PricewaterhouseCoopers LLP, the world's largest accounting firm, is being audited by the Internal Revenue Service for potential violations in reporting its own taxes, according to IRS and company documents.

The IRS is evaluating the timing of tax deductions, PricewaterhouseCoopers' pension plan, and how the firm moved profits between international units, said a person briefed on the audit. The review may be completed later this month, and the IRS is expected to reach its conclusions by the end of the year, PricewaterhouseCoopers' tax partner, Samuel Starr, said in a June 15 letter to the New York-based firm's 2,000 U.S. partners, who could be liable for any back taxes.

Additional taxes or penalties could damage the reputations of the firm and the industry, which have been under increased scrutiny since the 2001 collapse of Houston-based energy trader Enron Corp. and the demise of its auditor, Arthur Andersen LLP.

The IRS review may cost partners at PricewaterhouseCoopers "scores of millions" of dollars, said Robert Willens, a tax and accounting analyst at Lehman Brothers Holdings Inc. in New York.

"If the pension plan were to be disqualified, the results would be potentially nuclear," said Richard Susko, a pension attorney and partner at the New York law firm of Cleary, Gottleib, Steen & Hamilton. PricewaterhouseCoopers could lose deductions it took on contributions to the pension plan, though the IRS probably will "work out something less draconian," he said.

Officials at PricewaterhouseCoopers declined to discuss the audit. IRS spokesman Bruce Friedland also declined to comment, saying federal audits are confidential.

"PricewaterhouseCoopers is a large organization and, like any large entity, is under constant review by various taxing jurisdictions," said Steven Silber, a spokesman for the firm.

Edward Nusbaum, chief executive officer of Chicago-based Grant Thornton LLP, the sixth-largest accounting firm, said he was unaware of previous IRS audits of accounting firms. "In general, accounting firms don't get audited," he said. "I know we have not been audited."

The IRS notified PricewaterhouseCoopers of the audit in a June 3, 2005, letter to Starr, a partner based in Washington and an adjunct professor of law at Georgetown University. Starr's letter to his fellow partners, sent June 15 of this year, said the audit covers the firm's fiscal years ending September 2002 and September 2003. Copies of both letters were provided to Bloomberg News.

"To date, the IRS has not proposed any adjustments," Starr wrote in the letter. "However, we are not finished yet, and I will keep you advised in the event of any significant developments."

PricewaterhouseCoopers audits some of the world's biggest companies, including Irving, Texas-based Exxon Mobil Corp., the No. 1 oil producer; Dearborn, Michigan-based Ford Motor Co., the second-largest U.S. automaker; and New York's JPMorgan Chase & Co., the No. 3 U.S. bank by assets. It employs more than 130,000 people in 148 countries.