Danny McCance 3 Aug 2017 11:01am

PwC fined for Merrill Lynch audit failure

The Big Four firm has been forced to pay a $1m fine for compliance violations in its audit of financial services firm Merrill Lynch in 2014

The Public Companies Accounting Oversight Board (PCAOB) imposed the civil penalty for PwC’s failure to comply with the Securities and Exchange Commission’s (SEC’s) Customer Protection Rule.

"An auditor's attention to a broker's compliance with the SEC's Customer Protection Rule provides critical assurance that the business is protecting customer securities from liens by creditors of the broker," said PCAOB chairman, James R. Doty.

"PwC failed to fulfil its obligations during a period when Merrill Lynch exposed billions of dollars of customer assets to claims of its creditors,” he added.

PwC chose to accept the penalty without accepting or denying the claims.

"Investors should not have to worry that their brokers' auditors are failing to perform appropriate work in examining the safeguards around their funds," said the director of PCAOB enforcement and investigations, Claudius B. Modesti.

"Today's order demonstrates the enforcement division's commitment to using its authority to police and sanction those who place investors at risk,” he added.

It’s been a tough few months for PwC, with the firm recently banned from doing audit work in Ukraine over an accounting black hole worth billions.

Last month it was announced the PCAOB had joined the UK Financial Reporting Council in investigating PwC’s audits of BT’s Italian arm after historical accounting errors which cost the business up to £530m were discovered.

On Monday, it was announced that the National House Building Council is suing its auditor, PwC, for £35m in a row over payments of corporation tax that it did not need to make.

Yesterday, the PCAOB announced adoption of a new auditing standard that, if approved by the SEC, will bring about the first major changes to auditing practice in the US for more than 70 years.