Just four accounting firms – PricewaterhouseCoopers, KPMG, Deloitte & Touche and Ernst & Young – audit 97% of FTSE 350 companies. "Although their might is being challenged by mid-tier firms such as Grant Thornton.
The big four accountancy firms were behind almost half of all known avoidance schemes, the Revenue (HMRC) said in 2006.
Prem Sikka, Professor of Accounting at the University of Essex writes:
- "The global tax-avoidance industry is dominated by lawyers, bankers, financiers and the four major accountancy firms (PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte & Touche) in particular."
- "PricewaterhouseCoopers has advised the Conservative party on taxation policies. After examining evidence, a report by the US Senate committee on homeland security and governmental affairs (pdf) concluded that the firm sold "generic tax products to multiple clients, despite evidence that some ... were potentially abusive or illegal tax shelters"."
More on PWC and tax avoidance:
Creative accountants:'Toms', an avoidance scheme that could have cost the Treasury £1bn, is just one of the top accountancy firms' elaborate wheezes
- 1849 – Samuel Lowell Price establishes practice in London
- 1854 – William Cooper establishes practice in London
- 1957 – Cooper Brothers & Co (UK), McDonald, Currie and Co (Canada) and Lybrand, Ross Bros & Montgomery (US) merge to form Coopers & Lybrand
- 1998 – Price Waterhouse and Coopers & Lybrand form PricewaterhouseCoopers
Audits | Assurance | Global Risk Management | Dispute investigations | Project finance and privatisations | Human Resources solutions | Securities | Management consultancy | Tax services
PricewaterhouseCoopers (PwC) has:
- Global Employees: 160,000
- Scope: 150 ‘countries and territories’
- Sales (FY 2001): US $22.3 billion
Aerospace and Defence, Automotive, Chemicals, Consumer Goods, Education, Energy, Engineering and Construction, Entertainment and Media, Financial Services, Paper, Government, Healthcare, Hospitality and Leisure, Insurance, Freight, Metals and Mining, Pharmaceuticals, Real Estate, Retail, Technology, Telecommunications, Transport.
According to Public Accounting Report:
- In 2000 PwC were the subject of a major investigation by the US Securities and Exchange Commission. There were 140 cases of staff at the auditor holding financial interests in the companies they were auditing. In February 2001, the Financial Times reported that, “The appointment... of PwC, the leading accountancy firm, to investigate the relationship between Gazprom, the Russian gas giant, and Itera, the fast-growing gas company, has raised eyebrows among even hardened Moscow investors.” The FTcited estimates that PwC had earned $15 million in fees working for Gazprom, and would now be investigating its own past work for the company. The chief suspicion was that unacknowledged ‘below market price’ transactions had been taking place between Gazprom and Itera, something which, if true, PwC should have known about. The FT concluded, “The PwC appointment is the latest example of behaviour by international auditing firms in Russia that raises concerns about potential conflicts of interest.” PwC have also been the subject of several investigations by the Securities and Exchange Commission. In May 2001, the firm agreed to pay $55 million to settle a class action suit raised by shareholders of MicroStrategy, Inc. The software manufacturer had admitted to telling investors it was still profitable while it had in fact been losing millions. A report filed in court said the audit firm "consistently violated its responsibility" to maintain an appearance of independence. It cited an e-mail from a PwC auditor seeking a job at MicroStrategy while he was the senior manager on the team that reviewed the company’s accounting. PwC also received money for reselling MicroStrategy software and recommending it to other clients, and was working on setting up a business venture with its audit client, according to the report . Only the previous year, PwC had settled with 350 plaintiffs who had invested in the California based company First Pensions Corporation. The settlement came after Coopers & Lybrand and partner Hal Hurwitz had been found liable by a jury of misrepresenting First Pensions’ financial condition, concealing material information and abetting the company’s managers in fraud. Although the terms of the eventual settlement were not disclosed, the suit filed in Orange County Superior Court had sought damages of $136 million.
PwC the lobbyist
PwC also operates in the area of government relations or lobbying. See for example PwC Consulting Ltd.
PR Watch reports:
- PricewaterhouseCoopers is providing government relations services to Uzbekistan, the Central Asian country that is a prime ally in President Bush's 'War on Terror,'" O'Dwyer's PR Daily reports. "It is giving 'strategic advice and assistance' to Uzbekistan about dealing with the U.S. Congress, and Executive Branch on economic and trade relations, according to PWC's 'engagement letter.' The firm is receiving $300,000 a-year for its counsel." According to O'Dwyer's, former Republican Congressman and chair of the House Ways and Means committee Bill Archer will be "heading the work."
Lobbyists acting on its behalf
- PwC packages a number of its corporate services in response to an increased awareness of ‘intangible assets,’ chief among which is reputations.As companies get larger and take over smaller companies,the cost of damage to the parent companies’ reputation grows in tandem.
- Protest against multinationals has forced them to engage more with their critics and the people affected by what they do.Promoting their ‘reputation assurance’ package PwC say:
- “Corporate leaders are discovering that by engaging stakeholders, adopting rigorous business strategies, and implementing reputation management systems, they can more effectively establish trust with stakeholders, gain a competitive advantage, mitigate the impact of crises, and preserve a company’s most important asset – its reputation.”
- In early 2001, PwC was called-in by the Canadian firm Talisman Energy to verify a corporate responsibility and human rights report of its operations in Sudan. Talisman was accused by human rights and development organisations,including Christian Aid and Amnesty International,of being complicit in human rights abuses around its oilfields in Sudan. These included forcible displacements and murder of civilians by government troops.
- The company’s report was criticised by these organisations. Amnesty International noted that it failed to respond to concerns they had raised that the Sudanese government continued to commit human rights abuses in order to clear areas for oil exploration. It also criticised Talisman for failing to take the necessary steps to properly implement a code of ethics that it had signed up to.Yet rather than get a human rights or development organisation to verify its report,Talisman called in PricewaterhouseCoopers. PwC itself commented that it was “not conducting an in-depth study either of the effects of Talisman's presence in the Sudan or of the impact of oil production on the country.” It also intended to travel only within the areas covered by Talisman’s concession and controlled by the government. Its ability to conduct a serious verification of Talisman’s operations was thus severely limited,and questioned by human rights and aid organisations.
- In the words of Jennifer Woodward,responsible for overseeing the verification, PwC saw its role as “adding independence and credibility” to Talisman’s corporate responsibility report.From a human rights and development perspective however,verification and monitoring should be about establishing the facts and upholding human rights standards, not about rubber-stamping what companies say about themselves.
- There are also conflict of interest questions. At the same time that PwC was verifying Talisman’s Sudan report,it was acting as a consultant to Talisman on how to design and implement a corporate responsibility strategy. At a broader level,PwC is seeking to move into environmental and social audits and verification processes of corporate responsibility reports just as it enters the public relations market. PR and independent verification do not go very well together,and this will raise even more questions about the suitability of the constantly hybridising and diversifying accountancy firms to offer services in which their expertise is limited.
Notable current and former employees
- Frank Brown - former leader of the Advisory service line and current dean of INSEAD
- Barbara Cassani - former CEO of Go Fly and former chairman of the London 2012 Olympic committee.
- Cynthia Cooper - internal auditor, WorldCom accounting scandal whistleblower
- Robert Dart - Prominent Canadian businessman and philanthropist
- David Gill - Chairman of Manchester United F.C.
- Jonathan Howell - Director of Finance for the London Stock Exchange
- Margaret Jackson - Chairman of Qantas (2000-present)
- Mark King - CEO of Affiliated Computer Services
- Phil Knight - CEO and Co-founder of Nike
- Chris Lucas - Finance Director of Barclays Bank
- Dennis Powell - CFO of Cisco Systems, INC.
- James Schiro - CEO of Zurich Financial Services
- James M. Schneider - CFO of Dell
- Peter Smith - Chairman of Savills estate agents
- Henry Staunton - Finance Director of ITV plc (2003-present)
- John Surma - Chairman and CEO of U.S. Steel (2004-present)
- Eugene Tenenbaum - managing director of Millhouse Capital UK Ltd
- Min Zhu - co-founder of WebEx
- Richard Meddings - Group Finance Director, Standard Chartered plc
- Gianluca Meardi - Partner in Reply and founder of xPrice.biz international PwC Alumni community
Politics and public service
- Steven Ciobo - member of the Australian House of Representatives (2001-present)
- Justine Greening - Conservative Member of Parliament of the United Kingdom (2005-present)
- David Heathcoat-Amory - Conservative Member of Parliament of the United Kingdom (1983-present)
- Mark Hoban - Financial Secretary to the UK Treasury (May 2010-present) Conservative Member of Parliament of the United Kingdom (2001-present)
- Margaret Hodge, Labour MP
- John Liu - member of the New York City Council (2001-present)
- Jeffrey Lucy - chairman of the Australian Securities and Investments Commission (2004-present)
- Robert McNamara - United States Secretary of Defense (1961-68); President of the World Bank (1968-81)
- Morten Andreas Meyer - Norwegian Minister of Modernisation (2001-05)
- Francis Plowden - laymember of the Judicial Appointments Commission
- John Stuttard - Lord Mayor of London (2006)
- Paul Szabo - Member of the Canadian House of Commons (1993-present)
- Stephen Williams - Liberal Democrat Member of Parliament of the United Kingdom(2005-present)
PR, spin and lobbying
- Peadar Andrews - Gaelic footballer
- Keith Bradshaw - cricketer
- Teddy Flack - Australian athlete
- Marisha Pessl - writer
- Prannoy Roy - Indian journalist
- Enrique Sarasola - Spanish industrialist
- Thomas M. Sullivan - talk show host
FTSE 100 Audit clients
- ARM Holdings | Amersham | BG Group | BOC Group | Barclays | Brambles Industries | British Telecom | CGNU | Centrica | Daily Mail and General Trust | Friends Provident | GKN | Gallaher | GlaxoSmithKline | Great Universal Stores | Imperial Tobacco | Kingfisher | Land Securities | Lattice Group | Legal and General | Lloyds TSB | Logica | MAN Group | Marks and Spencer | National Grid Group | Northern Rock | Pearson | Powergen | Reckitt Benckiser | Rentokil Initial | Reuters Group | Rio Tinto | Royal and Sun Alliance | Sage Group | Sainsburys | Schroders | Scottish Power | Severn Trent | Shell Trans Trading Co. | Smiths Group | South African Breweries | Tesco | Unilever | United Business Media | Wolseley.
The following are PwC audit clients that are part of the FT Global 500 (2006), grouped by FT industry
Aerospace & defence: Raytheon, United Technologies
Automobiles & parts: Toyota Motor, Volkswagen, Peugeot
Banks: Al Rahji Banking & Investment, Bank of America, Bank of China (Hong Kong), Bank of Ireland, Banco Itau, Banco Popular Espanol, Barclays, Compass Bancshares, Credit Agricole, BB&T, BNP Paribas, BradescoSamba Financial, Commerzbank, Dexia, DnB NOR, Firstrand Bank Limited, Fortis, JP Morgan Chase, Lloyds TSB, Riyad Bank, Sanpaolo IMI, Sberbank (Russia), SEB, Standard Bank, Suntrust Banks, Westpac Banking Corporation
Beverages: Anheuser-Busch, Miller, SAB
Chemicals: Albemarle, Bayer, E.I. du Pont de Nemours, Praxair, Shin Etsu Chemical, Rohm & Haas
Electricity: Chubu Electric Power, FirstEnergy, Exelon, Unified Energy System
Electronic & electrical equipment: Agilent Technologies, Kyocera, LG Philips LCD
Fixed line telecommunications: BellSouth, BT Group, Deutsche Telekom, Etisalat, KPN, Nippon Telegraph and Telephone, Saudi Telecom
Food & drug retailers: Krispy Kreme, Seven & I Holdings Co., Tesco
Food producers: Danone, Kellogg, Unilever
Gas, water & multiutilities: Centrica, E.ONRWE, National Grid plc
General financial: American Express, Freddie Mac, Franklin Resources, Goldman Sachs, Nikko Cordial, SLMMoody's
General industrials: 3M, Honeywell International, Hutchison Whampoa
General retailers: eBay, GUS, Marks & Spencer
Healthcare equipment & services: Baxter International, HealthSouth Corporation, Medco Health Solutions, Medtronic, Zimmer Holdings
Household goods: Reckitt Benckiser
Industrial engineering: Caterpillar, Volvo
Industrial metals: Alcan, Alcoa, Nippon Steel, Nucor, Phelps Dodge, POSCO, Tenaris
Industrial transportation: Burlington Northern Santa Fe Corp., Deutsche Post
Leisure goods: Nintendo
Life insurance: Legal & General, Protective Life Corporation, Prudential Financial
Media: CBS, Thomson, Viacom, Walt Disney
Mining: Barrick Gold, Newmont Mining, Rio Tinto
Mobile telecommunications: Alltel, Bharti Tele-Ventures, KDDI, MTN Group, Sonera, Telia, Vodafone
Nonlife insurance: Ace, American International Group, AMB Generali, AXA, Millea Holdings, Progressive Corporation, Swiss Re, Zurich Financial Services
Oil & gas producers: BG, Burlington Resources, Canadian Natural Resources Ltd, Exxon Mobil, Chevron, EnCana Corporation, Eni, Gazprom, Imperial OilSuncor Energy, Marathon Oil, Royal Dutch Shell, Shell Canada
Oil equipment & services: Schlumberger
Personal goods: Colgate-Palmolive, L'Oreal, Nike, Richemont
Pharmaceuticals & biotechnology: Biogen Idec, Bristol-Myers-Squibb, Genzyme, GlaxoSmithKline, Johnson & Johnson, Merck & Co., Novartis, Novo Nordisk, Sanofi-Aventis, Teva Pharmaceutical Industries, Wyeth
Software & computer services: IBM, Yahoo!
Sports: Laureus World Sports Awards
Technology hardware & equipment: Cisco Systems, Corning Inc., Dell, EMC Corporation, Ericsson, Hon Hai Precision Industry, Nokia, Qualcomm, Samsung Electronics, STMicroelectronics
Tobacco: Altria, British American Tobacco, Imperial Tobacco, ITC
Travel & leisure: Carnival, Las Vegas Sands
London offices include:
1 Embankment Place
London, WC2N 6RH
London, WC2R 0AF
7 More London Riverside
London, SE1 2RT
10 - 18 Union Street
London, SE1 1SZ
Hays Lane , London, SE1 2RD
London ,EC4A 4HT
161 Marsh Wall
London, E14 9SQ
Note on sources
This page includes extracts from Five Brothers: the Rise and Nemesis of the Big Bean Counters: The Big Five audit firms are too big, unfit, unaccountable and increasingly irrelevant to the real economy, Author: Andrew Simms, Julian Oram, Publisher: NEF, Published: 25.03.02 http://www.neweconomics.org/gen/uploads/5br.pdf
- Prem Sikka, Called to account, Guardian, 14 December 2008
- Prem Sikka, Raw dealing, Guardian, 30 May 2007
- Gilt-edged profits for profession's 'big four', Guardian, 7 February 2009
- Prem Sikka, Viper's nest of tax avoiders, Guardian, 25 July 2007
- Prem Sikka, Accounting firms can't help on tax, Guardian, 1 August 2008
- Creative accountants, Guardian 'Tax Gap' series, 2009
- Public Accounting Report Volume XXIV,No. 17. September 15,2000
- PR Watch PricewaterhouseCoopers Advises Uzbekistan citing O'Dwyer's PR Daily, July 16, 2002
- [APPC Register Entry for 1 March 2011 to 31 May 2011]
- Andrew Simms, Julian Oram Five Brothers: the Rise and Nemesis of the Big Bean Counters: The Big Five audit firms are too big, unfit, unaccountable and increasingly irrelevant to the real economy, Publisher: NEF, Published: 25.03.02
- Reputation Assurance – Global Home, http://www.pwcglobal.com
- Amnesty International, Press Release,1/5/01, “Talisman Energy Must Do More to Protect Human Rights”
- Christian Aid, "The Scorched Earth: oil and war in Sudan", 15/3/01
- Financial Times,15/5/2001,"Spinning and Pumping"
- HOPE:A newsletter about Corporate Responsibility, Talisman Energy,Fall 2000
- The Guardian, 13/3/2001,“PR industry faces outside threat”
- American Benefits Council Memberships Accessed 26th February 2008