An investigation of the giant accounting firm PricewaterhouseCoopers found thousands of cases in which the firm's partners and senior employees had financial interests in companies the firm was auditing, the Securities and Exchange Commission said yesterday.

Such financial conflicts violate SEC and professional rules designed to make sure that accountants are independent of the companies whose books they audit. These audits are critical to the investing public because the books are supposed to provide an accurate picture of the company's financial health.

The probe, ordered by the SEC last year in settling a complaint against the firm's Tampa office, did not try to determine whether these violations influenced the firm's audit reports--and the investigators said they ran across no evidence that they did. But it concluded that there was "widespread . . . noncompliance" with the rules "that reflected serious structural and cultural problems" at PricewaterhouseCoopers (PwC).

PwC Chairman Nicholas G. Moore and chief executive James J. Schiro, in a letter to partners Wednesday, called the investigation's findings "embarrassing to our firm and to all of us as partners." But "these infractions of independence rules, however unacceptable, did not in any way impair the professional objectivity and integrity of our audits," they said.

Moore and Schiro noted that most of the violations concerned accountants who were not actually doing work for the client involved.

Among the more serious violations, its accountants owned stock in companies audited by the firm, took out loans from clients, had spouses or other relatives who worked for a client, and managed family trusts that had investments in a client.

Many of the other violations were minor or technical, such as owning shares of a mutual fund audited by the firm, but the sheer numbers suggest the firm paid only casual attention to the requirements of the profession.

Government officials, who have heard accountants insist that such violations are unusual or even rare, said they now see that the problems are much more widespread than they thought.

The SEC's investigation is continuing, and officials there said the Public Oversight Board, an industry-funded group that oversees the practice of accounting, has agreed to sponsor similar reviews of other firms.

Former U.S. comptroller general Charles Bowsher, the chairman of the oversight board, said the group will soon begin probes of the other four largest firms--Arthur Andersen, Deloitte & Touche, KPMG and Ernst & Young--and will move on to the medium-size firms as soon as those reviews are complete.

Regulators have been concerned about ethical lapses by accountants who are under growing pressures to generate revenue for their firms. For example, many firms, especially large ones, have extensive consulting practices that some experts fear could undermine their independence.

Last year SEC Chairman Arthur Levitt Jr. said, "I have grave concerns that the audit process, long rooted in independence and forged through professionalism, may be diminished--perhaps even sacrificed--in the name of more financial and commercial opportunities."

SEC Chief Accountant Lynn E. Turner called the report "a sobering reminder that accounting professionals need to renew their commitment to the fundamental principle of auditor independence."

Private experts agreed. "The rules themselves emphasize not only independence in fact but independence in appearance," said Philip Jacoby, a professor of accounting at American University.

"This sloppiness I would consider a major embarrassment to the firm, but I would also be shocked if that influenced their independence in fact [rather than simply appearance]. That would undermine the credibility of the profession."

The investigation of PwC began last year after regulators found that accountants in the Tampa office of Coopers & Lybrand owned securities of 44 of Coopers's audit clients.

Coopers & Lybrand merged with Price Waterhouse in 1998 to form PricewaterhouseCoopers. PwC now employs about 39,000 professionals in the United States.

The firm settled with the SEC at the time, calling the Tampa violations "aberrant." According to the report, however, "that assessment proved to be incorrect."

The investigation, led by Jess Fardella of the New York law firm Lankler Siffert & Wohl, found more than 8,000 independence violations over a two-year period, involving 1,885 PwC employees and partners. Notably, violations were found involving 1,301--or 48 percent--of the firm's 2,698 partners.

Peter Frank, PwC global managing partner for risk management, said the firm has determined that none of the violations involved illegality, nor did any compromise the integrity of an audit.

But a small number of cases involved things that were beyond inadvertence or technicality, and during the probe five partners and a similar number of other professionals were "asked to leave."

Kenton Sicchitano, global managing partner for regulation and independence, said the firm has conducted a "top-to-bottom" overhaul of its independence procedures and systems, including installation of an automated checking system.

"No system is foolproof," he said, but "I think we've put into place the tools to help people comply."