Again,
we’re confronted with a CPA firm that has harmed the auditing profession.
This
time, PricewaterhouseCoopers (PwC) was doing a consulting
assignment for the Bank of Tokyo-Mitsubishi (BTMU). The New York State Department of Financial Services investigated the assignment and concluded, "PwC – under pressure from BTMU executives – improperly altered an historical transaction review" (HTR) report submitted to regulators on wire transfers that the Bank performed on behalf of sanctioned countries and entities."
The purpose of
the engagement was to ensure that transactions with Iran and other
countries under United States sanctions were properly handled:
“[PwC] conducted a Historical Transaction Review ("HTR"
) for BTMU. The HTR analyzed BTMU 's U.S. dollar clearing activity between
April 1, 2006 and March 31, 2007. Its purpose was to: ( I) identify any U.S. dollar
transactions that potentially should have been frozen, blocked or reported
under applicable OFAC [Office of Foreign Asset Control] requirements; and (2) investigate the
relevant transaction set for compliance with OFAC requirements.”
PwC
claims it did this consulting assignment under Statement on Standards for
Consulting Services No. 1 issued by the AICPA. Those standards say the
consulting firm should:
“Serve the client interest by seeking to accomplish the
objectives established by the understanding with the client while maintaining
integrity and objectivity.”
In
addition, Article III of the Code of Professional Conduct describes integrity
as follows:
Unfortunately,
PwC allowed the client bank to edit its report and as a result, significant
changes occurred between the original draft and the final report.
Originally,
the report said:
“While we agree in theory, had PwC know [sic] about these "[deleted
Special]Written Operational Instructions" at the initial Phase of the HTR then we would have used a different approach for completing this project.”
The final report, after suggested edits from the bank, said:
“We have concluded that the written instructions would not have impacted the
completeness of data available for the HTR and our methodology to process and search the HTR data was appropriate.”
In an initial draft of
the report, PwC included paragraphs from a bank manual outlining “special
instructions” employees should follow to ensure that transactions with countries
under United States sanctions did not draw attention. PwC deleted those
paragraphs in the version of the report sent to regulators, again based on
suggested edits from the bank.
From at least 2002 to 2007,
BTMU had unlawfully cleared through the Bank' s New York State licensed branch about
28,000 payments, valued at about $100 billion. These improper payments involved
Iran, Sudan, Myanmar, and other entities under US sanctions
So as the United States
fights terrorist states around the world, PwC does nothing to help our nation while
it harms its reputation and the auditing profession.
I wonder what kind of
action the accounting profession will take against the PwC employees who failed
to follow the Consulting Standards and the Code of Professional Conduct? (See http://davehancox.blogspot.com/2014/08/illinois-takes-no-action-against.html-
taking no action by our profession is all too common – even on big publicity
events)
The New York State Department
of Financial Services fined PwC $25 million and has suspended the firm for 24
months from accepting consulting engagements at financial institutions
regulated by the Department of Financial Services.
Here is an example of the edits suggested by the bank - there were several iterations of these edits.
Being an internal auditor, it is quite common for management to attempt to edit reports we write. I've been successful in reducing this by working with management to set expectations at the front. Unfortunately, external firms don't have this luxury. If they push back on management, they risk losing revenue from future consulting engagements. Until attest engagements are done solely by firms with no consulting opportunities, this conflict will continue to exist. Furthermore, the regulatory agencies should make the punishment fit the crime (e.g., baring a firm from performing such work for a period of time). I believe this particular event was the responsibility of a few bad eggs, but there seem to be more and more bad eggs these days. Thanks!
ReplyDeleteYa we have same opinion, goo to know it
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