PwC Makes a Funny

PwC was auditor for what was then one of Russia’s largest oil companies, Yukos. The Russian government took a serious disliking to Yukos and its then-president Mikhail Khodorkovsky, eventually putting the company effectively out of business (with key bits sold off to state-owned or state-controlled companies) and Khodorkovsky in jail. Now the Russian government is pursuing another case against Khodorkovsky, and it does not want PwC’s audits to be usable in his defense. So the Russian authorities claim that PwC has not been diligent in paying its own taxes. It has raided various offices and threatened to pull the company’s license to operate within the country.

Yesterday, PwC said that it was withdrawing its audits of Yukos from 1995 to 2004, after “new information came to light.” New information provided by the government. Will PwC say what that information is? It will not. Its management did offer an opinion on a related question:

PwC’s management said yesterday the decision to withdraw the audits had nothing to do with this pressure

That’s from the first page of the second section in yesterday’s FT. (Electronic version is in pay-per-view.) The reporter did not indicate whether it was said with a straight face or not. More here here here and here.

At any rate, the message is clear: Audits of businesses that are important to the Russian state will say what the state wants them to say. Caveat lector.