Danny McCance 13 Jun 2019 11:25am

PwC fined £6.5m over Redcentric

The Financial Reporting Council (FRC) has fined Big Four firm PwC £6.5m and imposed sanctions against two of its partners in relation to the firm’s Redcentric audit

PwC had the fine reduced to £4.5m for admissions and early disposal, while partners Jaskamal Sarai and Arif Ahmad were both fined £200,000 – reduced to £140,000.

PwC and both partners were severely reprimanded following the investigation into the firm’s audit of the IT provider’s financial statements for the years ended 31 March 2015 and 2016, which began in February 2017.

 The final decision notice issued by the FRC found numerous breaches of relevant requirements which it said evidenced “a serious lack of competence in conducting the statutory audit work,” as well as various breaches that related to “the auditors’ failure to exercise profession scepticism”.

The FRC also imposed a condition that the firm “supplement the monitoring and support of the Leeds office audit practice on terms which have been agreed with the FRC”.

Last year PwC was fined £10m for misconduct in relation to its audit of Taveta Investments Limited and its subsidiaries – including BHS Limited, the audit of which was performed in part by the same office as the Redcentric audits.

Claudia Mortimore, deputy executive counsel to the FRC, said that these sanctions against PwC and its partners “reflect the seriousness and extent of the breaches” and that certain material misstatements would likely have been detected if the lacking professional scepticism had been applied.

“As this is the second Final Decision Notice involving PwC Leeds’ office in recent years, we have mandated that the firm supplements its ongoing monitoring and support for that office, to further improve the quality of audit work in the future,” Mortimore said.

A PwC spokesperson said the firm was sorry that its work “fell below the professional standards expected of us, and that it has taken several steps to strengthen its process since this work was undertaken.

“In addition, this month we announced an additional £30m investment annually as part of a new wide ranging action plan to provide greater focus on the quality and public interest responsibilities of PwC’s statutory audit services,” they said.

FRC opened a separate investigation into other parties in July 2017, including an investigation into an ICAEW member and the preparation and review of financial information for the years ended 31 March 2015 and 2016.