Rock audit fees climb to £2.4m

PricewaterhouseCoopers saw its fees for Northern Rock in 2007 increase by
more than a third as the troubled bank was forced to go cap in hand to the
government for emergency funding.

PwC earned £1.8m in 2006 and £2.4m in 2007, Northern Rock revealed today as
it released its annual report.

The audit fee for 2007 of £1m was double the £500,000 paid in 2006. PwC
picked up £400,000 for non-audit services in 2007. The rest of the fees paid to
the firm were for work on auditing Rock subsidiaries and advice on interim
management statements.

But the audit fees were just a small portion of the huge amounts paid to
advisers by the bank, as it attempted to find a buyer before it was eventually
nationalised.

Northern Rock paid £21.2m in fees to advisers and also had to pick up the
bill for £12.5m fees incurred by the Tripartite authorities as they worked
through the best way to save the bank.

Former finance director, Dave Jones, was paid £390,000 in 2007. He has since
been replaced Ann Godbehere.

The accounts showed that Northern Rock had suffered a loss of £199m in 2007
compared with a profit of £443m in 2006. The bank had to book a £471.9m
impairment charge on loans and advances and unsecured loans.

PwC warned that the situation could get worse for the bank in its audit
opinion on the 2007 accounts.

PwC did not qualify its opinion but said there was ‘material uncertainty’
about the Rock’s ability to continue as a going concern as the business is
reliant on a Bank of England loan facility which still needs to be cleared by
the European Commission for State aid.

‘These outstanding clearances indicate the existence of a material
uncertainty which may cast significant doubt about the company’s ability to
continue as a going concern. The financial statements do not include adjustments
that would result if the

Company was unable to continue as a going concern,’ the auditing firm said.

Further reading:

Read
the full annual report here

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