Compliance and Litigation Risks: the SEC's Tougher Stance on Intermediary Institutions

… 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 …

On Sept 23, 2019, the accounting firm PricewaterhouseCoopers (PwC) was charged by the U.S. Securities and Exchange Commission (SEC) with improper professional conduct in relation to 19 engagements on behalf of several publicly listed companies. In addition, PwC was also found violating audit independence by performing prohibited non-audit services during an audit engagement, including the exercise of decision-making power and management functions in the design and implementation of software related to auditing client financial reports. For the aforementioned misconduct, PwC was fined more than US$7.9 million by the SEC. Anita B. Bandy, Associate Director of the SEC's Division of Enforcement, stated that: "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. 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."