LONDON – Top accounting firm PricewaterhouseCoopers (PwC) , which took part in the forensic audit of Crane Bank before its sale to dfcu Bank, has been fined £6.5m by the UK accounting watchdog, the Financial Reporting Council (FRC), over misconduct in relation to the audit of top UK retailer BHS two years before it collapsed.
FRC reached the decision after two years of investigation in 2016 which also saw PwC’s audit partner Steve Denison fined £325,000 and banned from any audit work for 15 years.
PwC stopped working as auditor to BHS after the retailer was sold by Philip Green to Dominic Chappell in 2015. The company collapsed 13 months later, putting 11,000 jobs at risk.
The FRC said that under the terms of the agreement, PwC would “monitor and support its Leeds audit practice and provide detailed annual reports about that practice to the FRC for the next three years.”
The FRC’s decision to issue a record penalty follows a fraught period for the watchdog, which has been accused of being too close to the companies it supervises, of being slow to investigate misconduct, and of being “toothless” when it does issue fines.
PwC said: “We recognise and accept there were serious shortcomings with this audit work. We are sorry that our work fell well below the professional standards expected of us and that we demand of ourselves.”
It added: “Whilst the failings did not contribute to the collapse of BHS over one year later, they were serious and this is reflected in the Financial Reporting Council settlement.”
The failure of BHS, a 180-store, lossmaking chain, was the biggest collapse in the British retail industry since the demise of high street peer Woolworths in 2008.
The development raises concerns about the professional conduct of PwC which has for many years conducted high level audits of government institutions and commercial banks.
Both KPMG and PwC have since been declared ineligible to investigate the controversial sale of Crane Bank to dfcu Bank.
The two were pinpointed as having conflict of interest, having been clients of the defunct Crane Bank, which is a subject of the investigation. Both KPMG and PwC have also been BoU auditors and have previously worked as auditors for Crane Bank.
BoU had earlier contracted PwC to carryout forensic audit on Crane Bank. BoU used the report as a basis to file a case against city property mogul Sudhir Ruparelia. The case is pending hearing in the High Court.
The disputed forensic audit report which Sudhir’s lawyers, Kampala Associated Advocates (KAA), have since called a draft document, was made by PwC on November 13, 2014.
Crane Bank was also audited by KPMG from 2004-2007 and 2013-2015; PwC in 2008-2010; Deloitte and Touche 2011-2012, leaving the Auditor General shortlist with only two firms without issues.
Some analysts have advised that an independent foreign company be outsourced to audit BoU.