Top Stories
PwC hit with $8.9 million penalty for ‘serious breaches’ on Babcock audits
Global Banking & Finance Review®
Company
By Iain Withers
LONDON (Reuters) -Britain’s auditing watchdog has imposed a 7.5 million pound ($8.9 million) penalty on PwC for “serious breaches” found in audits of engineer Babcock International, the regulator said on Wednesday.
The Financial Reporting Council (FRC) said the penalties related to failings on audits of Babcock’s accounts up to the end of March 2017 and 2018, as well as one of its subsidiaries in the latter year.
The fine was discounted by 25% to 5.6 million pounds due to early resolution, the regulator said.
Auditing firms have faced tighter political scrutiny over the quality of their work in recent years, following a slew of high profile accounting scandals linked to some of Britain’s best-known companies including retailer BHS and builder Carillion.
The FRC said breaches identified on PwC’s audits of Babcock included repeated failures to challenge management and obtain sufficient appropriate evidence.
The firm also showed a lack of competence, care and diligence, the regulator said, citing one example where it found no evidence the audit team had read a 30-year contract with lifetime revenue of 3 billion pounds written in French.
In this case, the audit team neither possessed French language skills nor obtained a translation of the contract, the FRC said.
“We’re sorry that the work in question was not of the standard required and that we demand of ourselves,” a PwC spokesperson said.
Babcock, which was not a party to the FRC investigation, said it had conducted a review of its contracts and balance sheet which reported initial findings in April 2021, resulting in a write-off of around 2 billion pounds.
“This established an appropriate baseline for the financial performance of the group,” a Babcock spokesperson said.
Two PwC partners – Nicholas Campbell Lambert and Heather Ancient – were also fined 200,000 pounds and 65,000 respectively, discounted to 150,000 pounds and 48,750 pounds respectively.
The FRC’s investigation into PwC’s statutory audits of the Babcock group financial statements for 2019 and 2020 is ongoing.
($1 = 0.8460 pounds)
(Editing by Sinead Cruise and Jason Neely)
Auditing is the examination of financial records and statements to ensure accuracy and compliance with established standards and regulations.
The Financial Reporting Council (FRC) is a regulatory body in the UK responsible for overseeing corporate governance and financial reporting standards.
Audit breaches refer to failures in the auditing process, such as not obtaining sufficient evidence or not challenging management's assertions adequately.
Financial reporting involves the disclosure of financial information to stakeholders, including financial statements that summarize a company's financial performance.
Compliance in finance refers to adhering to laws, regulations, and standards set by governing bodies to ensure ethical and legal financial practices.
Explore more articles in the Top Stories category
