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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
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Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: January 15, 1999
(Date of earliest event reported): January 14, 1999
IMRGLOBAL CORP.
(Exact name of Company specified in its charter)
FLORIDA 0-28840 59-2911475
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification No.)
26750 U.S. HIGHWAY 19 NORTH, SUITE 500
CLEARWATER, FLORIDA 33761
(Address of principal executive offices) (Zip Code)
(727) 797-7080
(Company's telephone number, including area code)
INFORMATION MANAGEMENT RESOURCES, INC.
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
On January 14, 1999, the Company appointed Ernst & Young LLP ("E&Y") as
the independent accounting firm engaged as the principal accounting firm to
audit the financial statements of IMRglobal Corp. (the "Company"), for the year
ended December 31, 1998 and dismissed PricewaterhouseCoopers LLP ("PWC"). The
decision to dismiss PWC was approved by the Audit Committee of the Company's
Board of Directors on January 14, 1999.
The Company's decision was made after discussions with and in accordance
with directions by the Securities and Exchange Commission (the "Commission").
The Commission announced on January 14, 1999 that the Commission had brought and
settled charges against PWC for engaging in improper professional conduct by
violating SEC auditor independence rules. Attached as Exhibit 99.1 is a copy of
the Order Instituting Proceedings and Opinion and Order Pursuant to Rule 102(e)
of the Commission's Rules of Practice ("Order") issued by the SEC under
reference Securities Exchange Act of 1934 Release 40945/January 14, 1999 and
Accounting And Auditing Enforcement Release No. 1098/January 14, 1999,
Administrative Proceedings File No. 2-9809.
Specifically, the Order details activities by a PWC Tax Associate with
securities of a company identified in the Order as "Company B." Based on
communications with the Commission and PWC, IMRglobal Corp. believes that it is
the company identified in the Order as "Company B." The Order states that the
PWC tax associate worked on (1) a tax-related footnote included in the Company's
initial public offering on or about November 8, 1996, and (2) other tax
projects. The Order also states that the PWC tax associate did not own Company
securities while he performed services for the Company. PWC also has informed
the Company that from May 8, 1997 through April 6, 1998, a third party
investment manager, on behalf of a Coopers & Lybrand pension plan, but in
contravention of a contract prohibiting investments in Coopers & Lybrand
clients, purchased 42,290 shares of the Company's stock, and sold that stock
during the period from May 22, 1997 through May 4, 1998.
PWC has stated to the Company that they believe these violations had no
effect on either the quality and integrity of any audit or the reliability of
any opinion rendered in connection with their audit engagement with the Company.
The Company also firmly believes in the quality and integrity of its financial
statements and in the reliability of PWC audit opinions.
The Company had no knowledge or reason to know of PWC's lack of
compliance with the SEC's independence standards which was acknowledged by the
Commission to the Company. The conduct of PWC is not consistent with the
standards regarding compliance with Commission regulations that the Company
expects and demands from its independent public accountants.
Before the Company became aware of these independence violations, the
Company was very satisfied with its relationship with PWC and, in the absence of
the violations detailed in the Order, would not have elected to replace PWC.
PWC's reports on the Company's consolidated financial statements for
1997 and 1996 did not contain an adverse opinion or a disclaimer of opinion, and
was not qualified or modified as to uncertainty, audit scope, or accounting
principles. During the Company's two most recent fiscal years and the period
from the end of its most recent fiscal year through January 14, 1999, there were
no disagreements with PWC on any matter of accounting principles or practices,
financial statement
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disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of PWC, would have caused it to make reference to the
subject matter of the disagreements in connection with its reports. In addition,
during the Company's two most recent fiscal years and the period from the end of
its most recent fiscal year through January 14, 1999, there have been no
reportable events, as such term is defined in Item 304(a) of Regulation S-K
promulgated under the Securities Act of 1933, as amended.
The Company has provided PWC with a copy of this Current Report on Form
8-K (the "Report"). At the Company's request, PWC has furnished the Company with
a letter addressed to the Commission stating that it agrees with the statements
made by the Company in this Report. A copy of such letter is filed as Exhibit
16.1 to this Report.
On January 14, 1999, Ernst & Young, LLP ("E&Y") was engaged as the
principal accountant to audit the Company's 1998 consolidated financial
statements. This engagement was approved by the Audit Committee of the Company's
Board of Directors on January 14, 1999. During the Company's two most recent
fiscal years and the period from the end of its most recent fiscal year to
January 14, 1999, the Company did not consult Ernst & Young, LLP regarding
either (i) the application of accounting principles to a specified transaction,
either complete or proposed or (ii) the type of audit opinion that might be
rendered on the Company's consolidated financial statements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
16.1. Letter from PricewaterhouseCoopers LLP to the Commission dated
January 15, 1999.
99.1 Order In The Matter of PricewaterhouseCoopers LLP, Respondent,
SECURITIES EXCHANGE ACT OF 1934 Release No. 40945 / January 14,
1999; ACCOUNTING AND AUDITING ENFORCEMENT, Release No. 1098 /
January 14, 1999, ADMINISTRATIVE PROCEEDING File No. 3-9809.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IMRGLOBAL CORP.
/s/ DILIP PATEL
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DILIP PATEL
Secretary
Date: January 15, 1999
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
16.1. Letter from PricewaterhouseCoopers LLP to the Commission dated January 15,
1999.
99.1 Order In The Matter of PricewaterhouseCoopers LLP, Respondent, SECURITIES
EXCHANGE ACT OF 1934 Release No. 40945 / January 14, 1999; ACCOUNTING AND
AUDITING ENFORCEMENT, Release No. 1098 / January 14, 1999, ADMINISTRATIVE
PROCEEDING File No. 3-9809.
[PRICEWATERHOUSECOOPERS LETTERHEAD]
January 15, 1999
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Commissioners:
We have read the statements made by IMRglobal Corp. (copy attached), which we
understand will be filed with the Commission, pursuant to Item 4 of Form 8-K,
as part of the Company's Form 8-K report for the month of January 1999. We
agree with the statements concerning our Firm in such Form 8-K.
Very truly yours,
/s/ PRICEWATERHOUSECOOPERS LLP
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SEC CENSURES PRICEWATERHOUSECOOPERS FOR
[SEC Logo] VIOLATING AUDITOR INDEPENDENCE RULES AND
IMPROPER PROFESSIONAL CONDUCT
FOR IMMEDIATE RELEASE 99-5
PWC AGREES TO ESTABLISH NEW PROCEDURES AND TO CREATE $2.5
MILLION AUDITOR INDEPENDENCE EDUCATION FUND
WASHINGTON, D.C., JANUARY 14, 1999 - The Securities and Exchange Commission
today brought and settled charges against PricewaterhouseCoopers L.L.P. (PwC)
for engaging in improper professional conduct by violating SEC auditor
independence rules. In violation of SEC rules and in more than 70 instances,
some PwC partners and managers, including its pension fund, purchased securities
of PwC audit clients.
In settling the charges, PwC agreed to be censured, to establish a $2.5 million
auditor independence education fund, to improve its internal procedures for
monitoring adherence to auditor independence rules, and to conduct an internal
investigation supervised by an outside person named by the SEC, among other
things.
Richard H. Walker, Director of the SEC's Division of Enforcement said, "The
SEC's rules explicitly forbid accountants from owning stock in their audit
clients. If auditors are not independent of their clients, in fact or
perception, the integrity of the financial reporting system is jeopardized."
Chairman Arthur Levitt said, "Without independent auditors to assure the
veracity of the numbers, confidence in our markets would be severely undermined.
At the simplest level, members of an audit firm cannot invest in their clients."
PwC is the entity that resulted from the merger of Coopers & Lybrand L.L.P.
(C&L) and Price Waterhouse L.L.P. in July 1998. In its Order, the SEC found that
during the period 1996 through 1998, C&L procedures for ensuring its compliance
with independence standards with respect to publicly-held audit clients, whose
securities were registered with the Commission, failed to detect that:
/bullet/ In four instances, certain professionals owned securities of
publicly-held audit clients for which they provided professional
services;
/bullet/ In 31 instances, partners or managers owned securities of
publicly-held companies for which they provided no professional
services but were clients of C&L; and
/bullet/ In 45 instances, C&L's retirement plan owned securities of
publicly-held audit clients of C&L and PwC.
As part of the order, PwC agreed to:
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/bullet/ Be censured;
/bullet/ Pay $2.5 million to establish a fund for programs to further
awareness and education throughout the accounting profession relating
to the independence requirements of public accounting firms;
/bullet/ Implement various procedures to provide reasonable assurance that it
will comply with applicable professional standards requiring that
public accounting firms be independent of their audit clients, in
fact and in appearance;
/bullet/ Establish a database of its publicly-held audit clients and of the
securities transactions of its partners, and to compare each security
transaction by a partner with that database and take action if a
partner buys the securities of a PwC publicly-held audit client;
/bullet/ Undertake procedures to prevent members and its pension plans from
owning securities of PwC's publicly-held audit clients in
contravention of SEC regulations and other applicable professional
standards concerning auditor independence; and
/bullet/ Conduct an internal investigation supervised by an independent person
appointed by the SEC and to report to the SEC any additional
instances where a PwC partner or professional staff owned the
securities of a PwC audit client in contravention of SEC regulations
and other applicable professional standards concerning auditor
independence.
PwC consented to the entry of the SEC's Order without admitting or denying the
facts, findings, or conclusions of the Order.
Details of the Commission's action and PwC's undertakings are contained in the
Commission's Order, which is available at HTTP://WWW.SEC.GOV.
CONTACT
Randall J. Fons
Regional Director, Southeast Regional Office
(305) 982-6332
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UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 40945 / January 14, 1999
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1098 / January 14, 1999
ADMINISTRATIVE PROCEEDING
File No. 3-9809
:
In the Matter of : ORDER INSTITUTING
: PROCEEDINGS AND OPINION AND
PricewaterhouseCoopers LLP, : ORDER PURSUANT TO RULE 102(e)
: OF THE COMMISSION'S RULES OF
Respondent. : PRACTICE
:
I.
The Securities and Exchange Commission ("Commission") deems
it appropriate and in the public interest to institute public
administrative proceedings pursuant to Rule 102(e) of the
Commission's Rules of Practice[1] against PricewaterhouseCoopers
LLP ("PwC" or "Respondent").
II.
In anticipation of the institution of these administrative
proceedings, PwC has submitted an Offer of Settlement which the
Commission has determined to accept. Solely for the purpose of
these proceedings and any other proceedings brought by or on
behalf of the Commission, or to which the Commission is a party,
and without admitting or denying the facts, findings, or
conclusions herein, except as to the Commission's jurisdiction
over it and the subject matter of these proceedings, which are
admitted, PwC consents to the entry of this Order Instituting
Proceedings and Opinion and Order Pursuant to Rule 102(e) of the
Commission's Rules of Practice ("Order").
Accordingly, it is ordered that proceedings pursuant to Rule
102(e) of the Commission's Rules of Practice be, and hereby are,
instituted.
III.
On the basis of this Order and Respondent's Offer of
Settlement, the Commission makes the following findings:[2]
A. STATEMENT OF FACTS
1. Respondent
PricewaterhouseCoopers LLP is a public accounting firm
formed as a result of the merger of Coopers & Lybrand,
L.L.P. ("C&L") and Price Waterhouse LLP ("PW") on or
about July 1, 1998.
2. Direct or Material Indirect Financial Interests in
Audit Clients
During the period 1996 through 1998, C&L's procedures for
ensuring its compliance with independence standards with respect
to publicly-held audit clients, whose securities were registered
with the Commission, failed to detect that:
* In four instances, certain professionals owned
securities of publicly-held audit clients for which
they provided professional services;
* In 31 instances, individual partners owned securities
of publicly-held audit clients for which the partners
provided no professional services and individual
managers owned securities of publicly-held audit
clients of their office for which the managers provided
no professional services; and
* In 45 instances, C&L's retirement plan owned securities
of publicly-held audit clients of C&L and PwC.
Each of these instances was contrary to Rule 2-01(b) of
Regulation S-X and generally accepted auditing standards (GAAS),
which require, among other things, that public accounting firms
and their partners and certain professionals not have, or commit
to acquire, any direct or material indirect financial interest in
their audit clients. These situations are described in more
detail below.
a. Professionals who owned securities of publicly-
held audit clients for which they provided
professional services.
During the period 1996 through 1997, three C&L professionals
owned the securities of four publicly-held audit clients for
which they provided professional services.[3] Each of these
professionals was assigned to the Tampa, Florida office of C&L.
The circumstances for each of these situations are described
below.
First, in December 1996, a senior tax associate of C&L's
Tampa office ("Tampa Tax Associate") owned the securities of a
company ("Company A") for which he provided professional
services. The Tampa Tax Associate performed preliminary work
involved in transferring certain engagements for Company A from
C&L's Jacksonville, Florida office to its Tampa office. The Tampa
Tax Associate did not own Company A securities while he performed
services for Company A. However, his ownership of Company A
securities occurred during the period that C&L was designated as
Company A's public accountant.
Second, during November 1996 through April 1997, the Tampa
Tax Associate also owned the securities of another company
("Company B") for which he provided professional services. The
Tampa Tax Associate worked on (1) a tax-related footnote included
in Company B's financial statements relating to Company B's
initial public offering on or about November 8, 1996 and (2)
other tax projects. The Tampa Tax Associate did not own Company
B securities while he performed services for Company B. However,
his ownership of Company B securities occurred during the period
that C&L was designated as Company B's public accountant.
Third, during December 1996 through February 1997, the Tampa
Tax Associate also owned the securities of another company
("Company C") for which he provided professional services.
During the time he owned Company C securities, the Tampa Tax
Associate was exercising manager-level responsibilities on the
tax accrual for Company C's 1996 financial statements included in
a Form 10-K filed with the Commission on or about March 31,
1997.[4]
During October 1997 through July 1998, a consultant in C&L's
Human Resource Advisory group also owned securities of Company C.
During 1997, the consultant provided one hour of professional
services for Company C relating to a 401(k) plan offered by
Company C.
Fourth, during October 1996 through February 1997, another
senior tax associate of C&L's Tampa office ("Second Tampa Tax
Associate") owned the securities of a company ("Company D") for
which he provided professional services. During the period that
he owned Company D stock, the Second Tampa Tax Associate worked
on pending IRS audits of Company D and the tax accrual and
footnote for Company D's 1996 financial statements included in a
Form 10-K filed with the Commission on or about March 31, 1997.
b. Partners who owned securities of publicly-held
audit clients for which the partners provided no
professional services and managers who owned
securities of publicly-held audit clients of their
office for which the managers provided no
professional services.
During the period 1996 through 1998, five C&L partners or
their spouses owned securities of, or had another direct or
material indirect financial interest in, 31 publicly-held audit
clients for which the partners provided no professional services.
In addition, three C&L managers or their spouses owned securities
of, or had another direct or material indirect financial interest
in, three publicly-held audit clients of their office for which
the managers provided no professional services.
c. Investments by C&L's retirement plan in securities
of publicly-held audit clients of C&L and PwC.
During the period 1996 through 1998, C&L's retirement plan
owned securities of 45 publicly-held audit clients. These
investments occurred in three types of instances.
i) Clients on C&L's independence list
During the period 1997 through 1998, an independent fund
manager that was not a C&L employee and that was retained to
manage certain of C&L's pension fund assets made 15 purchases of
the securities of 11 different publicly-held audit clients of
C&L, notwithstanding provisions in its contract with C&L
prohibiting the purchase of such securities. C&L at least
annually provided its fund manager with a list of its audit
clients ("independence list"), the securities of which were not
to be purchased. C&L's procedure for monitoring the fund
manager's compliance with C&L's prohibitions consisted of only a
periodic comparison by personnel in its pension department of the
fund holdings to C&L's independence list. In addition, C&L had
no procedures to detect any investments in publicly-held audit
clients that occurred during the period between the pension
department comparisons.
The pension department discovered 14 of these investments in
10 different clients when it compared the investments reported by
the fund manager to C&L's independence list. Although the
pension department directed the fund manager to dispose of the
investments, the agreement between C&L and the fund manager did
not require immediate disposal; the fund manager was required to
sell the holdings as quickly as was reasonable, but had up to 30
days to dispose of the investments. In addition, the pension
department did not ensure that the investments were sold, and did
not report the investments by the fund manager to senior C&L
officials. In one instance, C&L's pension department never
detected the fund manager's trading in a publicly-held audit
client.
ii) Clients not on C&L's independence list
During the period 1996 through 1998, the same fund manager
made three purchases of the securities of three different
publicly-held audit clients of C&L. C&L had inadequate
procedures in place to provide the fund managers with timely
updates to its independence list. The fund manager made these
purchases prior to being provided by C&L with an updated
independence list which identified these three clients. The fund
manager sold the securities after notification by C&L in
accordance with the agreement between C&L and the fund manager as
described above.
iii) Client investments not disposed of prior to
the merger
From July 1, 1998, the date of the PW and C&L merger,
through approximately November 1998, C&L's retirement plan held
the securities of 32 PwC publicly-held audit clients that had
been clients of PW before the merger. Former C&L pension
personnel, who became employees of PwC, failed to provide three
different fund managers with a list of PW's clients. Although
PwC provided such lists in October or November 1998, in the
interim, the managers invested in, or continued to hold
securities of, the PwC clients.
B. APPLICABLE PROFESSIONAL STANDARDS
Standards relating to the independence of public accounting
firms are contained in Rule 2-01(b) of Regulation S-X and GAAS.
1. Regulation S-X
Rule 2-01(b) of Regulation S-X states in pertinent part:
The Commission will not recognize any certified public
accountant or public accountant as independent who is
not in fact independent. For example, an accountant
will be considered not independent with respect to any
person or any of its parents, its subsidiaries, or
other affiliates (1) in which, during the period of his
professional engagement to examine the financial
statements being reported on or at the date of his
report, he, his firm, or a member of his firm had, or
was committed to acquire, any direct financial interest
or any material indirect financial interest; . . .
[T]he term "member" means [i] all partners,
shareholders, and other principals of the firm, [ii]
any professional employee involved in providing any
professional service to the person, its parents,
subsidiaries, or other affiliates, and [iii] any
professional employee having managerial
responsibilities and located in [the engagement office]
or other office of the firm which participates in a
significant portion of the audit.
2. GAAS
Statement on Auditing Standards No. 1, Codification of
Auditing Standards and Procedures (SAS No. 1) contains the
general standards of GAAS. The second general standard requires
that "[i]n all matters relating to the assignment, an
independence in mental attitude is to be maintained by the
auditor or auditors."
SAS No. 1 states that
It is of utmost importance to the profession that the
general public maintain confidence in the independence
of independent auditors. Public confidence would be
impaired by evidence that independence was actually
lacking, and it might also be impaired by the existence
of circumstances which reasonable people might believe
likely to influence independence. To be independent,
the auditor must be intellectually honest; to be
recognized as independent, he must be free from any
obligation to or interest in the client, its
management, or its owners. . . . Independent auditors
should not only be independent in fact; they should
avoid situations that may lead outsiders to doubt their
independence.
C. FINDINGS
On the basis of the foregoing, the Commission finds that
Respondent failed to comply with Rule 2-01(b) of Regulation S-X
and GAAS, which require, among other things, that public
accounting firms and their partners and certain professionals not
have, or commit to acquire, any direct or material indirect
financial interest in their audit clients.
IV.
Based on the foregoing, the Commission finds that PwC
engaged in improper professional conduct within the meaning of
Rule 102(e)(1)(ii) of the Commission's Rules of Practice in that
it failed to comply with Rule 2-01(b) of Regulation S-X and GAAS,
which require, among other things, that public accounting firms
and their partners and certain professionals not have, or commit
to acquire, any direct or material indirect financial interest in
their audit clients.
**FOOTNOTES**
[1]: Rule 102(e)(1) of the Commission's Rules of Practice,
17 C.F.R. ss. 201.102(e), provides in pertinent part:
The Commission may censure a person or deny,
temporarily or permanently, the privilege of appearing
or practicing before it in any way to any person who is
found by the Commission after notice of and opportunity
for hearing in the matter . . . (ii) to be lacking in
character or integrity or to have engaged in unethical
or improper professional conduct.
[2]: The findings herein are made pursuant to Respondent's
Offer and are not binding on any other person or entity in these
or any other proceedings.
[3]: In some instances, these services were not audit-
related. However, the independence standards of Rule 2-01(b) of
Regulation S-X cover "any professional employee . . . providing
any professional service to the" client [emphasis added].
[4]: In December 1997, the regional heads of C&L's Tax
Department and Human Resources department received an anonymous
letter. The letter alleged that the Tampa Tax Associate had
purchased the stock of three publicly-held audit clients
(designated above as Companies A, B and C) for which he was
performing professional services.
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V.
Accordingly, the Commission hereby accepts PwC's Offer of
Settlement and orders that:
A. PwC is hereby censured.
B. PwC undertakes that it will take measures which it
determines will be designed to provide reasonable assurance that
it will comply with GAAS and Rule 2-01(b) of Regulation S-X
requiring that public accounting firms be independent, in fact
and appearance, of their audit clients, including the following:
1. To complete within 90 days an internal review
supervised by an independent, outside person or firm
appointed by the Commission, and conducted in a manner
not unacceptable to the Commission Staff, and to report
to the Commission Staff any additional instances in
which partners or professional staff of PwC owned
securities of public audit clients of the firm in
contravention of the applicable rules and regulations
respecting professional independence ("Internal
Investigation"). The independent, outside person or
firm shall have the option to seek an extension of time
by making a written request to the Commission Staff.
2. To notify promptly in writing the chairman of the audit
committee of any public audit client of any instance in
which, during the period of PwC's audit engagement or
at the date of PwC's audit report, PwC, or a member of
PwC, had or was committed to acquire, any direct
financial interest or any material indirect financial
interest in such public audit client, regardless of how
such interest was acquired or the length of time such
interest was held, for each client
a) referred to in this Order; or
b) discovered during the course of the Internal
Investigation;
and to provide copies of all such notifications to the
Commission Staff.
3. To take measures designed to provide reasonable
assurance that it will comply with applicable
professional standards requiring that public accounting
firms and their members not have any direct or material
indirect financial interest in their audit clients,
including:
a) To adopt forthwith policies and procedures
reasonably designed to prevent the ownership of
securities in any circumstance that would impair
the firm's professional independence through:
(1) maintaining a database of all PwC clients and
other publicly-traded companies, and any of
the parents, subsidiaries or other affiliates
of such clients and companies, in which
investments by PwC personnel are restricted
("Restricted Entity List");
(2) requiring that all partners and principals
(collectively, "partners") of PwC not hold
securities whose ownership would impair the
firm's professional independence by:
(a) requiring that all partners review the
Restricted Entity List before acquiring
any security in order to determine that
such ownership would not be in
contravention of the rules and
regulations respecting professional
independence;
(b) maintaining a database of all securities
held by partners, as updated by
disclosures under subparagraphs (2)(c)-
(d) ("Securities Held List");
(c) requiring that all partners disclose to
PwC all current investments in
securities for inclusion on the
Securities Held List;
(d) requiring that all partners disclose to
PwC their acquisition or disposition of
any security within five business days
of such transaction and modify the
Securities Held List to reflect such
transaction;
(e) reviewing, against the Restricted Entity
List, all securities holdings or
transactions by PwC partners;
(f) notifying, within five business days of
disclosure pursuant to subparagraph (c)
or (d), any partner who holds securities
of any client appearing on the
Restricted Entity List, that such
securities must be disposed of within
five business days; and
(g) verifying with the partner within five
business days of the notice provided in
subparagraph (f) that such securities
have been disposed of;
(3) requiring that no manager hold securities of
any public audit client of the firm in
contravention of the applicable rules and
regulations respecting professional
independence by requiring that
(a) the Restricted Entity List above include
a field that lists the offices
performing a "significant portion" of
the audit;
(b) every manager review the Restricted
Entity List and not trade in the
securities of any company for which the
office out of which the manager works is
listed as an office performing a
"significant portion" of the audit;
(c) all managers report to PwC their
acquisition of any security within five
business days of its occurrence;
(d) the disclosure referred to in
subparagraph (c) will require that the
manager disclose whether:
(i) the client in whose securities the
manager transacted is on the
Restricted Entity List, and
(ii) if the client appears on the
Restricted Entity List, the office
out of which the manager works is
listed in the field described at
subparagraph (3)(a);
(e) managers not enter into any transaction
that results in affirmative answers to
both questions posed in subparagraphs
(d)(i) and (d)(ii); and
(f) any manager who, in reporting a
securities transaction, answers both
(d)(i) and (d)(ii) in the affirmative,
dispose of that security within five
business days;
(4) requiring that prior to accepting a new audit
engagement for any company, the securities of
which are publicly traded, PwC will
(a) check the Securities Held List to
determine whether any partner owns the
securities of that prospective audit
client in contravention of the rules and
regulations of the Commission regarding
independence;
(b) check the assets held by all PwC, PW and
C&L retirement funds to determine
whether the funds own the securities of
that prospective audit client in
contravention of the rules and
regulations of the Commission regarding
independence;
(c) where such review discloses that a
partner or retirement fund owns a
security of the prospective client,
require disposition of that asset within
fifteen business days after acceptance
of the engagement;
(d) verify with all partners and retirement
fund managers that such securities have
been disposed of in accordance with the
requirements of (c) above;
(e) notify each manager in every office that
will perform a significant portion of
the audit work that he or she must
dispose of the specified securities
within fifteen business days after
acceptance of the engagement; and
(f) obtain confirmation from any
professional prior to assignment to the
engagement that they do not hold any
securities of the proposed client or
will dispose of such securities prior to
such assignment;
(5) requiring that annual reports be filed by:
(a) all partners indicating affirmatively
whether, over the prior year, they had
acquired, or were committed to acquire,
any direct financial interest or any
material indirect financial interest in
any security on the Restricted Entity
List;
(b) all managers indicating affirmatively
whether, over the prior year, they had
acquired, or were committed to acquire,
any direct financial interest or any
material indirect financial interest in
any security on the Restricted Entity
List, where the office out of which the
manager works performed a "significant
portion" of the audit during the prior
year; and
(c) all remaining professional staff
indicating affirmatively whether, over
the prior year, they had acquired, or
were committed to acquire, any direct
financial interest or any material
indirect financial interest in any
security on the Restricted Entity List,
for which client they provided
professional services during the prior
year;
(6) reviewing compliance with the foregoing.
Such review shall include an annual audit of
the securities portfolios of randomly-
selected partners and professionals. Such
audit shall confirm that they do not hold,
and have not held during the past year,
securities of public audit clients of the
firm in contravention of the applicable rules
and regulations respecting professional
independence;
(7) requiring that for each engagement involving
the audit of financial statements of a
company, the securities of which are
registered with the Commission and for which
audit work is performed by a foreign
affiliate of PwC, that the responsible
engagement partner obtain, prior to the
commencement of the period of the
professional engagement, written confirmation
from the responsible foreign firm partner,
that the foreign firm, and, where applicable,
all applicable foreign firm professionals do
not own the securities of the audit client in
contravention of the Commission's rules and
regulations respecting direct or material
indirect financial investments in audit
clients;
(8) requiring that the firm's pension assets be
invested in individual equity securities or
in mutual funds
(a) only after prior approval by PwC upon
review of the Restricted Entity List,
and
(b) pension assets so held will be subject
to periodic review by PwC to determine
that they do not include securities of
clients on the Restricted Entity List
and have not included holdings of
securities of clients on the Restricted
Entity List during the period from the
prior periodic review through the
current review;
and
(9) requiring that all partners and professional
staff complete a course of professional
education and training on independence issues
in 1999 (and for each of the succeeding two
calendar years, that all laterally hired
partners and newly hired professional staff
complete such a course).
Such policies and procedures as are set forth in
subparagraphs (1) through (8) shall be implemented
as soon as possible, but in all events within 180
days of entry of this Order. PwC shall have the
option to seek an extension of time by making a
written request to the Commission Staff.
b) To retain, not more than 210 days from the entry
of this Order, an independent consultant,
appointed by the Commission, to review, at PwC's
expense, PwC's compliance with the undertakings
set forth in subparagraph a.(1) through a.(9)
above and to report thereon to the Commission
Staff.
4. PwC further undertakes, pursuant to agreement with the
Commission and not pursuant to Rule 102(e), to
establish within 30 days a fund of $2.5 million to be
used within 12 months, in a manner not unacceptable to
the Commission staff, for program(s) to further
awareness and education throughout the profession
relating to the independence requirements for public
accounting firms. Within 30 days of the expiration of
the 12 month period, PwC will provide the Commission
Staff with an accounting of all funds paid.
By the Commission.
Jonathan G. Katz
Secretary
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