The SEC settled an independence case with PricewaterhouseCoopers (PWC) in July 2002. 7 The case found that from 1996 to 2001, PWC engaged in contingent fee arrangements with 14 public companies. In each instance, the client hired the audit firm's investment bankers to perform financial advisory services for a fee that was based on the success of the services. According to the SEC, this arrangement violated the AICPA Code of Professional Conduct. PWC agreed to pay the SEC $5 million and to provide independence training to all PWC professionals.
a. Identify the sections of the AICPA Professional Code of Conduct violated by the contingent fee arrangements.
b. Do you agree with the SEC finding?
c. Why did PWC engage in this behavior if it violates the code of professional conduct?