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12 Oct 2015 11:56am

PwC in the dock over Connaught audit

The Financial Reporting Council has delivered a formal disciplinary complaint against PwC and one of its partners over the audit of Connaught plc

The former FTSE 250 social housing maintenance firm collapsed in 2010 saddling creditors with major losses and costing hundreds of jobs.

The FRC complaint relates to Stephen Harrison, PwC’s senior statutory auditor and audit engagement partner, and PwC, in relation to the audit of the financial statements of Connaught plc and its subsidiaries for the year ended 31st August 2009.

In 2010 KPMG was appointed administrators of Connaught plc, which comprises three main operating businesses: Connaught Partnerships, Connaught Environmental and Connaught Compliance.

KPMG discovered 50,000 unprocessed invoices at the Leeds offices of the Connaught Partnerships social housing unit and at the time spoke of its shock at the state of its books.

The accounting regulator alleges that Harrison and PwC “failed to act with competence and due care” in relation to the audit of the financial statements for the group, Connaught Partnership Limited and Connaught Compliance Limited and that their conduct fell significantly short of the standards reasonably to be expected of a member or member firm of the ICAEW.

In response, PwC said, "We are disappointed that over five years after the event the FRC has decided to pursue complaints against the firm. We have cooperated fully with the FRC throughout their lengthy investigation and will now consider its concerns and respond appropriately."

Included in the complaint are Stephen Hill (Connaught’s Group FD) and David Wells (deputy financial director responsible for the Group’s treasury management) in relation to the preparation and approval of Connaught’s interim financial statements for the six months ended 28th February 2010.

The FRC alleges that Stephen Hill and David Wells breached the fundamental principle of integrity in relation to the accounting treatment of a short term loan provided by a related party shortly before the half year end.

Raymond Doherty

 

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