Non-audit services supplied to Northern Rock by
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
‘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
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
PwC declined to comment.
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