OCTOBER 18, 2017 RECENT DEVELOPMENTS / POINT OF VIEW
PwC's recent announcement to open a law firm in the US has raised some eyebrows - to say the least. According to a 9/22/17 New York Times article, the new firm, ILC Legal, will only provide advice on foreign legal matters. Further, the new firm's service providers are not licensed to practice law in the US and due to SEC independence restrictions on legal services can advise only nonaudit clients. Even so, all four firms have provided legal services, employing thousands of attorneys, in recent years; the only new development is PwC's creation of a separate legal entity for that purpose.
Click here to read a BNA Bloomberg article on reactions to this event from the PCAOB, academia, consultants (including myself), and members of the legal community who are particularly concerned about the Big 4 firms' abilities to offer multidisciplinary services and continue cutting into their business. I will add to my comments by saying that while compliance with the SEC's restrictions on legal services to audit clients and their affiliates (see the blurb below) is far from simple (due to the complexities of business), the firms put tremendous effort and resources into maintaining that compliance.
Excerpt From SEC Reg S-X Rule 2-01(c):
(4) Non-audit services. An accountant is not independent if, at any point during the audit and professional engagement period, the accountant provides the following non-audit services to an audit client:
(ix) Legal services. Providing any service to an audit client that, under circumstances in which the service is provided, could be provided only by someone licensed, admitted, or otherwise qualified to practice law in the jurisdiction in which the service is provided.