© Reuters. FILE PHOTO: The Price Waterhouse Coopers logo is seen at their Berlin office in Berlin, Germany, September 20, 2019. REUTERS/Wolfgang Rattay
By Iain Withers
LONDON (Reuters) – Britain’s audit watchdog has imposed a 7.5 million pound ($8.9 million) penalty on PwC for “serious breaches” found in audits by engineer Babcock International, the Wednesday the regulator.
The Financial Reporting Council (FRC) said the sanctions were related to failures to audit Babcock’s accounts through the end of March 2017 and 2018, as well as one of its subsidiaries in the latter year.
The fine was discounted by 25% to 5.6 million pounds due to the early ruling, the regulator said.
Audit firms have faced tougher political scrutiny over the quality of their work in recent years, following a series of high-profile accounting scandals linked to some of Britain’s best-known companies, including retailer BHS. and the construction company Carillion.
The FRC said the breaches identified in PwC’s Babcock audits included repeated failures to challenge management and obtain sufficient appropriate evidence.
The firm also showed a lack of competence, care and diligence, the regulator said, citing an example where it found no evidence that the audit team had read a 30-year £3bn lifetime revenue contract written in French.
In this case, the audit team was not fluent in French or obtained a translation of the contract, the FRC said.
“We regret that the work in question did not meet the required standard and that we hold ourselves to it,” a PwC spokesperson said.
Babcock, who was not part of the FRC investigation, said it had carried out a review of its contracts and balance sheet that reported initial findings in April 2021, resulting in a write-off of around £2bn.
“This established an appropriate baseline for the group’s financial performance,” a Babcock spokesman said.
Two PwC partners, Nicholas Campbell Lambert and Heather Ancient, were also fined £200,000 and £65,000 respectively, reduced to £150,000 and £48,750 respectively.
The FRC’s investigation into PwC’s statutory audits of the Babcock group’s financial statements for 2019 and 2020 is ongoing.
($1 = 0.8460 pounds)