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hrough a merger between Coopers & Lybrand LLP and Price Waterhouse LLP, which was consummated on or about July 1, 1998.

Fact: The merger resulted in making PwC the largest accounting firm in the world.

The SEC Targets the C&L Tampa Office for possible violations
During 1997, the SEC received an anonymous letter from a whistle blower at the Southeast Regional Office in Miami. The letter alleged that audit staff in the Tampa office of C&L owned stock in the companies they were auditing, which clearly violated the SEC’s independence rule. In 1998, the SEC ordered an investigation into the allegations of auditor conflicts of interest at Coopers & Lybrand's Tampa office, now known as PwC.

Fact: Upon merging, both accounting firms (partners and staff) were required by the independence rule to divest all shares owned in companies audited by each other. The independent study revealed that this never took place and in fact PwC had committed an independence violation at that location.

SEC Charges PwC with Auditors’ Independence Rules
The 'auditor independence' issue came to the forefront on January 14, 1999. The SEC issued an Opinion and Order Pursuant to Rule 102(e) of the Commission's Rules of Practice In the Matter of PricewaterhouseCoopers LLP (Securities Exchange Act of 1934 Release No. 40945) ('Order'), which censured PwC for violating auditor independence rules and improper professional conduct. PwC agreed to a complete internal review supervised by an independent person or firm to be appointed by the SEC and to report any additional violations.

Fact: Although no violations compromised or impaired any of the PwC audits it did trigger an investigation of the remaining Big Five by the Public Oversight Board.

PwC had taken the position that the independence issue was a result of the merger and a one-time breakdown in the internal system.

Fact: The independent report concludes……the numbers of violations alone, as PwC acknowledges, reflect serious structural and cultural problems that were rooted in both its legacy firms (PW and C&L); although a large percentage of the reported and unreported violations is attributable solely to the Merger, an even larger portion is not; thus, the situation revealed by the internal investigation is not a one-time breakdown explained solely by the merger.
Independent Consultant Review Regarding PwC’s Violations
On March 1999, the SEC appointed independent consultant Mr. Jess Fardella of Lankler Siffert & Wohl LLP to supervise PwC's internal review of potential independence violations by the firm.

The SEC issued the independent consultant’s report citing PwC with 8,064 violations and that a substantial number of PwC professionals (mostly partners) had attributed to the independence violations.

Facts uncovered from the independent consultant’s report:
1.Of 8,064 reported violations, 81.3% were reported by partners and 17.4% by managers; 45.2% of the violations were reported by partners who performed services related to audits of financial statements.

2. Approximately half of the PwC partners had self-reported at least one independence violation. The average number of violations was approximately five; 153 partners reported more than 10 violatio