The Public Company Accounting Oversight Board announced that PricewaterhouseCoopers Singapore agreed to pay $1.5 million for violations of PCAOB rules and quality control standards. The violations arose from the Firm’s failure to have appropriate policies and procedures over its Personal Independence Compliance Testing (PICT) process and to foster an appropriate ethical culture within its Independence Office.
Over a nearly two-year period, personnel in PwC Singapore’s Independence Office developed and implemented various methods to understate the rates at which the PwC personnel failed to properly or timely disclose their financial interests and relationships. These methods involved misclassifying certain of those failures – known as PICT exceptions – as self-reported. As a result, on two separate occasions the firm provided understated PICT exception rates to the PCAOB in order to address prior PCAOB inspection findings.
“The PCAOB found that firm leadership’s focus on achieving a targeted PICT exception rate, combined with a lack of appropriate PICT-related policies and procedures and related controls, enabled the independence office’s misconduct,” the PCAOB said. “The PCAOB also found that the firm failed to give appropriate consideration to the assignment of quality control responsibilities when selecting the individual it appointed as its partner responsible for independence.”
The PCAOB found that PwC Singapore’s leadership’s focus on achieving a targeted PICT exception rate, combined with a lack of appropriate PICT-related policies and procedures and related controls, enabled the Independence Office’s misconduct. The PCAOB also found that the firm failed to give appropriate consideration to the assignment of quality control responsibilities when selecting the individual it appointed as its Partner Responsible for Independence.
“It is imperative that firms maintain an appropriate ethical culture in all aspects of their system of quality control,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations (DEI). “Firms must properly monitor and report on compliance with their independence-related policies and procedures to ensure the Board and investors have accurate information.”
PwC Singapore’s Cooperation Credit
The PCAOB board noted that it took PwC Singapore’s “extraordinary cooperation in this matter.” Specifically, the firm shared with the PCAOB the results of its internal investigation which revealed the circumstances surrounding the Independence Office’s efforts to improperly reduce the Firm’s reported PICT exception rates.
Without admitting or denying the Board’s findings, PwC Singapore agreed to settle the PCAOB’s allegations, which ultimately imposed a $1.5 million penalty. PwC Singapore is also required to undertake certain remedial measures to establish, revise, or supplement, as necessary, policies and procedures, including monitoring procedures, related to the Firm’s independence processes.