Watchdog fines PwC £7.5m over Babcock botch
ACCOUNTING giant PwC has been fined £7.5m for botched audit work for the fourth time in less than a year.
in just the latest embarrassment for the Big Four auditor, the Financial reporting Council (FrC) issued a penalty for ‘numerous, serious breaches’ in its handling of the books of defence firm Babcock.
PwC, whose partners were paid an average of more than £1m each last year, has been fined a total of £18.9m in the past nine months for work at Bt, Galliford try and Kier Group as well as Babcock.
the amount paid was reduced, to reflect co- operation with the FrC, with the penalty for the work on Babcock cut by 25pc to £5.6m.
in a scathing assessment of the Babcock case, the FrC highlighted ‘repeated failures’ and ‘a general reluctance to challenge management’ as well as ‘ a failure to follow basic audit requirements evidencing a lack of competence, care or diligence’. the report added: ‘Breaches were identified in respect of every area of audit investigated.’
Nick Campbell Lambert, the leader of the Babcock audit at PwC, was fined £150,000 while Heather ancient, who led the audit of a subsidiary, received a £48,750 penalty.
the FrC severely reprimanded PwC and the two former partners and ordered it to review training programmes. the probe covered audits of Babcock’s accounts over two years including seven contracts that made up around a quarter of its revenue in 2018.
Failures included a lack of evidence that PwC’s auditors read a partnership deal Babcock signed, worth £3bn over 30 years. and a contract in French, worth £570m, was not translated into english even though no one on the audit team could speak French.
FrC said that ‘ran the risk’ that a misstatement in Babcock results for 2017 and 2018 could have gone undetected. ‘the quality of these audits fell far short of the standards expected of statutory auditors,’ said deputy executive counsel Claudia Mortimore.
‘this robust package of sanctions seeks to encourage improvement by the firm.’
Other PwC audits under FrC investigation include its decision to sign off accounts of collapsed shopping centre owner intu as well as Wyelands Bank, London Capital & Finance and eddie Stobart Logistics.