PwC fined £6.5m over 'lack of competence' in audit | Eurasia Diary -

9 July, Thursday

PwC fined £6.5m over 'lack of competence' in audit

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Accounting giant PwC has been fined £6.5m over its audit of the cloud computing firm Redcentric.

The Financial Reporting Council (FRC), which regulates auditors, reduced the fine to £4.55m after PwC admitted its mistakes.

The FRC said some of the breaches were of a "fundamental nature, evidencing a serious lack of competence in conducting the audit work".

Two partners at PwC were each fined £200,000.

Jaskamal Sarai and Arif Ahmad from the firm's Leeds' office will each pay £140,000 after co-operating.

PwC apologised and said it had taken "numerous steps to strengthen processes".

The auditor has run into trouble with its regulator several times in recent years:

  • In 2018, it was fined £6.5m for poor auditing of collapsed department store BHS
  • In 2017, it was fined £5.1m for a poor audit of failed auditor RSM Tenon Group
  • Also in 2017, PwC was fined £5m for misconduct in its audit work for failed maintenance firm Connaught

According to the FRC, Redcentric's 2016 financial statements were extensively restated, with net assets written down by £15.8m, and £5.3m in pre-tax profits restated to be a £4.2m loss.

The regulator said a number of the breaches related to PwC's failure to exercise "professional scepticism".

"Had [scepticism] been applied, it is likely that certain material misstatements would have been detected," said Claudia Mortimore, deputy executive counsel to the FRC.

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