PricewaterhouseCoopers investigated by Russian police
Russian tax authorities are accusing PwC’s Moscow branch of deliberately underestimating profit tax on sums it allegedly paid to offshore PricewaterhouseCoopers Resourses B.V., which was supposed to provide financial consultations to clients in Russia. Tax officials said the consultations were provided by the Moscow branch of the company instead.
A separate investigation of PwC is also ongoing. The auditors are suspected of assisting Yukos – for whom PwC were auditors – to cover up “illegal financial schemes” and of drawing up two different audit reports for the now bankrupt energy giant.
The tax service is seeking to invalidate Yukos-PwC contracts for 2002-2004 and to charge $480,000 from PwC. Tax authorities said Yukos failed to correct violations discovered in 2002 in the following two years.
This is an interesting development, not only because it demonstrates once again that Russia is unafraid of taking on even the biggest foreign firms operating in Russia today, but because it may well have the effect of scaring away a major auditor from the Russian market.
Which, in a market that should be crying out for the transparency and respectability that professional audit can bring, is most definitely not a positive development.
[Full disclosure: I have worked for PwC in the past, although was not in any way connected to their Russian operations].