ^ RBI lifts ban on PwC
- ^ PwC has a chequered past with taxmen
- ^ Regulator may blacklist Price Waterhouse
- ^ Third mess-up by PwC after GTB, DSQ Soft
- ^ Investor group wants Sebi to supersede Satyam board
- ^ Regulator probes PwC over Cattles audit
- ^ "Timeline: The Bernardo/Homolka case". cbc.ca. Canadian Broadcasting Corporation. http://www.cbc.ca/canada/story/2010/06/16/f-bernardo-homolka-timeline.html. Retrieved February 17, 2009.
Notable accounting scandals
Company | Year | Audit Firm | Country | Notes |
|---|---|---|---|---|
| Nugan Hand Bank | 1980[1] | Australia | ||
| ZZZZ Best | 1986[2] | United States | Ponzi scheme run by Barry Minkow | |
| Barlow Clowes | 1988[3] | United Kingdom | Gilts management service. £110 million missing | |
| MiniScribe | 1989[4] | United States | ||
| Polly Peck | 1990[5] | United Kingdom | ||
| Bank of Credit and Commerce International | 1991[6] | United Kingdom | ||
| Northern Rock | United Kingdom | |||
| Clearstream | Luxembourg | |||
| Phar-Mor | 1992[7] | United States | ||
| Informix | 1996[8] | Ernst & Young[9] | United States | |
| Cendant | 1998[10] | Ernst & Young | United States | |
| Waste Management, Inc. | 1999[11] | Arthur Andersen | United States | Financial mistatements |
| MicroStrategy | 2000[12] | PricewaterhouseCoopers | United States | Michael Saylor |
| Unify Corporation | 2000[13] | United States | ||
| Computer Associates | 2000[14] | KPMG | United States | Sanjay Kumar |
| Xerox | 2000[15] | KPMG | United States | Falsifying financial results |
| One.Tel | 2001[16] | Ernst & Young | Australia | |
| Enron | 2001[17] | Arthur Andersen | United States | Jeffrey Skilling, Kenneth Lay, Andrew Fastow |
| Adelphia | 2002[18] | Deloitte & Touche | United States | John Rigas |
| AOL | 2002[15] | Ernst & Young | United States | Inflated sales |
| Bristol-Myers Squibb | 2002[15][19] | PricewaterhouseCoopers | United States | Inflated revenues |
| CMS Energy | 2002[15][20] | Arthur Andersen | United States | Round trip trades |
| Duke Energy | 2002[15] | Deloitte & Touche | United States | Round trip trades |
| Dynegy | 2002[15] | Arthur Andersen | United States | Round trip trades |
| El Paso Corporation | 2002[15] | Deloitte & Touche | United States | Round trip trades |
| Freddie Mac | 2002[21] | United States | Understated earnings | |
| Global Crossing | 2002[15] | Arthur Andersen | Bermuda | Network capacity swaps to inflate revenues |
| Halliburton | 2002[15] | Arthur Andersen | United States | Improper booking of cost overruns |
| Homestore.com | 2002[15][22] | United States | Improper booking of sales | |
| ImClone Systems | 2002[23] | KPMG | United States | Samuel D. Waksal |
| Kmart | 2002[15][24] | PricewaterhouseCoopers | United States | Misleading accounting practices |
| Merck & Co. | 2002[15] | United States | Recorded co-payments that were not collected | |
| Merrill Lynch | 2002[25] | Deloitte & Touche | United States | Conflict of interest |
| Mirant | 2002[15] | United States | Overstated assets and liabilities | |
| Nicor | 2002[15] | United States | Overstated assets, understated liabilities | |
| Peregrine Systems | 2002[15] | KPMG | United States | Overstated sales |
| Qwest Communications | 2002[15] | United States | Inflated revenues | |
| Reliant Energy | 2002[15] | Deloitte & Touche | United States | Round trip trades |
| Sunbeam | 2002[26] | United States | ||
| Tyco International | 2002[15] | PricewaterhouseCoopers | Bermuda | Improper accounting, Dennis Kozlowski |
| WorldCom | 2002[15] | Arthur Andersen | United States | Overstated cash flows, Bernard Ebbers |
| Royal Ahold | 2003[27] | Deloitte & Touche | Netherlands | Inflating promotional allowances |
| Parmalat | 2003[28][29] | Grant Thornton SpA | Italy | Falsified accounting documents, Calisto Tanzi |
| HealthSouth Corporation | 2003[30] | Ernst & Young | United States | Richard M. Scrushy |
| Nortel | 2003[31] | Deloitte & Touche | Canada | Distributed ill advised corporate bonuses to top 43 managers |
| Chiquita Brands International | 2004[32] | United States | Illegal payments | |
| AIG | 2004[33] | PricewaterhouseCoopers | United States | Accounting of structured financial deals |
| Bernard L. Madoff Investment Securities LLC | 2008[34] | Friehling & Horowitz | United States | Massive Ponzi scheme.[35] |
| Anglo Irish Bank | 2008[36] | Ernst & Young | Ireland | Anglo Irish Bank hidden loans controversy |
| Satyam Computer Services | 2009[37] | PricewaterhouseCoopers | India | Falsified accounts |
| Lernout & Hauspie | Belgium | |||
| Lehman Brothers | 2010[38] | Ernst & Young | United States | Failure to disclose Repo 105 transactions to investors |
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