PwC’s $5.8M fine gives fresh ammunition to audit critics

PricewaterhouseCoopers was fined 4.55 million pounds ($5.8 million) by the U.K.’s accounting watchdog over failings in its handling of technology firm Redcentric Plc, giving fresh ammunition to critics calling for a breakup of the so-called Big Four auditing firms.

The penalty was reduced from 6.5 million pounds after the company admitted its wrongdoing ahead of a final decision by the Financial Reporting Council. Two PwC partners, Jaskamal Sarai and Arif Ahmad, were each fined a reduced 140,000 pounds after admitting breaches in the standards of their work, and were also given a “severe reprimand.”

The breaches were “numerous and in certain cases were of a basic and/or fundamental nature, evidencing a serious lack of competence in conducting the statutory audit work,” according to an FRC statement on Thursday.

The PricewaterhouseCoopers LLP logo sits on a sign outside 51-storey skyscraper Tower 185 in Frankfurt, Germany.
The PricewaterhouseCoopers LLP logo sits on a sign outside 51-storey skyscraper Tower 185 in Frankfurt, Germany, on Wednesday, Oct. 18. 2017. In a tweet with the hashtag #Brexit, Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein on Thursday hailed “great meetings” he had in Frankfurt and said he will spend a lot more time there. Photographer: Alex Kraus/Bloomberg

This latest transgression adds to the scrutiny of PricewaterhouseCoopers, Deloitte, EY and KPMG, which together control more than 90 percent of U.K. audits for large companies. The Competition and Markets Authority has urged a split of their operations amid allegations of conflicts of interest and a failure to spot a series of high-profile corporate failures including the wake of building contractor Carillion Plc.

The FRC’s sanctions follow an investigation that began more than two years ago into PwC’s handling of Redcentric’s financial statements for 2015 and 2016 after an initial review showed that Redcentric had overstated its net assets and profits after tax by 20.8 million pounds.

“We are sorry that our work fell below the professional standards expected of us,” PwC said in an emailed statement. The firm said it has taken numerous steps to strengthen processes and is investing 30 million pounds “to provide greater focus on the quality and public interest responsibilities of PwC’s statutory audit services.”

An outside spokesman for Redcentric declined to comment.