Britain’s auditing watchdog has imposed a 7.5 million pound ($8.9 million) penalty on PwC (PriceWaterhouseCoopers) for “serious breaches” found in audits of engineer Babcock International (BAB.L), Reuters said on Wednesday, quoting the regulator.
The Financial Reporting Council (FRC) said the penalties related to failings on audits of Babcock’s accounts up to the end of March 2017 and 2018, as well as one of its subsidiaries in the latter year.
The fine was discounted by 25% to 5.6 million pounds due to early resolution, the regulator said
Auditing firms have faced tighter political scrutiny over the quality of their work in recent years, following a slew of high profile accounting scandals linked to some of Britain’s best-known companies including retailer BHS and builder Carillion.
According to Reuters, the FRC said breaches identified on PwC’s audits of Babcock included repeated failures to challenge management and obtain sufficient appropriate evidence.
The firm also showed a lack of competence, care and diligence, the regulator said, citing one example where it found no evidence the audit team had read a 30-year contract with lifetime revenue of 3 billion pounds written in French.
In this case, the audit team neither possessed French language skills nor obtained a translation of the contract, the FRC said.
“We’re sorry that the work in question was not of the standard required and that we demand of ourselves,” a PwC spokesperson said
Babcock, which was not a party to the FRC investigation, said it had conducted a review of its contracts and balance sheet which reported initial findings in April 2021, resulting in a write-off of around 2 billion pounds.
“This established an appropriate baseline for the financial performance of the group,” a Babcock spokesperson said.
Two PwC partners – Nicholas Campbell Lambert and Heather Ancient – were also fined 200,000 pounds and 65,000 respectively, discounted to 150,000 pounds and 48,750 pounds respectively.
The FRC’s investigation into PwC’s statutory audits of the Babcock group financial statements for 2019 and 2020 is ongoing.