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PwC Canada fined over one million CDN by US, Canadian regulators

Big Four accounting firm voluntarily disclosed to regulators that its employees shared answers on mandatory internal training courses
Mar 1, 2022 Author: Colin Ellis

TORONTO, March 1, 2022 – The Canadian affiliate of PricewaterhouseCoopers LLP has agreed to pay more than one million dollars in penalties after disclosing widespread sharing of answers by its accountants on internal training tests. After discovering the training-related misconduct in January 2020, PwC Canada reported the matter to the Canadian Public Accountability Board, conducted an internal investigation, and began implementing remedial policies and procedures.

The US Public Company Accounting Oversight Board (PCAOB) censured PwC Canada and imposed a civil money penalty of $750,000 USD. CPAB also censured the Big Four accounting firm and imposed a penalty of “up to a maximum of $200,000” CDN. If paid in full and, accounting for exchange rates, PwC Canada would ultimately pay regulators fines amounting to a total of approximately $1.105M CDN.

Widespread test cheating over a period of four years at all firm levels

From at least 2016 until early 2020, more than 1,200 employees at PwC Canada were involved in improper answer sharing — either by providing or receiving answers — in connection with tests for mandatory internal training courses covering topics that included auditing, accounting, and professional independence, according to a seven-page enforcement action by the PCAOB.

More than 1,100 of the auditors were employed in the firm’s Assurance practice. PwC Canada used an online platform to conduct mandatory online courses, including courses containing content regarding professional independence and performing professional responsibilities with integrity, and tailored to the experience level of the employee.

Over the four-year period, firm personnel primarily shared answers through the use of shared drives that employees had created on the firm's computer network, posting the answers and providing supplemental answers. According to the enforcement actions, the shared drives contained answers to at least 46 of the firm’s approximately 55 mandatory assurance tests, and the “improper sharing” of answers occurred at all levels of the firm, from junior staff to partners.

Commenters in the online r/accounting community on Reddit dismissed the size of the monetary penalty as negligible to a Big Four professional services firm; noted the significant disparity between the US and Canadian fines; and complained about the number of mandatory internal courses conducted at large public accounting firms, saying that time and billing pressures encouraged cheating.
PwC Canada disclosed the answer sharing to CPAB

Audit regulators have policies in place that provide credit in circumstances of voluntary disclosure. In ordering sanctions, the regulators took into account the accounting firm’s “extraordinary cooperation” in the matter. PwC Canada voluntarily self-reported the matter and instituted remedial measures (the penalties levied were largely for the lack of internal controls at PwC). “Absent the Firm’s extraordinary cooperation, the civil money penalty imposed would have been significantly larger, and the Board may have imposed additional sanctions.”

During the four-year period when PwC employees were improperly sharing answers on mandatory courses on professional independence and integrity, “the Firm served as the principal auditor for over 55 issuer audit clients. Additionally, at all relevant times, the Firm performed audit work that other PCAOB registered firms, including member firms of PwC Global, used or relied on in issuing audit reports for their issuer clients.”

The PCAOB has the authority to levy penalties against foreign accounting firms that do business on American soil. In 2021, the PCAOB levied penalties against five Canadian accounting firms, including Big Four accounting firm Deloitte Canada. In 2019, the US Securities and Exchange Commission fined KPMG US 50 million dollars for “illicit use of PCAOB data and cheating on training exams,” one year after charging five former KPMG US officials in a case alleging they schemed to interfere with the PCAOB’s ability to detect audit deficiencies at KPMG.

In a statement posted on the PwC Canada website, the firm states: “we are committed to serving our stakeholders to the best of our ability and in accordance with our values and purpose — to build trust in society and solve important problems. When we do not meet the standards we set for ourselves, we acknowledge it and take action to do better.”

Colin Ellis is a contributing editor to Canadian Accountant. Image : PwC Canada, Toronto, Canada (iStock).