PwC fined £5.6m by Financial Reporting Council for improper audit of Babcock results
- PwC has been criticized for regularly failing to challenge Babcock’s leadership
- The company was initially fined £7.5m but this was reduced by a quarter
- Two other former audit partners received harsh reprimands and fines
PwC has been fined £5.6million by the UK accounting regulator for misconduct over its work with defense and aerospace firm Babcock International.
The Financial Reporting Council said it found breaches in “all areas” it reviewed of PwC’s audit work on Babcock’s 2017 financial results and the 2018 accounts of Babcock and its subsidiary Devonport Royal Dockyard.
The regulator criticized the company for regularly failing to challenge Babcock’s management and for a “lack of skill, care or diligence” regarding its failure to comply with basic audit requirements.
Reprimanded: PwC has been fined £5.6million over failures to audit defense firm Babcock International and its subsidiary Devonport Royal Dockyard
On one occasion, an audit team received a €640m (£570m) contract written in French, but none of them had the language skills to understand it or asked a translation of the agreement, according to the regulator.
In another case, audit evidence of a sensitive government contract was tampered with, while no evidence was found that auditors had received or read a 30-year contract potentially worth $3 billion. pound sterling.
PwC was initially fined £7.5million, but this was reduced by a quarter after the firm’s admission of guilt.
Two other former audit partners, Nicholas Campbell Lambert and Heather Ancient, received severe reprimands and fines of £150,000 and £48,750, respectively.
PwC said in a statement: ‘We are sorry that the work in question did not meet the standard required and which we demand of ourselves.
“In the years that followed, we made significant and continuous investments in improving the quality of audits, which resulted in improved inspection results. We strive to ensure the consistent delivery of high quality audits.
The latest fine marks the fourth time the FRC has penalized the ‘Big Four’ accountancy group for its audits of London-listed companies in the past year.
In August, PwC was fined £2.5million for failing to sufficiently challenge BT Group’s 2017 results after fraud was perpetrated at the telecoms giant’s Italian division.
Two months earlier, he had been penalized twice in one day for failing to audit the annual results of construction companies Kier Group and Galliford Try.
Claudia Mortimore, the FRC’s assistant legal adviser, said the Babcock audits “fall well below the standards expected of auditors”.
She added: “The lack of applied skepticism and failure to meet certain basic audit requirements are of particular concern.”
Mortimore also said that PwC had “conducted effective self-reviews in four of the areas under investigation and, in this regard, had shown exceptional cooperation.”
“However, this did not result in a further reduction in penalties, as it was countered by instances of errors, omissions and delays in the provision of materials to the investigation, as well as the provision of certain unclear or inaccurate answers.”
Investigations are still ongoing into PwC’s audits of Babcock’s 2019 and 2020 financial statements and accounts belonging to collapsed shopping center owner Intu Properties, Wyelands Bank, Eddie Stobart Logistics and London Capital & Finance.