PwC hit with £5.6m fine for ‘serious failures’ over Babcock audit
It is the fourth fine in four years that the “big four” accounting firm has faced from the UK’s accountancy regulator.
Accounting giant PwC has been slapped with a £5.6 million fine by the UK’s auditing regulator over serious failures in handling the accounts of defence company Babcock.
The Financial Reporting Council (FRC) said that PwC has been sanctioned four times since 2019.
The “big four” accountant failed to follow some basic audit requirements, and showed a lack of competence, care or diligence, the FRC found in its investigation.
For example, it did not attempt to read or translate a contract worth 640 million euros (£570 million) that was written in French, when none of the audit team spoke the language, the regulator said.
It also did not challenge Babcock’s management over certain areas of the audit that risked misstating profit figures in its 2018 financial results.
This robust package of sanctions seeks to deter future breaches and encourage improvement by the firm, in circumstances where PwC has now been sanctioned four times since 2019
The FRC said Babcock’s work attracts “significant public interest” because it holds a number of highly sensitive contracts with the UK government.
The UK-headquartered global firm works with public bodies, namely the Ministry of Defence, to provide services including engineering across the aviation, marine and nuclear sectors.
PwC’s fine was reduced by 25% from £7.5 million to £5.6 million after reaching a settlement with the regulator, it revealed.
A former partner at the firm, Nicholas Campbell Lambert, was hit with a personal fine of £150,000 for leading the Babcock audit.
Heather Ancient, who led the audit of a Babcock subsidiary, was also sanctioned £48,750.
Claudia Mortimore, deputy executive counsel at FRC, said: “The quality of these audits fell far short of the standards expected of statutory auditors.
“Of particular concern is the lack of scepticism applied and the failures to follow some basic audit requirements.
“This robust package of sanctions seeks to deter future breaches and encourage improvement by the firm, in circumstances where PwC has now been sanctioned four times since 2019.
PwC cooperated with the investigation, but there were errors, omissions and delays in the material it provided and some inaccurate responses, Ms Mortimore added.
PwC was fined £1.75 million in August over its audit work for BT, carried out after the telecoms giant was involved in an Italian fraud affair.
It was also sanctioned twice in one day in June over auditing failures at construction firms Kier Group and Galliford Try.
The FRC said it still has an ongoing investigation into PwC’s audits of Babcock’s 2019 and 2020 financial statements.