PwC secures court victory over former audit client

The court issued a judgement asserting that the Big Five firm had acted with ‘total propriety’ during the saga, and which was highly critical of Jarvis.The road and rail infrastructure group brought the case to dispute a statement PricewaterhouseCoopers lodged with Companies House in March when it resigned as auditor.

But the company withdrew its complaints the morning before the High Court hearing after discussions with the judge, Mr Justice Lightman.

Jarvis said today that it was considering an appeal against the judgement.

Differences arose over fees for the 1999 audit when Jarvis refused to pay £449,000 above the agreed estimate, which the firm had charged to cover extra work it had not anticipated. Issues causing the extra work included differences of opinion over the way Jarvis accounted for long-term contracts.

Further disputes arose over fees for the 2000 audit, and PwC resigned saying that ‘an unusually high level of audit work is necessary before it is possible for us to express an opinion on (the Jarvis) accounts.’

Ernst & Young was subsequently appointed as auditor, prompting claims from Jarvis directors that PwC was ‘bitter’ about losing the audit to its Big Five rival.

Directors at the company also alleged that the PwC statement – a section 394 statement which auditors must file when they resign audits – suggested there was ‘an unsatisfactory state of affairs’ in the way the company accounted for long-term contracts, and that the firm wanted to paint its resignation in ‘a more favourable light’.

Justice Lightman said: ‘These highly damaging allegations were groundless and false and were unequivocally withdrawn by Jarvis in response to an invitation from me in the course of the hearing before me.’

He also raised doubts over ‘whether Jarvis was maintaining these proceedings in good faith or to achieve a collateral advantage’.

A spokesman for Jarvis said today it disagreed with elements of the court judgment, which it considers ‘incorrect in material ways’, and that the company was considering an appeal.

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