PricewaterhouseCoopers has lost its legal bid to clear its name after a Moscow appeal court upheld a previous ruling which associated the company with irregularities in the audit reports of the collapsed oil firm, Yukos.
The Ninth Arbitration Appellate Court ruled on Monday that the appeal could not proceed because Yukos, a co-defendant with PwC, had been liquidated and, from November 2007, has formally ceased to exist.
The ruling leaves the validity of PwC's licence to operate as an audit firm in Russia in some doubt, although its large presence in the Russian audit market - the company audits about one in three firms on the Russian stock market - means that its licence is unlikely to be revoked any time soon.
The latest ruling brings the case to an abrupt and unfavourable conclusion for PwC, although the audit firm is understood to be examining the next legal step in its bid to clear its name.
The company's legal fight began in 2006, when the Russian tax inspectorate accused it of helping Yukos to evade taxes when carrying out an audit of the firm in 2002. The authorities also accused the firm of audit irregularities between 2002 and 2004 because it had completed two reports on Yukos, one intended for the oil company's shareholders and the other for internal use - a claim that was upheld by the Moscow Commercial Court in March 2007 which imposed a substantial fine on PwC.
The company has always denied that it assisted Yukos in evading taxes, and has insisted that its audits were conducted above board.
However, in the summer of 2007, as prosecutors were mounting a fresh case of tax evasion and money laundering claims against Yukos's former chief executive, Mikhail Khodorkovsky, the firm announced that it had withdrawn ten years worth of Yukos audit reports dating from 1995 on suspicion that "information and representations...provided to PwC by Yukos’s former management may not have been accurate".
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