PracticeAuditWikileaks reveals US concerns over PwC Yukos audits

Wikileaks reveals US concerns over PwC Yukos audits

US officials report PwC auditors may have been pressured to rescind audit opinions

US officials were told the PwC auditors of Russian gas giant Yukos may have been pressured into revising their audit opinion, according to leaked diplomatic cables.

The confidential cable, which forms part of the Wikileaks disclosures, detail the concerns in 2009 of US embassy officials in Moscow surrounding the trial of Yukos CEO Mikhail Khodorkovsky (pictured), and business partner Platon Lebedev, accused of stealing 218 million tons of oil.

In a cable titled “rule of law lipstick on a political pig” US officials were told that an attempt to introduce a crucial testimony, by a PwC auditor, was being resisted by the Government backed prosecution.

The officials were told the testimony may have revealed PwC auditors were pressured by government officials. The testimony relates to a 2007 decision by PwC to reverse its clean audit opinions for Yukos between 1994 to 2003.

The embassy cable reports that some obserers had speculated that the testimony, contained in a deposition taken in the US, would claim that PwC came under pressure from the Russian government – a claim PwC denies.

PwC’s decision to rescind its prior audit opinions reinforced government-backed allegations that Yukos had misappropriated funds and failed to pay tax.

“The PWC deposition goes to the heart of Yukos’s guilt or innocence; as Yukos’s auditor, it signed off on Yukos’s financial statements from 1994 to 2003, only to disavow this prior approval in 2007,” US officials said in the cable.

The US officials were told the testimony may have shown that “PWC had been pressured by the Russian government into withdrawing its prior certifications of Yukos books and Records”.

“If the audits were properly withdrawn, this will be a ‘black mark’ for the defense; if not, it could help the defense, but would greatly tarnish PWC’s international reputation.”

A PwC spokesman has vehemently denied claims it acted under government pressure and said the firm stood behind the decision to withdraw its audit opinions.

“The speculation about any pressure is completely without substance,” he said.

“PwC Russia became aware of new information which called in to question the reliability of management representations, and applicable professional standards left us no option other than the withdrawal of our audit opinions.”

Khodorkovsky and Lebedev trial will conclude on December 27, when a verdict is expected.

The Russian Embassy declined to comment on the cables.

 

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