PricewaterhouseCoopers have been given a record breaking fine from the Financial Reporting Council after admitting “misconduct” in its 2011 financial year audit.
Following the investigation by the financial watchdog into the 2011 accounts of RSM Tendon, PwC was “severely reprimanded” and fined £5.1 million.
The FRC found in the investigation that PwC failed to obtain sufficient appropriate audit evidence, whilst also failing “to exercise sufficient professional scepticism”.
The initial fine was £6 million, though this was reduced to £5.1 following a settlement discount.
The Financial Reporting Council said the misconduct included “failures to obtain sufficient appropriate audit evidence and failures to exercise sufficient professional scepticism”.
“The misconduct was extensive, comprising five separate admitted acts in relation to the following areas of the audit: the accrual of bonus payments, certain aspects in relation to the recognition of work in progress and amounts recoverable on contracts, the accounting for a lease, the assessment of the impairment of goodwill, and the calculation of goodwill in relation to a subsidiary,” it added.
Nick Boden, a PwC audit engagement partner who was heavily involved with the matter, has been given a fine of £114,750.
“We are sorry that aspects of the audit carried out in 2011 fell short of professional standards. We cooperated fully with the FRC during its lengthy investigation and accept its findings.” said a spokesperson for PwC.
“We continually review and update our audit processes in response to both internal reviews and external inspection findings. Audit quality is of paramount importance and our annual Audit Quality Reviews show year-on-year improvements,” they added.
This is just the latest controversy for PwC. Earlier this month, the company was given a $1 million fine to settle allegations of shortcomings in a compliance audit of Merrill Lynch.
PwC was also the recipient of the previous largest fine. The group was charged £5 million in May over its audit of Connaught.