The firm has been 'severely reprimanded' over their 2009 audit of Connaught, a property services group that went into administration in 2010
PwC has been “severely reprimanded” and slapped with a record £5m fine by financial watchdog the Financial Reporting Council (FRC), over misconduct relating to their 2009 audit of Connaught.
The FTSE 250 company was a property services group that went into administration in 2010.
Retired PwC audit partner Stephen Harrison was also reprimanded and fined £150,000 for his role in the audit. PwC were also ordered to compensate for the FRC’s Executive Counsel’s legal costs and to make an interim payment of £1.5m.
The FRC found misconduct in three areas: mobilisation costs, long-term contracts and intangible assets.
The Accountancy and Actuarial Discipline Board first announced an investigation in PwC’s audit of Connaught in November 2010. Last year, two former Connaught finance directors were banned by the FRC over a £4m accounting misstatement. PwC said in a statement: “Since 2010 when the case began, we’ve worked hard to improve our procedures and processes. Audit quality is of paramount importance to PwC and the FRC’s annual audit quality assessments have shown a trend of improvement in our work over several years.”
The watchdog has recently shown a more stringent attitude towards misconduct following a series of accounting scandals. Nicholas Querée, Associate at Peters & Peters commented: “PwC’s record fine, closely following the commencement of an investigation into KPMG over its auditing of Rolls Royce, is further evidence of the role that the FRC wishes to play in the continuing international debate over what investors, and regulators, are entitled to expect from audit firms, and the role of audit in enhancing corporate governance structures.”