PwC fined a record £10m over BHS audit

The Financial Reporting Council (FRC) has sanctioned PwC and senior audit partner Steve Denison over their 2014 audits of BHS and the Taveta Group.

The Big Four firm has been fined a record £10m (reduced to £6.5m) and Denison faces a fine of £500,000 (reduced to £325,000) and has agreed to not perform any audit work for 15 years after admitting misconduct.

BHS entered administration in 2016 with debts of £1.3bn, endangering 11,000 jobs and leaving a £571m pension black hole. The department store chain collapsed one year after Sir Philip Green sold the group to Dominic Chappell for just £1, following several loss-making years.

In 2016 the FRC launched a two-year investigation into BHS’s 2014 audit, which PwC had signed off on as a “going concern” just days before the sale.

These sanctions come after the FRC implemented a new policy in April to fine large firms up to £10m for “seriously poor audit work”. Prior to this the highest fine levied by the FRC was £5.1m, also to PwC for its audit of RSM Tenon.

The FRC levied a combination of financial and non-financial sanctions, including tasking PwC to review and amend its audit policies and procedures and adding a condition for PwC to provide detailed annual reports about its Leeds Audit Practice to the FRC for the next three years.

A spokesperson for PwC said: “We recognise and accept that there were serious shortcomings with this audit work and that it is important to learn the necessary lessons. We are sorry that our work fell well below the professional standards expected of us and that we demand of ourselves.”

“We have agreed this settlement, recognising that it is important to learn the necessary lessons. At its core this is not a failure in our audit methodology, the methodology simply was not followed.”

“As a result of our internal reviews we took swift action to enhance our monitoring procedures. We have agreed with the FRC to extend these further for an additional period.”

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