PwC US cutting back consulting work in bid to reduce conflict risk
PwC US is planning to curtail tens of millions worth of consulting work to reduce the risk of conflict of interest.
The targeted miscellaneous consulting work amounts to approximately $100 million of annual revenue and is expected to be phased out by 2025, PwC told the Financial Times. It will not include tax work.
The move aims to alleviate concern from clients whose stakeholders are increasingly scrutinizing potential conflicts. It arrives months after EY’s abortive attempt to split its global audit and consulting businesses in order to unlock new revenue and reduce conflict risk.
The Sarbanes-Oxley Act, passed in 2002 after the Enron scandal, curtailed the amount of consulting work that accounting firms could provide to their audit clients. The US regulations, however, still allow for more concurrent non-audit services provision than in Europe.
The consulting PwC provides to US audit clients amounts to a smaller proportion of fees than for Deloitte and EY, according to figures from Ideagen Audit Analytics. The Big Four accountancies provided $1.5 billion of tax and miscellaneous consulting services to US audit clients, compared to $13.5 billion in audit and audit-related services.
PwC’s consulting cut is part of a wider reform package that seeks to improve the firm’s audit quality, governance, and reputation. PwC in 2021 unveiled its “New Equation” global strategy and branding exercise, which centered around the concept of “trust” and promised increased investment in ESG and digital.
The other recently announced policy changes include new pay clawback provisions for the seven-member PwC US leadership team that would be triggered by ethics scandals or other firmwide failures.
PwC Australia has this year been embroiled in an ethics scandal in which partners allegedly misused confidential information about the government’s tax plans.
PwC US will also next year introduce improved audit procedures to better detect fraud and bankruptcy risk.
The American firm expects other PwC country member firms will also adopt the reform package.
