The global audit firm Price Waterhouse Coopers (PwC) had failed to challenge the management of the IT services company Redcentric. It was later found that the there was a 20 million pound in the company accounts. This was the charge that was brought against PwC by Britain’s accounting watchdog and announced a fine of 4.55 million pounds against it on Thursday.

The incident at the IT company also required PwC to supplement the monitoring and support of its audit practice in the northern English city of Leeds, said the regulator – the Financial Reporting Council (FRC). PwC is considered to be one of the world’s “Big Four” accounting firms.

The breaches of duty of the accounting form were numerous in number and in some instances, those mistakes were even basic or fundamental in nature, said the regulator.

Fine of 140,000 pounds each were levied on two partners, Jaskamal Sarai and Arif Ahmad. The regulator also severely reprimanded both the partners as well as PwC. The regulator also ordered PwC to publicly declare that the relevant regulatory requirements were not satisfied by its audit reports.

The case of breach in this fine related to audits conducted by the PwC of the accounts of Redcentric for the financial years ending March 2015 and March 2016 and all of the fines were discounted to reflect an early settlement of the case.

PwC apologized for the incident and oversight failure in a statement and admitted that its work fell below the professional standards that are expected of a company as large as PwC.  “Since the work in question was completed we have taken numerous steps to strengthen processes,” it said.

An investment of an additional 30 million pounds would be made by PwC to focus more quality in audits, the accounting firm had announced earlier this month.

The 2016 fiscal year statement of Redcentric were severely and extensively restated. The redone accounts of the company brought down and written down by the assets of the company by 15.8 million pounds, and its profit after tax of 5.3 million pounds was further reduced ti reflect a loss of 4.2 million pounds.

Training that related to applying professional scepticism to what a client tells them had been undertaken by Sarai and Ahmad, the FRC said. “Professional scepticism was lacking in this audit. Had it been applied, it is likely that certain material misstatements would have been detected,” said Claudia Mortimore, the FRC’s deputy executive counsel.

“As this is the second final decision notice involving PwC Leeds office in recent years, we have mandated that the firm supplements its ongoing monitoring and support for that office, to further improve the quality of audit work in the future,” Mortimore said.

In recent times, there have been concerted efforts to bring in sweeping reforms in the audit sector, and the FRC itself, to enhance the face standards in auditing following the revelation of some high profile cases which include the collapse of the British construction giant Carillion and that of the retailer BHS whose audit had been conducted by PwC.

(Adapted from TheTelegrtaph.co.uk)

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