Raymond Doherty 13 Aug 2019 03:23pm

PwC resigns as auditor of Staffline

The Big Four firm has revealed that it has quit as auditors of UK recruitment company Staffline

The business announced in June that it was delaying its half-year results until September and was taking a £32.6m hit over compliance with National Minimum Wage (NMW) regulations.

Yesterday it revealed that PwC was resigning as auditor and a tender process had begun.

PwC confirmed there was “mutual agreement with the audit committee not to participate in this process following the completion of the company's audit for the year ended 31 December 2018”.

In its letter of resignation the Big Four firm referred to a section of Staffline’s 2018 annual report, which stated, “On 29 January 2019, PwC received an email from an anonymous third party raising concerns regarding certain of the group’s practices, accounting and disclosures in relation to payroll and related accruals, including non-payment of amounts due to employees and related accounting entries and accruals, sales invoicing in relation to VAT liabilities, contractual disputes and other claims, management of reported results, and the non-disclosure of information to PwC and to other third parties in relation to these matters.

“Due to the nature and timing of these allegations, management required some time to assess their substance and any financial implications and we required time to audit this assessment.”

An independent investigation committee, made up of non-executive directors and the non-executive chairman, was established and an independent law firm was retained.

PwC was told by the committee to complete its 2018 audit. In that audit it raised concerns regarding the completeness of information provided previously by management to PwC in relation to customer claims and disputes.

An inspection of emails identified further areas of concern in relation to certain customer disputes and other claims, the ongoing HMRC review of compliance with NMW regulations, and various adjustments and balance sheet releases.

PwC concluded that the “combination of these circumstances represent a material uncertainty which may cast significant doubt upon the group and the company’s ability to continue as a going concern.”