UK regulator to investigate PwC’s audits of BT following the Italian scandal

BRITAIN’S ACCOUNTANCY watchdog has opened an investigation into PwC’s audit of BT following the telecoms giant’s Italian accounting scandal.

The Financial Reporting Council (FRC) said on Thursday it has commenced an investigation under the Audit Enforcement Procedure into audits of BT undertaken by PwC between 2015 and 2017.

“The decision to investigate follows announcements by BT in relation to accounting issues in its Italian operations,” the FRC said in a statement.

The move comes after the scandal at the firm’s Italian division, BT Italia, resulted in the firm booking a £530m writedown.

The company’s shares plummeted 19 per cent when BT revealed details of the scandal in January, wiping £8bn off its stock market value.

BT boss Gavin Patterson was stripped of his bonus following the debacle, with his total pay packet cut from £5.3m to £1.3m.

Earlier this month, BT said it would drop PwC, its auditors since 1984, in favour of KPMG after an evaluation found “areas for improvement”.

PwC said in a statement: “We will continue to co-operate fully with the FRC in its inquiries.

“The regulator has a duty to investigate where they believe there is a public interest, in order to give confidence to the financial markets.

“Audit quality is of paramount importance to the firm. The FRC’s annual reviews of our audit work, policies and procedures show a continued trend of improvement in our work and we use the FRC’s insights, together with our own reviews, to continuously improve how we deliver high-quality audits.”

BT filed a criminal complaint with Italian prosecutors in April, accusing several former executives and other employees of unlawful conduct.

Current and former staff have said practices to disguise the Italian unit’s true financial performance had been going on since at least 2013.