Following yesterday’s decision to fine PwC a record of £6.5m for its audit of the troubled retailer, Frank Field wrote to the FRC’s CEO Stephen Haddrill, asking if the regulator is considering widening its investigation into PwC’s audit work.
He also asked for more details about PwC’s misconduct in the BHS audits. “In the absence of any published explanation other than ‘misconduct’ for why the fines were levied, it is difficult to establish whether they were appropriate,” he said.
The MP asked in his letter why the FRC had chosen not to publish a report into its findings, and whether it was planning to do so in the future.
Together with Ian Wright, the former chairman of Business, Innovation and Skills (BIS), Field had previously expressed concern that the scope of the FRC’s investigation was too narrow.
Back in 2016, the pair urged the regulator to consider widening the brief to cover not just the audit of the 2014 BHS financial statements but previous years’ as well.
They also wanted the FRC to look at PwC audits of the accounts of other companies within the Taveta group, the one-time owner of BHS, where there were links with BHS finances.
Today, the committee’s chair asked Haddrill if he was now planning to investigate previous PwC audits of BHS and Taveta.
Moreover, he questioned if PwC has conflicts of interest in auditing BHS as well as the company that was attempting to sell it and in providing other services to Taveta which were more lucrative than its statutory audits.
While recognising the fines imposed yesterday were “welcome” and “undoubtedly a good first move”, he argued these also reopened the question of whether BHS was a “going concern” when it was sold for £1.
“For that, the company directors as well as the auditors are on the hook,” Field said.
“As we know, that sale – which came just six days after PwC signed off the books – threw 11,000 people out of work and permanently reduced the pensions of 20,000 people. The committee is now pressing the FRC on whether further investigations, and wider and stronger sanctions, are called for.
“On the basis of their reply, the Select Committee may request the right to appeal to the FRC to significantly increase the fines, putting them in the vanguard of necessary reforms,” he continued.
The FRC declined to comment but said it would respond to the letter in due course.