In yet another blow to the US accounting profession’s reputation, the Internal Revenue Service said on Thursday that industry giant Pricewaterhouse Coopers has agreed to make a financial payment to settle issues over tax shelter advice it gave its clients in recent years.
”Without admitting or denying wrongdoing or legal liability … Pricewaterhouse Coopers … agreed to make a substantial payment to resolve issues in connection with advice rendered to clients dating back to 1995,” the IRS said in a statement.
New York-based PricewaterhouseCoopers is the world’s largest accounting firm. Earlier this month, a Texas jury convicted another accounting giant, Andersen, for its role in the spectacular collapse of energy trader Enron. Andersen has also been implicated in the revelation by telecom giant WorldCom that its earnings had been overstated by more than $3-billion.
While the IRS did not specify the amount of the Pricewaterhouse payment, it said the agreement resolved issues ”relating to tax shelter registration and list maintenance” under US tax law.
A representative for Pricewaterhouse, speaking on condition of anonymity, said the amount of the payment was ”not significant” in comparison to the firm’s size. The firm has annual revenues of about $9-billion annually.
”This agreement has no impact on our clients’ ability to sustain the tax benefits of the tax advice we provided,” Pricewaterhouse Coopers said in a statement.
The IRS also said Pricewaterhouse had agreed to provide ”certain client information” and to work with the IRS on coming up with ways to ensure compliance with rules on tax shelter registrations and lists of investors using such shelters.
Pricewaterhouse said it agreed to resolve the issue with the IRS because of concern over the disruption that legal summonses issued by the IRS could cause, the possibility of a ”protracted dispute” with the agency, and worry over potential litigation.
”The costs of continuing to dispute these issues with the IRS far exceed the costs of settlement,” it said.
The firm said that, as part of the settlement, the IRS will limit its requests for client-specific information to ”authorised legal processes.” That stands in contrast to ”broad-based summonses currently being issued by the IRS to other tax advisors” that the firm said it was worried might potentially affect its clients. – Reuters