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Financial Times: Moscow grants PwC five-year licence extension

By Catherine Belton in Moscow
Published: April 20 2007 03:00 | Last updated: April 20 2007 03:00

Russia has extended PwC’s licence to operate in the country for another five years, the finance ministry said yesterday, ending weeks of uncertainty over whether the audit firm could lose its licence over its role as auditor of the bankrupt Yukos oil group.

The firm’s standing had been thrown into doubt when a court ruled in March that it had colluded with Yukos in producing false accounts between 2002 and 2004 while closing its eyes to tax avoidance schemes by the company.

The unusually harsh wording of the ruling prompted fears that the firm could lose its licence and position in a fast-growing market including its audits of some of the nation’s biggest clients – Gazprom, the central bank and Sberbank.

One month after prosecutors filed new money-laundering charges against Mr Khodorkovsky, about 20 law enforcers raided PwC’s offices in mid-March for documents relating to Yukos and to tax evasion charges against PwC itself. Several senior managers at the firm were called into the prosecutors for questioning.

Analysts said PwC had been caught in the crossfire as prosecutors sought to expand a campaign that has led to Yukos’s bankruptcy over $33bn (€24.3bn, £16.4bn) in back tax claims and the jailing of its former owner, Mikhail Khodorkovsky, for fraud and tax evasion.

Following the ruling, AvtoVAZ, the state-owned carmaker, said it was dropping PwC as its auditor after more than 14 years. PwC also lost part of its account with the $21.4bn Sakhalin-2 project involving the energy groups Gazprom and Royal Dutch Shell. But one of PwC’s biggest clients, Gazprom, said earlier this month it was retaining it as its auditor.

PwC said yesterday it was pleased by the decision. “We will continue to provide the highest-quality services to our clients, many of which are the largest and most successful companies in Russia,” it said.

PwC said it would continue its appeal against the March ruling that cost it a Rbs16.8m fine ($652,000). The firm is still facing a criminal investigation into whether its Moscow office avoided Rbs243m in taxes.

The firm denies any wrongdoing.

Copyright The Financial Times Limited 2007

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