Non-audit services supplied to Northern Rock by PricewaterhouseCoopers have raised serious worries that auditors of large financial institutions are conflicted, MPs on the influential Treasury committee have said.

‘There appears to be a particular conflict of interest between the statutory role of the auditor and the other work it may undertake for a financial institution.

‘For example, PwC was paid £700,000 in non-audit fees, largely comprised of fees relating to assurance services in connection with Northern Rock’s actions in raising finance,’ the committee said in a hard-hitting report on the troubled bank’s collapse.
The MPs were also critical about the scope of assurance PwC was able to offer Northern Rock shareholders with regards to the bank’s risk management processes.

The committee said an audit could offer nothing more than ‘a snapshot of the paststate of the company’.

The committee stopped short of criticising PwC specifically, but it will be a great embarrassment to the firm that these general issues arose within a company under its watch.

Jon Grant, executive director of the Auditing Practices Board, defended the UK audit system against the criticisms made by the MPs. He said regulators had consulted widely on risk management and conflicts of interest, and received support from stakeholders for the UK’s principles-based approach. ‘There was no appetite among stakeholders for US-style regulation,’ Grant told Accountancy Age.

PwC declined to comment.

PwC urged to return Northern Rock fees

PwC to face 'vigorous' grilling by MPs