Analysis On Price Waterhouse Coopers Accounting Essay

Category: Accounting

The objective of this profiling is to conduct an analysis on PricewaterhouseCoopers (PwC), to explore how they operate the company and how the company is form over the years. The structure of PwC, the wide range of services they provide, and strategies will be included in the profiling. There will also be a comparison of PricewaterhouseCoopers and KPMG using SWOT analysis to see the difference in their internal and external factors of the company. This profiling will also include the introduction, the code of conduct and values of PricewaterhouseCoopers.

Introduction of PricewaterhouseCoopers

PricewaterhouseCoopers, also known as PwC, was known to be the biggest accounting and business consultancy firm around the world which provides industry-focused assurance, tax and advisory services. PricewaterhouseCoopers earn a total of US$26.2 billion worldwide revenues for year 2009 and employed more than 163,000 people in 151 different countries.

PwC is also the largest of the Big Four Auditor, besides KPMG, Ernst & Young and Deloitte & Touche. It was formed in 1998 when there is a merger between the two Big Six accounting firms which are Price Waterhouse and Coopers & Lybrand. PricewaterhouseCoopers was officially known as PwC on 20th September 2010 with the announcement of brand repositioning which also includes a newly designed logo.

History of PricewaterhouseCoopers

PricewaterhouseCoopers was formed in 1988 from the merger between the two Big Six accounting firms which are Price Waterhouse and Coopers & Lybrand. Both companies were originated in London and also have histories back from the nineteen century. The reason for the merge is because of the increasing competitive from other accounting firms and the aim was to compete more internationally in countries such as China and Russia. In the recent history, partners of PricewaterhouseCoopers approve the sale of consultancy business to International Business Machines in 2002 and PricewaterhouseCoopers had officially shortened their brand name to PwC in 2010.

History of Price Waterhouse

An accountant, Samuel Lowell Price established his own practice during 1849 in London. Price, Waterhouse & Co was known in 1874, by Samuel Lowell Price and Edwin Waterhouse after the leave of William Hopkins Holyland who is in the partnership in 1865. Price Waterhouse had gained some recognition as an accounting firm during the late nineteenth century, which creates a trade between United States of America and United Kingdom. Price Waterhouse world firm was formed in 1982, which creates a large professional consulting branch. In 1890, Price Waterhouse opened an office in New York and 1904 is the opening of an office in Liverpool by the British firm and also in other countries which makes the firms continuously expanding and having partnership in different countries. Having the advantages due to the expansion, Price Waterhouse have the thought of merger with Arthur Andersen in 1989, but it did not succeed because there are too many conflicts like Arthur Andersen's commercial link with the International Business Machines and Price Waterhouse's audit of International Business Machines.

History of Coopers & Lybrand

William Cooper started his own practice during 1854 in London. It became Cooper Brothers after seven years in 1861 when his three brothers joined him. William M. Lybrand and H. Montgomery together with the Ross brothers, Adam A. Ross Jr. and T. Edward Ross, established Lybrand, Ross Brothers and Montgomery during 1898 in United States of America. In 1957, Coopers & Lybrand was formed by the merger of Lybrand, Ross Brothers & Montgomery, Cooper Brothers & Co, and McDonald, Currie and Co which is a Canadian firm. Some countries which include Coopers & Lybrand in United Kingdom merge with Deloitte Haskins & Sells and it became Coopers & Lybrand Deloitte in 1990. In 1992, it was renamed to Coopers & Lybrand.

Overall, the deal for Price Waterhouse and Coopers & Lybrand to merge allows both the firms to leap ahead of their rivals in terms of their partners and their revenues, and this will also allow them to provide their clients a broad range of accounting and consulting services.

Structure of PricewaterhouseCoopers

PricewaterhouseCoopers was linked through the membership in PricewaterhouseCoopers International Limited and they were structured as a system of partner firms. As PwC is managing its business in many other countries all over the world, it is not easy to work together, and so they need an active global network. The structure of PwC enables its firms to work openly and instantaneously for businesses in both global and local. In this way, they are capable of serving a large scale of clients, including both well-known and private companies, regardless of the size.

The client engagement team is the most crucial to the success of PwC. The team's primary responsibility is to build and expand the relationship between the clients and themselves. They also act as the decision-making authority that decides whether the client's needs are met. The PwC culture is carried to younger professionals as the engagement team is where most of the professional development takes place. Because of this, PwC network shares a common aim, which is to aid engagement teams to connect with clients and also guide the next generation.

Governance Structures

Global Board: This board's task is to make sure the effectiveness of the governance, defend PwC International Limited system, and have responsibility among them. Every four years, the members of global board are selected by all of the partners internationally as they do not hold an external role.

Network Leadership Team: This team's role is to set the standards for PwC to follow. They also established strategies for their own system.

Strategy Council: This council's task is to ensure everyone agrees on the strategic management and also the orientation in the implementation of strategies. The members of the council are mostly seniors from different large firms of PwC.

Network Executive Team: This team's role is in charge of the service line and useful areas through PwC network and also reporting to the Network Leadership Team.

An efficient teamwork needs good interactions, being able to respect one another and also sharing. As the best solution is produce by working well together with both clients and colleagues.

We can achieve excellence through improvement, knowledge and dexterity. Including adding values further than what is anticipated and also keeping our words.

The most important points in leadership are to possess courage, honesty and vision. A leader needs to lead clients, people, and always have leadership in mind.Code of Conduct of PricewaterhouseCoopers

PricewaterhouseCoopers manage its business within the structure of appropriate professional standards, codes and regulations together with its standards and rules. Nevertheless, it was admitted that the standards, rules and regulations administrate all the different types of behaviour. Because of this, the Code of Conduct was introduced to all the people and firms in PricewaterhouseCoopers. The experience in PricewaterhouseCoopers can rise by following the Code of Conduct and demonstrating the values.

Both the guidelines and the values in the Code are required for each person in PricewaterhouseCoopers to know and understand. But by knowing and understand might not be enough, they need to have responsibility and will to obey the Code and also to aid others in doing the same. As there isn't a Code that deal with every situation which might encounter, so the Code provides a wide range of guidance, and as a result, the code cannot be an alternative for obtaining guidance on appropriate business conduct.

Upholding the PricewaterhouseCoopers name

PricewaterhouseCoopers work towards to serve clients who are competent to serve, who worth their service and who meet the suitable standards of legality and honesty. They maintain the reputation of professional capability and integrity so that their colleagues and client will continue to trust PricewaterhouseCoopers. When they are speaking during a discussion, they only state PricewaterhouseCoopers's views and not their own, even if the audience would expect them speaking as representative. They use the assets that belong to PricewaterhouseCoopers and to their clients appropriately, and only for authorised intentions.

Behaving professionally

PricewaterhouseCoopers provide professional services in agreement with the rules and professional standards. The confidential and privacy of clients must be respected and strive to provide service should not be less that the dedications. When there are difficulties, they consult suitable PricewaterhouseCoopers individuals before acting. It is improper to accept of offer bribes, and it is best to avoid conflicts.

Respecting others

It is important to respect others, including colleagues, clients and people with who they do business with fair and courtesy. Balancing of work and private life is essential, and so to provide safe working environment for everyone. They are dedicated to uphold a working environment which is free from unfairness and harassment, and to view the variety of workforce as an advantage to be nurtured and developed.

Corporate Citizenship

PwC will only take part in any activities that benefits and has education values to communities and not something that is against human nature. It will operate with respect to the law, customs and tradition for the firms in each different country. They are dedicated in fighting against corruption and financial crimes. PwC also aims to reduce the impact to the environmental due to operations.

Our responsibilities

It is the responsibility of every employee in PwC to follow the Code of Conducts and policies given by the company. Those who fail to follow will result in disciplinary action from the company. Policies of the host country should be followed when they are face with doubts on international assignments or business conduct questions.

Framework for Ethical Decision Making

Every employees of PwC must follow a guideline when making decisions. This includes knowing the situation well, considering the options available, and the consequences of choosing that particular option. In this way, the best option can be offered to the clients.

Sustained business success "Growth"

Consistent superior client appreciation "Loyalty"

People "Pride, Passion & Purpose"

Behaviour

Strategies of PricewaterhouseCoopers

Behaviour

Having good behaviour is one of the strategies for PwC. It means to have good interaction with clients and colleagues, respecting one another, willing to challenge and achieve success. They should know the limitations and reflect on every action done. When there are different views, all of them must be considered and use it to improve and achieve the objective. They need to adapt to different behaviours and have a change in themselves for the firm, not just individually. Experience in PwC should also be promoted to clients.

People "Pride, Passion & Purpose"

People in PwC should have "Pride, Passion and Purpose". They can help each other to achieve goals by encouraging being more passionate. The knowledge possess could be use in the appropriate way and achieving higher quality for themselves. It is also important to understand the main purpose of the career. To provide a different experience, flexibility and agility will be increase.

Consistent superior client appreciation "Loyalty"

It is important to understand their clients and putting themselves in their client's shoes. In order to make improvements, new ideas are taken in and so service provided for main clients and markets in the industry sectors will get better. By showing clients the experiences in PwC, their trust towards them will increase.

Sustained business success "Growth"

Continuing business success is to have growth in the company. PwC aims to achieve higher annual growth for audit and non-audit revenues by 2016. It can be done by having more association with financial audit teams and making tactical investments. They must also lower down the cost of delivery and price, improve the boundary and to make all the staff to have business development mindset.

Comparison between PricewaterhouseCoopers and KPMG

PricewaterhouseCoopers

KPMG

Strengths

PricewaterhouseCoopers, being the world largest accounting company among 151 countries, has the best leadership among the Big Four audit firms, as they are dedicated to serve as a force. With the wide range of services offered, it leads to the increase of clients and the relationship with each other. Because of the expanding of firms in many other countries, there is global presence and the revenues they earn each year are continually increasing.

KPMG have the ability to combine its member firms and bring investor's credibility. With the broad global reach and large range of services provided, it increases the revenues earn and it is also spread across industries to reduce the exposure to business and the risk of economic cycle. They also have diversified business portfolio which is the strength of the company.

Weaknesses

After PricewaterhouseCoopers have lawsuits, it caused the reputation of the firm to decrease adversely. In the Advisory Segment, the market share is declining which cause a decrease in profit. Sometimes they took a little longer time to take decision and they are poor in keeping hold of talented people.

Because of litigations and the carelessness of gross in audit practice, it leads to the reduction in reputation of brand. The lacking of transparency will cause clients to stop working with them. Some contracts are subjected competition and audit fees may have an unfavourable impact cause by client concentration.

Opportunities

As PricewaterhouseCoopers is expanding, there might be a chance of increasing growth in Asia-Pacific region, and also to benefit from the developing of markets. Insurance Service Market may start growing after that and through strategic acquisition, many things could be fulfilled. There might also be an increase in the demand for compliance resolutions.

As the markets are growing and developing, KPMG could benefit from it. KPMG has become the new business model for advisory services as the rising spending on infrastructure urge demands for them.

Having approval of IFRS standards early might encourage demands for accounting and auditing services, and the change in capital requirements will benefit them too.

Threats

When the economics of the global slowdown, it affects all consulting business, which is a threat to all of them. The estimating of auction rate might shift demands away from Big Four. Big Four are the four largest international firms and when all of them are competitive, it results in the pressure. The reorganising or failures of big entity might become a threat to PricewaterhouseCoopers. As well as easing the controlling restriction, this might cause competition among firms.

KPMG might face threats where there is a decrease in global economic, financial market and deals market. The estimating of auction rate might also shift demands away from Big Four. When easing the controlling restriction, it may cause competition among firms and increase the competition pressures. KPMG also face threats in the difficulty in Merger & Acquisition Pipeline.

Learning Reflections

From this G902 Professional Profiling module, I learnt a lot which I have never encountered or tried. I learnt the ways to do an analysis of a company. The main example would be to do the SWOT analysis of the two companies which I did the comparison on. It was clear showing the internal and external factors that affects the company's operations. I also learnt about the different things required for a company to be successful and how they managed to compete with their competitors.

I think the purpose of doing this profiling is get to learn and know more about the operations of a company and prepare us on any profiling in the future. There were some problems that I face during this profiling, which make me realise the problems and difficulty about this module. But after this, I have gain a lot and this would be a great experience for me. In the future, if I would need to do profiling on any company again, I would use what I have learnt from this module and the problems I face to improve and do a better profiling.

Conclusion

PricewaterhouseCoopers is a large firm that provides good and large range of services. They always put their clients at the first priority and would serve together as a force. They would also want their employees to follow the values, code of conduct and strategies in order to present the best performance. They measure success by client feedbacks and survey results and try to make improvements from it. The merger of Price Waterhouse and Coopers & Lybrand was a good choice as it leaps ahead of their rivals and become one of the Big Four auditors.

Although they have weaknesses and threats, it did not obstruct PwC from being successful, as they have strategies which are their strengths. KPMG is also one of the Big Four auditors, but it was ranked lower than PwC in terms of their revenues earn. The structure of PwC is also important to their operations as they have many firms all around the world. It is the different boards and teams which make PwC able to work instantaneously for businesses in the global. I think that PwC will continue to be expanding in the future years and reach their targets regardless of the threats they face.