PwC is slammed over BHS collapse

PWC should have flagged significant doubts over the future of BHS in an audit that was completed just days before the loss-making UK retailer was sold for a token one pound in 2015, ahead of its collapse a year later, a regulator said yesterday.

BHS had 163 stores and employed 11 000 people when it collapsed in 2016, triggering a political firestorm.

The Financial Reporting Council (FRC) watchdog fined PwC in June a record £6.5 million (R117m), and former partner Stephen Denison £325 000. Denison was also banned from auditing for 15 years.

After pressure from lawmakers, the FRC published documents yesterday detailing the eight allegations of misconduct that prompted the penalties.

PwC said yesterday it was sorry its work fell well below the professional standards expected.

“This is unacceptable and we agreed the settlement recognising that it is important to learn the necessary lessons,” it said in a statement.

PwC is one of the world’s top four auditors, along with KPMG, Deloitte and EY, which check the books of most bluechip companies across the globe.

Juggling audits They are coming under intense scrutiny in Britain over how they failed to spot company collapses and for juggling audits and more lucrative nonaudit work for the same clients.

Lawmakers have said they may formally request higher fines once the FRC published the details of its probe into PwC. They called the FRC “toothless” over its handling of the BHS audit, and the watchdog’s powers are being reviewed independently.

The documents are likely to spark fresh calls for the audit and non-audit operations of the big four audit firms to be split up.

At the core of an audit, accountants are required to say if they think a company is a “going concern”, meaning it can stay in business for the foreseeable future. The FRC looked at the audit of Taveta Group, which includes BHS, for the year ending August 30, 2014.

“There were several events or conditions that should have appeared to the respondents (PwC and Denison) to cast significant doubt over BHS’s ability to continue as a going concern and therefore to require further investigation,” the FRC said.

BHS had significant net liabilities, had had to make provision for loss-making stores, and had very significant deficits in its defined-benefit pension schemes. – Reuters