AUDITOR EDUCATION FUND ESTABLISHED AS A RESULT OF CENSURE OF FIRM

The Securities and Exchange Commission recently brought and settled charges against PricewaterhouseCoopers LLP for engaging in improper professional conduct by violating SEC auditor independence rules. In violation of SEC rules and in more than 70 instances, some PricewaterhouseCoopers partners and managers, including its pension fund, purchased securities of PricewaterhouseCoopers audit clients.

In settling the charges, PricewaterhouseCoopers agreed to be censured, to establish a $2.5 million auditor independence education fund, to improve its internal procedures for monitoring adherence to auditor independence rules, and to conduct an internal investigation supervised by an outside person named by the SEC, among other things.

"The SEC's rules explicitly forbid accountants from owning stock in their audit clients," said Richard H. Walker, director of the SEC's Division of Enforcement. "If auditors are not independent of their clients, in fact or perception, the integrity of the financial reporting system is jeopardized."

In its order, the SEC found that during the 1996­1998 period, Coopers & Lybrand procedures for ensuring its compliance with independence standards with respect to publicly held audit clients, whose securities were registered with the SEC, failed to detect certain ownership rule violations.

PricewaterhouseCoopers consented to the entry of the SEC's order without admitting or denying the facts, findings, or conclusions of the order.

Details of the SEC's action and PricewaterhouseCoopers' response can be found at www.sec.gov. *