Accountancy firm in Saudi arms row

UK big four accountants PriceWaterhouseCoopers in bid to help Saudi Defence

We still tend to think of professional accountants as respectable members of society.  Accountants are often the butt of jokes about being dull, boring and pedantic their very dullness being some kind of recognition of respectability.  This (respectability that is) is still likely to apply to the small and middle sized firms that inhabit the high streets around the country.  It does not apply to the big four firms of which PwC is one.  There has been a string of financial failures involved these accountancy firms and in the case of PwC, they have recently been fined a staggering $625m for audit failure of the Federal Deposit Insurance Corp in the USA on top of other audit failures including Merrill Lynch, RSM Tenon and famously BHS.  They are also involved in the Carilion collapse.  It is a wonder therefore that they continue to enjoy the influence they do but they are closely involved with both main political parties in the UK and in advising the Treasury.

In addition to audit incompetence is their role in tax avoidance.  This is on an ‘industrial scale’ according to a parliamentary committee and involves the design of complex schemes to shuffle money to various tax havens.

We believe that PricewaterhouseCoopers’s activities represent nothing short of the promotion of tax avoidance on an industrial scale,” said Margaret Hodge, chairwoman of the Public Accounts Committee (PAC). 2015

Billions of tax is thus avoided and the moral element of their actions is being questioned more and more.  As the Journal of World Business puts it:

These included apparent PwC entities based in jurisdictions known as tax havens, including for example the Cayman Islands, Gibraltar, Luxembourg and Mauritius.  In regards to the Big 4′s role in the overall tax strategy of Multinational Enterprise’s (MNEs), it is the earlier ‘LuxLeaks’ of November 2014 which has provided a number of clear insights. These documents showed that PwC assisted MNEs to obtain at least 548 legal but secret tax rulings in Luxembourg from 2002 to 2010.  53(2018) [accessed 1 August 2018]

Further damage

So in addition to audit blunders, and tax avoidance activities on an industrial scale, what more can PwC do to damage its reputation still further?  Never underestimate the skill of a big four accountancy firm to carry on digging once it’s in a hole. It was revealed in Guardian newspaper on 1 August that the firm is negotiating to land a major contract to help streamline and modernise Saudi Arabia’s military.  Readers of this blog will be aware of the role Saudi Arabia is playing in the humanitarian crisis engulfing Yemen, aided by weapons and personnel supplied by the UK.  That a major UK accountancy firm should risk its reputation still further by getting involved in the conflict is hard to understand.

It is also hard to understand in the context of its stated policies of which its website is replete.  This is their human rights statement :

We believe it’s our responsibility to respect and uphold the human rights of our people and any other individuals we are in contact with, either directly or indirectly.  Our unwavering commitment to human rights is demonstrated through our actions, our involvement in voluntary initiatives like the UN Global Compact1, PwC’s Global Human Rights Statement and related guidance for our people.

We work to guard against complicity in human rights abuses, comply with applicable labour and employment laws, and draw on internationally recognised labour principles in how we do business. Our approach to human rights is already well integrated into our existing business practices, for example as part of our Human Capital, Procurement, Ethics & Compliance and Corporate Responsibility activities.

In connection with human rights issues with clients :

If we have concerns that our work will be directly linked to human rights violations by a client, discuss our concerns with relevant parties, seek to mitigate the impacts and only proceed if we are comfortable that our work will not contribute to human rights violations.

Be prepared to walk away from clients and engagements where our integrity could be called into question if we continued

Pious words indeed and giving the impression of a firm committed – sorry, ‘unwaveringly committed’ – to protecting and upholding human rights standards internally and with those it does business.  Yet it is bidding for work in Saudi where beheadings are routine, torture is endemic, women’s rights are tightly restricted and which is engaged in a brutal war in Yemen with thousands dead and many more suffering from disease and malnutrition.

Amnesty

In a statement, Amnesty International said :

Like any company, international accountancy firms should ensure that they avoid contributing to human rights violations in their operations, or being directly linked to them by their business relationships.

We’d like to know what due diligence the company has done.  The United Nations guiding principles on business and human rights make it clear that a company may be viewed as complicit if they are seen to benefit from abuses committed by another party

In the Guardian piece, they say they asked PwC what due diligence it had done but the firm did not respond.

Assisting this regime – and in particular its defence activities – is to be deprecated.  One wonders whether the firm will rethink its tender?  Will it walk away?’  Unlikely.  The big four accountants are now so large (PwC had revenues of $37.7bn in 2016) so infused with hubris and so imbedded with the political process and government that a rethink is unlikely.

Sources: Guardian; Tax Justice Network; Independent; Accountancy Age; Economia; Internal Audit 360°; PwC’s website

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