Academic journal article Journal of Accountancy

PWC Relaxes Position on Employee Investments

Academic journal article Journal of Accountancy

PWC Relaxes Position on Employee Investments

Article excerpt

Faced with a mutiny in its ranks, PricewaterhouseCoopers LLP backed down on a policy aimed at limiting employee investments in companies for which the firm performs audit engagements. Within a month of directing its employees to dump all of their investments in the affected companies, the firm softened its stance.

PricewaterhouseCoopers had ordered all employees above the rank of manager to sell, by the end of August, stocks, bonds and long or short positions in any company it audits. The policy, which applied to the spouses, cohabitants and dependents of employees as well, also prohibited investments in firm-audited mutual funds. Employees were responsible for any taxes, expenses and losses incurred as a result of the divestitures.

After employees complained that divestitures would create economic turmoil for them, the firm agreed to allow them to keep investments acquired before June 17, the date the policy was adopted.

PricewaterhouseCoopers had initiated the procedures after being censured in January by the SEC for violating conflict-of-interest and accounting regulations.

"Partners of an audit firm may not own stock in an audit client," said Randall J. Fons, regional director of the SEC's Southeast regional office, about auditor independence. "Partners have a direct financial interest in the audit firm and, therefore, should not have a direct financial interest in any audit client. …

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