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PwC Rejects Russian Tax Service's Yukos Claims

by Tatiana Smolenskaya,, Moscow

28 December 2006

PricewaterhouseCoopers has "categorically rejected" claims by the Russian tax inspectorate that it helped bankrupt Russian oil firm Yukos to evade taxes when carrying out an audit of the firm in 2002.

According to the tax office, PwC helped Yukos, itself accused of evading many billions of dollars in taxes, to delay paying its 2002 taxes until 2005, and it is demanding that the US$145,000 paid to the audit firm by the oil company be handed over to tax collectors.

The tax service also took issue with the fact that PwC conducted two audits on Yukos - one intended for internal use and the other prepared for the use of shareholders in the company.

In a counter statement issued Monday, PwC strongly refuted the tax inspectorate's claims and suggested that the tax authorities misunderstood the role of company auditors.

“PricewaterhouseCoopers categorically rejects the claims of Tax Inspectorate 5," said Mike Kubena, General Director, PricewaterhouseCoopers Russia.

"PwC conducts all of its audits, including the 2002 Yukos audit, according to the highest professional and ethical standards strictly in compliance with Russian and international law."

Kubena said that PwC practiced the "highest ethical norms" the world over and did not devise any tax schemes or conceal information.

"We see from the Claim of Inspectorate No 5 of the Federal tax Service that the oversight authorities interpret the auditor’s role differently as compared to the interpretation generally accepted by the professional community," Kubena continued.

"The auditor’s task is not to perform control functions. It is to carry out an audit and express an opinion on whether the financial statements of an audited entity present a fair and true picture of said audited entity’s financial position and results of its operations in accordance with the statutory requirements for accounting and reporting. The responsibility for decisions that should be made by corporate management cannot be transferred to the auditor," he added.

Kubena said that the 2002 Yukos audit opinion was "not unqualified, but amended," and that the report issued to the company's management recommended the elimination of "identified weaknesses."

PwC said that it will "vigorously defend" its position and reputation both in court and in dialogue with government authorities.

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