For “severe breaches” discovered in audits of engineer Babcock International, Britain’s auditing watchdog fined PwC 7.5 million pounds ($8.9 million), the regulator announced on Wednesday.
The fines, according to the Financial Reporting Council (FRC), were due to errors found during audits of Babcock’s financial statements up until the end of March 2017 and 2018, as well as those of one of its subsidiaries in the latter year.
Due to an early agreement, the fine was reduced by 25% to 5.6 million pounds, according to the regulator.
Following a string of high-profile accounting scandals connected to some of Britain’s most well-known companies, including retailer BHS and constructor Carillion, auditing firms have come under increased political scrutiny about the quality of their work in recent years.
According to the FRC, violations found during PwC’s audits of Babcock included persistent failures to question management and gather enough pertinent evidence.
The regulator cited one instance where it had no proof the audit team had studied a 30-year contract with a lifetime income of 3 billion pounds written in French as evidence that the firm also lacked expertise, care, and thoroughness.
The audit team in this instance lacked French language proficiency and was unable to obtain a translation of the contract, according to the FRC.
A PwC spokesman apologized that the work in question did not meet the standards that were expected of it and that PwC holds itself to.
A write-off of about 2 billion pounds resulted from a review of Babcock’s contracts and balance sheet, which the company said it undertook but which was not a party to the FRC probe. Babcock stated it submitted its preliminary findings in April 2021.
‘This provided a suitable foundation for the financial performance of the group,’ a Babcock representative said.
Nicholas Campbell Lambert and Heather Ancient, two PwC partners, also received fines of 200,000 and 65,000 pounds, respectively, which were later reduced to 150,000 and 48,750 pounds.
The FRC is still looking into PwC’s statutory audits of the financial statements for the Babcock group for 2019 and 2020.
