Auditing Theory: PricewaterhouseCoopers vs Tyco International LTD Shareholders
Added on 2023-03-20
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Auditing Theory (PricewaterhouseCoopers versus Tyco International
LTD Shareholders)
NAME:
LTD Shareholders)
NAME:
Background
•PricewaterhouseCoopers (PWC) was involved in a case with the shareholders of Tyco
International LTD which saw PWC pay $229 million .
•Being the auditor, PWC was accused of not uncovering $5.8 billion fraud where Tyco
LTD made accounting overstatements.
•As the fraud span from 1995, PWC was expected to have noticed the millions of
unreported dollars, misrepresented and misappropriated compensations.
•Tyco gave interest-free loans to high ranking company employees and reported stock
sales in a belated manner
•Dennis Kozlowski and the then chief financial officer were handed 25 years in jail after
conviction in 2005, while PWC bore the brunt by agreeing to pay the damages to Tyco’s
shareholders in 2007.
•The payments were shared among those who acquired shares in Tyco between 1999
and 2002. PWC raises serious concerns over the misuse of auditor autonomy in the
United Kingdom (UK).
•PricewaterhouseCoopers (PWC) was involved in a case with the shareholders of Tyco
International LTD which saw PWC pay $229 million .
•Being the auditor, PWC was accused of not uncovering $5.8 billion fraud where Tyco
LTD made accounting overstatements.
•As the fraud span from 1995, PWC was expected to have noticed the millions of
unreported dollars, misrepresented and misappropriated compensations.
•Tyco gave interest-free loans to high ranking company employees and reported stock
sales in a belated manner
•Dennis Kozlowski and the then chief financial officer were handed 25 years in jail after
conviction in 2005, while PWC bore the brunt by agreeing to pay the damages to Tyco’s
shareholders in 2007.
•The payments were shared among those who acquired shares in Tyco between 1999
and 2002. PWC raises serious concerns over the misuse of auditor autonomy in the
United Kingdom (UK).
The Threshold For Litigation Against Auditors
• it is essential for the plaintiff to show that the auditor owed a duty to them.
• Another threshold that the case against an auditor must meet is that the
plaintiff must prove that the auditor either deliberately or inadvertently
neglected or breached that duty to care.
• Thirdly, the case must meet the threshold that the plaintiff suffered a loss.
• Lastly, there must be a clear demonstration of the connection between the
plaintiff’s loss and the auditor’s negligence.
• it is essential for the plaintiff to show that the auditor owed a duty to them.
• Another threshold that the case against an auditor must meet is that the
plaintiff must prove that the auditor either deliberately or inadvertently
neglected or breached that duty to care.
• Thirdly, the case must meet the threshold that the plaintiff suffered a loss.
• Lastly, there must be a clear demonstration of the connection between the
plaintiff’s loss and the auditor’s negligence.
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