British accounting firms face new setback as FRC opens probe
Britain’s audit industry faces another dent to its reputation as the nation’s accounting watchdog ordered a probe into PricewaterhouseCoopers LLP, Ernst & Young and Oliver Clive & Co.’s work for defunct London Capital & Finance Plc.
The Financial Reporting Council said in a statement on Wednesday that its enforcement unit will look at the audits of now defunct mini-bond lender London Capital & Finance for the periods ending April 30, 2015, the year ending April 30, 2016 and for the year ending April 30, 2017.
London Capital & Finance issued mini-bonds, taking funds from about 14,000 customers that the company said it used to make loans to corporations for investment. It went into administration after the U.K. Financial Conduct Authority and Serious Fraud Office opened investigations.
The announcement comes at a difficult time for the accounting firms. The so-called Big Four, including PwC and Ernst & Young, have been beset by criticism in the U.K. Several instances of firms’ failure to flag the struggles of companies prior to bankruptcies have brought calls to break up their audit and consulting units.
PwC said it will “cooperate fully” with the FRC. Ernst & Young and Oliver Clive didn’t respond to emails seeking comment.
“We are committed to delivering consistently high quality audits and in June 2019 introduced a major ongoing programme to enhance audit quality across the firm,” PwC said in an emailed statement.