Briefing Papers / Q&A on PwC’s Reversal of Yukos Audit
On September 7, 2010, the Wall Street Journal and Financial Times both published major reports on PwC’s decision in June 2007 to withdraw a decade of Yukos audits. Why did these stories appear now?
With new charges having been brought against Khodorkovsky and Lebedev in 2007 to prevent their scheduled release from prison in 2011, it was clear to prosecutors that PwC’s stamp of approval on the Yukos audits was raising serious questions worldwide about the credibility of the case. Since June 2007, when PwC withdrew its Yukos audit opinions for the 10 years from 1995 to 2004, the Khodorkovsky‐Lebedev defense team has been asserting that this unusual and unconventional reversal was made in response to coercion and threats from Russian authorities. In the three years since then, the defense team has documented its assertions and initiated legal actions in order to prove that PwC legally should have stood by its audits, and that the excuses PwC gave for its decision are factually incorrect and meant to cover up the truth.
Neither the Wall Street Journal nor the Financial Times would have run their major features on September 7, 2010 had they not recently obtained proof of the truth and credibility of the assertions being made against PwC. The Wall Street Journal and Financial Times stories also raise troubling questions about the reputation and reliability of PwC in Russia, given the firm’s national predominance. In today’s challenging financial environment, the value of PwC audits that can be pulled essentially on orders from corrupt officials alters the calculus of risk in the Russian economy.