| Type | Member firms have different legal structures; both UK and US firms are limited liability partnerships |
|---|---|
| Industry | Professional services |
| Founded | 1998 (PricewaterhouseCoopers) 1849 (Price Waterhouse) 1854 (Coopers & Lybrand)[1] |
| Headquarters | London, United Kingdom[2] |
| Area served | Worldwide |
| Key people | Dennis Nally (Chairman)[3] |
| Products | Assurance Tax Advisory Consulting Financial Advisory Actuarial Legal |
| Revenue | US$29.2 billion (FY 2011)[4] |
| Employees | Approximately 175,000[4] |
| Website | pwc.com |
PricewaterhouseCoopers (trading as PwC) is a global professional services firm headquartered in London, United Kingdom.[2] It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms.[5]
PwC has offices in 757 cities across 154 countries and employs over 175,000 people.[4] It had total revenues of $29.2 billion in FY 2011, of which $14.14 billion was generated by its Assurance practice, $7.63 billion by its Tax practice and $7.46 billion by its Advisory practice.[6]
The firm was formed in 1998 by a merger between Coopers & Lybrand and Price Waterhouse.[1] The trading name was shortened to PwC in September 2010 as part of a major rebranding exercise.[7]
As of 2010[update] PwC was the seventh-largest privately-owned organization in the United States.[8]
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The PricewaterhouseCoopers name was formed by the combination of the names of Price Waterhouse and Coopers & Lybrand, following their merger in 1998. On 20 September 2010, PricewaterhouseCoopers rebranded as PwC and introduced a new logo, although the legal name of the firm remained PricewaterhouseCoopers.[7] The new logo was designed with the assistance of Wolff Olins.[9]
Each member firm of PwC is a separate legal entity under the umbrella of PricewaterhouseCoopers International Limited.
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The firm was created by the merger of two large firms, Price Waterhouse and Coopers & Lybrand in 1998.[1] These two firms each have histories dating back to the nineteenth century.
In 1854 William Cooper founded an accountancy practice in London, which became Cooper Brothers seven years later when his three brothers joined.[1]
In 1898, Robert H. Montgomery, William M. Lybrand, Adam A. Ross Jr. and his brother T. Edward Ross formed Lybrand, Ross Brothers and Montgomery in the United States.[1]
In 1957 Cooper Brothers; Lybrand, Ross Bros & Montgomery and a Canadian firm McDonald, Currie and Co, agreed to adopt the name Coopers & Lybrand in international practice.[1] In 1973 the three member firms in the UK, US and Canada changed their names to Coopers & Lybrand.[10] In 1990 in certain countries including the UK Coopers & Lybrand merged with Deloitte Haskins & Sells to become Coopers & Lybrand Deloitte,[1] in 1992 renamed Coopers & Lybrand.[11]
Samuel Lowell Price, an accountant, founded an accountancy practice in London in 1849.[12] In 1865 Price went into partnership with William Hopkins Holyland and Edwin Waterhouse. Holyland left shortly after to work alone in accountancy and the firm was known from 1874 as Price, Waterhouse & Co.[12] (The comma was dropped from the name much later.) The original partnership agreement, signed by Price, Holyland and Waterhouse could be found in Southwark Towers, one of PwC's important legacy offices (now demolished).
By the late nineteenth century, Price Waterhouse had gained significant recognition as an accounting firm. As a result of growing trade between the United Kingdom and the United States, Price Waterhouse opened an office in New York in 1890,[12] and the American firm itself soon expanded rapidly. The original British firm opened an office in Liverpool in 1904[12] and then elsewhere in the United Kingdom and worldwide, each time establishing a separate partnership in each country: the worldwide practice of PW was therefore a federation of collaborating firms that had grown organically rather than being the result of an international merger.[12]
In a further effort to take advantage of economies of scale, PW and Arthur Andersen discussed a merger in 1989[13] but the negotiations failed mainly because of conflicts of interest such as Andersen's strong commercial links with IBM and PW's audit of IBM.
In 1998, Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers (written with a lowercase 'w') in an attempt to gain a scale that would put the new firm in a different league.[14]
After the merger the firm had a large professional consulting branch, as did other major accountancy firms, generating much of its fees. Management Consulting Services (MCS) was the fastest growing and often most profitable area of the practice, though it was cyclical. The major cause for growth in the Nineties was the implementation of complex integrated ERP systems for multi-national companies.
However, PwC came under increasing pressure to avoid conflicts of interests by not providing consulting services to its audit clients. Since it audited a large proportion of the world's largest companies, this was beginning to limit its potential market. These conflicts were going to increase when additional services such as the outsourcing of ERP systems were offered. For these reasons, in 2000, Ernst & Young was the first of the Big Four to sell its consulting services, to Capgemini.[15]
PwC therefore planned to capitalize on MCS's rapid growth through its sale to Hewlett Packard (for a reported $17 billion) but negotiations broke down in 2000.[16]
In March 2002, Arthur Anderson,LLP affiliates in Hong Kong and China completed talks to join PriceWaterhouseCoopers, China.[17]
PwC announced in May 2002 that its consulting activities would be spun off as an independent entity. An outside consultancy, Wolff Olins, was hired to create a brand image for the new entity, called "Monday".[18] The firm's CEO, Greg Brenneman described the unusual name as "a real word, concise, recognizable, global and the right fit for a company that works hard to deliver results."[19] These plans were soon revised, however. In October 2002, PwC sold the entire consultancy business to IBM for approximately $3.9 billion in cash and stock. PwC's consultancy business was absorbed into IBM Global Business Services, increasing the size and capabilities of IBM's growing consulting practice.[20]
The legal structure of a limited liability partnership (LLP) is very different from that of a Corporation, and as such the global firm is in fact a collection of member firms, that are run autonomously in their respective jurisdictions. The senior partners of member firms sit on a global board of partners and there is also an 'umbrella' company called PricewaterhouseCoopers International Limited, a UK-based[21] company which provides co-ordination. Dennis Nally, the former Chairman of the US firm, became Chairman of PwC International on July 1, 2009.[22]
PricewaterhouseCoopers has three main service lines:[23]
PwC's service lines face the market in each country by broad industry specialisations such as:
These sub-divisions may vary slightly in some territories.
PwC has developed several broader consulting initiatives in the Enterprise Risk Management (ERM) framework, including a global effort to assist corporations with outsourcing, as well as a global political risk assessment with the political risk advisory firm Eurasia Group.[29]
Advisory services offered by PwC also include two actuarial consultancy departments; Actuarial and Insurance Management Solutions (AIMS) and a sub branch of "Human Resource Services" (HRS). Actuarial covers mainly 4 areas: pensions, life insurance, non-life insurance and investments. AIMS deals with life and non-life insurance and investments while HRS deals mainly with pensions.[30]
PwC serves the US Federal Government through their Public Sector practice. PwC has over 2000 professionals based in the Washington Metro Corridor.[31]
Europe and North America account for about 81% of PwC's annual revenue,[32] with Europe alone accounting for 45%.[32] The firm's dominant practice, auditing, accounts for over 50% of PwC's revenue.[23]
One client, the Academy of Motion Picture Arts and Sciences, gives PwC the unique distinction of having been (in various incarnations) the tabulator and certifier of votes for the Academy Awards since 1934.[33]
PwC audits 40% of companies in the FTSE 100 Index[34] and 45% of the Fortune 1000 energy companies.[35]
PwC has offices in 757 cities across 154 countries.[4]
| Some notable PwC office buildings | ||||||||||||||
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In 1990, the Internal Revenue Service seized most of the assets of Willie Nelson, claiming he owed $32 million in back taxes, including penalties and interest. He sued Price Waterhouse, contending that they put him into tax shelters that were later disallowed by the IRS.[36] The lawsuit was settled for an undisclosed amount.[37]
BusinessWeek said that PwC was American International Group Inc.'s auditor through years of "questionable dealings." AIG on 30 March 2005 said that deals with a Barbados-based insurance company, for instance, may have been incorrectly accounted for over the past 14 years, because an AIG-affiliated company may have been secretly covering that insurer's losses.[38]
BusinessWeek said that PwC appears to have "dropped the ball" on the deals between AIG and Berkshire Hathaway Inc.'s General Re Corp. General Re transferred $500 million in anticipated claims and premiums to AIG. BusinessWeek asked: "Did the auditor do its job by verifying that AIG was assuming risk on claims beyond the $500 million, thus allowing AIG to account for the deal as insurance? That's Accounting 101 in any reinsurance transaction."[38]
From 2000 to 2006, PwC's affiliate of assurance service in Japan was ChuoAoyama Audit Corporation (中央青山監査法人 Chūō-Aoyama Kansa Hōjin). In May 2006, the Financial Services Agency of Japan suspended ChuoAoyama from provision of some statutory auditing service for two months following the collapse of cosmetics company Kanebo of which three of the firm's partners were found assisting with accounting fraud for boosting earnings by the company of about $1.9 billion over the course of five years. The accountants got suspended prison terms up to eighteen months from the Tokyo District Court after the judge deemed them to have played a "passive role" in the crime.[39] The suspension was the first ever imposed on a major accounting firm in the country. Many of the firm's largest clients were forced to find replacement auditors before the suspension began that July.[40]
Shortly after the suspension of ChuoAoyama (中央青山監査法人), PwC acted quickly to stem any possible client attrition as a result of the scandal. It set up the PricewaterhouseCoopers Aarata, and some of ChuoAoyama's accountants (but most of the international divisions) moved to the new firm. ChuoAoyama resumed operations on September 1 under the Misuzu name. However, by this point the two firms combined had 30% fewer clients than did ChuoAoyama prior to its suspension.[41] Misuzu was dissolved in July, 2007.[42]
In July 2007, PwC agreed to pay US$229 million to settle a class-action lawsuit brought by shareholders of Tyco International Ltd. over a multibillion-dollar accounting fraud. The chief executive and chief financial officer of Tyco were found guilty of looting $600 million from the company.[43]
In January 2009 PwC was criticised,[44][45][46][47][48][49] along with the promoters of Satyam, an Indian IT firm listed on the NASDAQ, in a $1.5 billion fraud.[50] PwC has written a letter to the board of directors of Satyam that its audit may be rendered "inaccurate and unreliable" due to the disclosures made by Satyam's (ex) Chairman.[51] PwC's US arm "was the reviewer for the U.S. filings for Satyam."[52] Consequently, lawsuits have been filed in the US with PwC as a defendant.[53] Two partners of PricewaterhouseCoopers, Srinivas Talluri and Subramani Gopalakrishnan, have been charged by India’s Central Bureau of Investigation in connection with the Satyam scandal. Since the scandal broke out, Subramani Gopalakrishnan retired from the firm after reaching mandatory retirement age; while Talluri remains on suspension from the firm.[54]
In November 2010, The New York Times reported that PwC had been assisting the Russian Government with prosecutions in relation to alleged tax evasion at Yukos stating "...Then, in 2007, with the prospect of parole on the horizon, the same prosecutors — with what appears to be the complicity of PricewaterhouseCoopers, Yukos’s longtime accounting firm — indicted the two men (Mikhail B. Khodorkovsky and Platon Lebedev), again, bringing a new round of Kafkaesque charges."[55]
A cable from the US embassy in Moscow stated that the trial was politically motivated and that a deposition in a US court by PricewaterhouseCoopers may show that PwC was pressured by the Russian government to withdraw its prior Yukos audits. An embassy source noted that if the audits were not properly withdrawn it "would greatly tarnish PWC's international reputation."[56] Russian authorities were investigating PwC for tax evasion, but suspended the investigation once PwC withdrew the Yukos audits.[57]
India's accounting standards agency ICAI is investigating partners of PwC for professional negligence[45] in the now-defunct Global Trust Bank Ltd. case of 2007. Like Satyam, Global Trust Bank was also based in Hyderabad. This led to Reserve Bank of India banning PwC from auditing any financial company for over a year.[58][59][60] PwC was also associated with the accounting scandal at DSQ Software[61] in India. Following the Satyam scandal, the Mumbai-based Small Investor Grievances Association (SIGA) has requested the Indian stock market regulator SEBI to ban PwC permanently and seize its assets in India alleging few more scandals like "Ketan Parekh stock manipulations."[62] The Accountancy and Actuarial Discipline Board, which regulates the profession in the UK, announced an inquiry in July 2009 into PwC's auditing of Cattles, the struggling sub-prime lender that failed to keep track of its bad debts.[63]
The construction of the ESPO (East Siberia-Pacific Ocean) pipeline by Transneft was estimated to cost in excess of US$13 billion. A leaked report of the Audit Chamber of the Russian Federation indicated that the total amount stolen and siphoned from the company during construction through various mechanisms and schemes reaches up to USD 4 billion.[64][65] A Moscow Times editorial stated that one of the chamber’s auditors attempted “damage control” by saying in effect, “Yes, money was stolen, but not as much the media reported.”[66] PricewaterhouseCoopers (PwC) was Transneft’s auditor and denied wrongdoing saying “We believe there are absolutely no grounds for such allegations, and we stand behind our work."[65]
It has been alleged that PriceWaterhouseCoopers (PWC) was involved in the erroneous assessment of Sustainable Sewage and Water Management Project for National Capital Territory of Delhi, India. Due to public outcry and RTI's (Right To Information Act) documents and subsequent appeals, the project was dropped. [67][68][69][70]
In 2011, a House of Lords inquiry specifically criticized PwC for not drawing attention to the risks in the business model followed by Northern Rock, a client of the firm, which was rescued by the UK government during the financial crisis.[71]
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