PwC and one of its partners was hit with more than £3 million ($4.1 million) of fines by a U.K. regulator over its audits of Babcock International Group Plc.
The Financial Reporting Council said PwC and the audit engagement partner, John Waters, "admitted serious and numerous breaches," according to a statement on Thursday. The firm and Waters didn't obtain appropriate audit evidence in some circumstances and failed to challenge Babcock's management to determine whether its accounting approach was compliant.
The sanctions were tied to audits of Babcock's financial statements for the 2019 and 2020 fiscal years. U.K.-headquartered Babcock, which is listed, provides engineering services, with a number of its contracts with the U.K. government, according to the FRC.
"We're sorry that some aspects of these audits were not of the standard expected," PwC said in a statement. "Audit quality is a constant focus for the firm and the impact of our commitment to continuous improvement has been underlined by recent inspection results."
Babcock shares plummeted in 2021 after the firm reported more than £2 billion of impairments and made certain accounting changes after a broad business review. The company said it had to restate earlier profits that it had reported in error.
The fine was reduced from £5 million to mitigate for cooperation and admissions, the U.K. regulator said. PwC was fined £3.2 million, while Waters' sanction came to about £59,000. Waters has retired from PwC and is no longer a registered auditor.
