Accounting Firm Settles Charges

Accounting giant PricewaterhouseCoopers LLP, accused by federal regulators of violating rules requiring accountants to remain independent from companies they audit, agreed Thursday to a settlement that creates a $2.5 million education fund.

The Securities and Exchange Commission, which announced the settlement, said the company also agreed to be censured, to improve its procedures for monitoring adherence to auditor independence rules, and to conduct an internal investigation supervised by an outside person.

Pricewaterhouse Coopers, which resulted from the merger last July of Price Waterhouse LLP and Coopers & Lybrand LLP, neither admitted nor denied wrongdoing in agreeing to the settlement.

The SEC alleged that from 1996 through 1998, Coopers & Lybrand failed to discover that in four cases, some of its accountants owned stock in corporations they audited. In 31 cases, the agency said, partners or managers of the accounting firm owned stock in corporations that were clients of Coopers & Lybrand.

In another 45 cases, Coopers & Lybrand's retirement plan held securities of corporations that were audit clients of Coopers & Lybrand and PricewaterhouseCoopers, the market watchdog agency said.

"The SEC's rules explicitly forbid accountants from owning stock in their audit clients," SEC Enforcement Director Richard Walker said in a statement. "If auditors are not independent of their clients, in fact or perception, the integrity of the financial reporting system is jeopardized."

The settlement came a day after the SEC brought securities and accounting fraud charges against the former top managers of Broadway theater producer Livent Inc., a troubled Canadian company whose productions included Ragtime and Kiss of the Spider Woman.