PricewaterhouseCoopers LLP was charged by the Securities and Exchange Commission with violating auditor independence by performing prohibited non-audit services for 15 SEC-registered audit clients. The SEC’s September 23 order stated the firm had exercised decision-making authority in the design and implementation of software relating to an audit client’s financial reporting and engaged in management functions in performing non-audit services. The firm was charged with violating Public Company Accounting Oversight Board Rule 3525, which requires an auditor to describe in writing to the audit committee the scope of work, discuss with the audit committee the potential effects of the work on independence, and document the substance of the independence discussion. According to the SEC, PwC deprived issuers’ audit committees the information necessary to assess PwC’s independence. The Commission concluded the violations had occurred because there had been breakdowns in PwC’s independence-related quality controls.

PwC and PwC Partner Brandon Sprankle consented to the SEC’s order without admitting or denying the findings and agreed to cease and desist from future violations. PwC agreed to be censured and to pay disgorgement of $3,839,213, plus pre-judgement interest of $613,842 and a civil penalty of $3.5 million. Mr. Sprankle agreed to pay a penalty of $25,000 and to be suspended from practicing before the Commission, with a right to reapply for reinstatement after four years. PwC agreed to review its current quality controls for complying with auditor independence requirements for non-audit services and for evaluating its providing non-audit services.

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