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PwC Hit With $2.75 Million Fine By PCAOB For Running Afoul of Independence Rules

Published

7 months ago

April 9, 2024

The Public Company Accounting Oversight Board (PCAOB) nailed Big Four firm PwC US with a $2.75 million fine on March 28 for quality-control violations related to auditor independence.

PwC’s quality-control policies and procedures were found to be deficient because “they didn’t provide reasonable assurance that the firm’s personnel would timely consult with qualified individuals or refer to authoritative literature or other sources when dealing with certain complex, unusual, or unfamiliar independence issues,” the PCAOB said in the disciplinary order for PwC.

Because of its size, PwC “can often face complex, unusual, or unfamiliar issues that may impact the firm’s independence, either in fact or appearance. Those issues can include circumstances which are not specifically addressed in applicable independence rules and standards, but which have the potential to impair independence.”

As a result, PwC established an Independence Office intended to address independence risks due to the substantial tax and advisory services the firm provides clients outside of assurance.

“That office, which is a key pillar in PwC’s system of quality control, comprises independence-focused individuals with specialized knowledge, and is responsible for maintaining PwC’s independence policies, processes, and controls, and for developing the firm’s independence training courses,” the PCAOB said. “The Independence Office is also intended to serve as a resource when independence-related questions arise, including by providing ad hoc guidance on an as-needed basis.”

However, in 2018, numerous PwC leaders and partners failed to consult with the firm’s Independence Office or conduct other appropriate independence analysis as PwC explored the possibility of terminating its audit relationship with an unnamed issuer—a software supplier that PwC used (as a consumer) in a variety of both internal and client-facing business activities—to allow for a joint business relationship (JBR) with that company, according to the PCAOB.

PwC did not raise the JBR‑related discussions to its Independence Office—or perform an appropriate analysis of PwC’s independence in light of those discussions—until PCAOB investigators raised questions about PwC’s independence from the issuer.

“Auditor independence is essential to maintaining trust in our capital market system,” PCAOB Chair Erica Williams said in a statement last Thursday. “Firms must have effective guardrails in place to enforce independence and uphold the integrity of their audits.”

The PCAOB further found that, in 2018, members of PwC’s tax group prepared and shared with members of PwC’s assurance group a “business case” document showing that PwC could generate substantially more revenue from a JBR with the software supplier than it was earning as the company’s auditor.

In response to that business case document and at the instruction of one of PwC’s national leaders for assurance, two PwC partners—including the engagement partner for the issuer’s then‐ongoing 2018 integrated audit—met with the software supplier’s CEO and president in November 2018 and discussed, among other things, business opportunities that PwC and the company could pursue in a JBR, according to the PCAOB. Both during and after the meeting, the CEO expressed enthusiasm for a JBR with PwC, which the CEO understood might be worth tens of millions of dollars to the company.

Shortly after the November meeting, PwC and the company began exploring the possibility of transitioning the audit to another audit firm. At the same time, however, PwC planned to continue performing the audit of the company’s financial statements for the year ending Dec. 31, 2018, and to also perform the next quarterly review. PwC’s then‐existing independence policies and procedures didn’t require an Independence Office consultation in these circumstances, the PCAOB said.

PwC’s Independence Office was informed of the November meeting and related discussions only after the PCAOB’s Division of Enforcement and Investigations sent PwC a document and information request concerning PwC’s independence from the issuer. That PCAOB request caused PwC to initiate a consultation with its Independence Office. The Independence Office then considered the results of that meeting, as well as PwC’s other non‐audit interactions with and involving the software supplier, and determined that there was “a risk that a reasonable investor could conclude that PwC was not independent of the issuer in 2018,” the PCAOB said. PwC was terminated as the software supplier’s auditor before completing the 2018 audit.

Without admitting or denying the board’s findings, PwC agreed to the PCAOB’s order against the firm, which censures the firm, imposes a $2.75 million civil money penalty on the firm, and requires the firm to complete remedial undertakings. Those remedial undertakings require that PwC:

Review and revise or supplement, as necessary, its independence‐related quality-control policies and procedures;
Make certain communications to the firm’s professionals regarding certain independence rules and standards, and related firm quality-control policies and procedures; and
Ensure that all current firm professionals, and all professionals hired in the next five years, complete four additional hours of professional training related to certain independence rules and standards, and related firm quality-control policies and procedures.

“A critical component of a well-functioning system of quality control are policies and procedures that provide reasonable assurance that personnel will refer to authoritative literature or other sources and consult, on a timely basis, when appropriate” said Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations. “If a firm does not appropriately design and maintain such policies and procedures, or does not adequately communicate them, we will not hesitate to hold the firm accountable for that failure.”

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RightTool Wins 2024 Accountant Bracket Challenge

Published

7 months ago

April 12, 2024

Business Finance News

QuickBooks automation tool RightTool is the champion of the 2024 Accountant Bracket Challenge, presented by Accounting High, as the 3 seed defeated 1 seed CPA Jason Staats, host of the Jason Daily podcast, by a score of 355 votes to 110 votes in the final.

“To everybody in the RightTool Facebook community and all the RightTool users, all of you came together and helped us get the most votes, so I wanted to thank you guys for being the best community in the industry, in my opinion,” said Hector Garcia, CPA, co-founder of RightTool, during the championship final show, which was streamed by Accounting High on YouTube and LinkedIn earlier this afternoon.

RightTool joins accounting and bookkeeping app Uncat as winners of the ABC Tournament. In the inaugural Accountant Bracket Challenge last year, Uncat defeated Staats 339-190 in the championship match.

“I think what we’ve learned is … machines win,” Staats said about his consecutive losses in the tournament final. “We thought that would be down the road, but it’s happening.”

A grand total of 36,831 votes were cast during the three-week tournament.

“This has been so much fun. It only works if other people participate and pay attention and have fun, so thank you to the 1,806 ‘students’ who participated,” said Scott Scarano, an accounting firm owner who founded Accounting High, a community for forward-thinking accountants.

He added that the tournament will return next year, with some tweaks to make it better.

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Tesla to Launch RoboTaxi on August 8

Published

7 months ago

April 12, 2024

Business Finance News

Dana Hull
Bloomberg News
(TNS)

Tesla Inc. plans to unveil its long-promised robotaxi later this year as the electric carmaker struggles with weak sales and competition from cheap Chinese EVs.

Chief Executive Officer Elon Musk posted Friday on X, his social media site, that Tesla’s robotaxi will be unveiled on Aug. 8.

Shares gained as much as 5.1% in postmarket trading in New York. Tesla’s stock has fallen 34% this year through Friday’s close. Shortly before Musk posted the news about the robotaxi, he lost the title of third-richest person in the works to Mark Zuckerberg, CEO of Meta Platforms Inc.

A fully autonomous vehicle, pitched to investors in 2019, has long been key to Tesla’s lofty valuation. In recent weeks, Tesla has rolled out the latest version of the driver-assistance software that it markets as FSD, or Full Self-Driving, to consumers.

The company has said that its next-generation vehicle platform will include both a cheaper car and a dedicated robotaxi. Though the company has teased both, it has yet to unveil prototypes of either. Musk’s Friday tweet indicates that the robotaxi is taking priority over the cheaper car, though both will be designed on the same platform.

Reuters reported earlier Friday that the carmaker had called off plans for the less-expensive vehicle and was shifting more resources toward trying to bring a robotaxi to market. Musk responded by saying “Reuters is lying,” without offering specifics.

Tesla also produced 46,561 more vehicles than it delivered in the first quarter, which has forced it to slash prices. U.S. consumers have been turning away from more expensive EVs in favor of hybrid models, causing many manufacturers to rethink pushes to electrify their fleets.

Splashy product announcements by Musk have always been a key part of Tesla’s ability to gin up enthusiasm among customers and investors without spending on traditional advertising. They don’t always work: the company unveiled the Cybertruck to enormous fanfare in November 2019, but production was delayed for years and the ramp up of that vehicle has been slow.

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(With assistance from Catherine Larkin.)

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Retail Sales and Wages Grew in March

Published

7 months ago

April 12, 2024

Business Finance News

Retail sales grew at a steady pace in March, according to the CNBC/NRF Retail Monitor, powered by Affinity Solutions, released today by the National Retail Federation.

“As inflation for goods levels off, March’s data demonstrates steady spending by value-focused consumers who continue to benefit from a strong labor market and real wage gains,” NRF President and CEO Matthew Shay said. “In this highly competitive market, retailers are having to keep prices as low as possible to meet the demand of consumers looking to stretch their family budgets.”

Total retail sales, excluding automobiles and gasoline, were up 0.36% seasonally adjusted month over month and up 2.72% unadjusted year over year in March, according to the Retail Monitor. That compared with increases of 0.4% month over month and 2.7% year over year in February, based on the first 28 days in February.

The Retail Monitor calculation of core retail sales – excluding restaurants in addition to automobiles and gasoline – was up 0.23% month over month and up 2.92% year over year in March. That compared with increases of 0.27% month over month and 2.99% year over year in February, based on the first 28 days in February.

For the first quarter, total retail sales were up 2.65% year over year and core sales were up 3.12%.

This is the sixth month that the Retail Monitor, which was launched in November, has provided data on monthly retail sales. Unlike survey-based numbers collected by the Census Bureau, the Retail Monitor uses actual, anonymized credit and debit card purchase data compiled by Affinity Solutions and does not need to be revised monthly or annually.

March sales were up in six out of nine retail categories on a yearly basis, led by online sales, sporting goods stores and health and personal care stores, and up in five categories on a monthly basis. Specifics from key sectors include:

Online and other non-store sales were up 2.48% month over month seasonally adjusted and up 15.47% year over year unadjusted.
Sporting goods, hobby, music and book stores were up 0.86% month over month seasonally adjusted and up 8.33% year over year unadjusted.
Health and personal care stores were up 0.03% month over month seasonally adjusted and up 4.5% year over year unadjusted.
Grocery and beverage stores were up 1.17% month over month and up 4.22% year over year unadjusted.
General merchandise stores were up 0.13% month over month seasonally adjusted and up 3.38% year over year unadjusted.
Clothing and accessories stores were down 0.01% month over month and up 2.13% year over year unadjusted.
Building and garden supply stores were down 2.13% month over month and down 3.97% year over year unadjusted.
Furniture and home furnishings stores were down 1.46% month over month seasonally adjusted and down 5.28% year over year unadjusted.
Electronics and appliance stores were down 2.27% month over month seasonally adjusted and down 5.92% year over year unadjusted.

To learn more, visit nrf.com/nrf/cnbc-retail-monitor.

As the leading authority and voice for the retail industry, NRF provides data on retail sales each month and also forecasts annual retail sales and spending for key periods such as the holiday season each year.