IRS Is Auditing Accounting Giant Pricewaterhouse

PricewaterhouseCoopers, the world’s largest accounting firm, is being audited by the Internal Revenue Service for potential violations in reporting its taxes, according to IRS and company documents.

The IRS is evaluating the timing of tax deductions, PricewaterhouseCoopers’ pension plan and how the New York-based firm moved profits between international units, said a person briefed on the audit.

The review may be completed this month, and the IRS is expected to reach its conclusions by the end of the year, PricewaterhouseCoopers’ tax partner Samuel Starr said in a June 15 letter to the firm’s 2,000 U.S. partners, who could be liable for any back taxes.

Additional taxes or penalties could damage the reputations of the firm and the industry, which have been under increased scrutiny since the 2001 collapse of Houston-based energy trader Enron Corp. and the demise of its auditor, Arthur Andersen.

The IRS review may cost partners at PricewaterhouseCoopers “scores of millions” of dollars, said Robert Willens, a tax and accounting analyst at Lehman Bros. Holdings Inc.

Executives at PricewaterhouseCoopers declined to discuss the audit. IRS spokesman Bruce Friedland also declined to comment, saying federal audits are confidential.