Yahoo Finance PwC fined £1.8m over audit failures in BT's Italy operations
Big four accounting firm PwC has been fined £1.8m ($2.2m) after failing to properly scrutinise the accounts of telecoms company BT (BT-A.L) and failing to present sufficient or solid audit evidence.
The fine from the Financial Reporting Council (FRC) stems from a £513m fraud claim discovered during its audit of the telco's Italian operations in 2017.
Britain's accounting watchdog also fined audit partner Richard Hughes £42,000.
It said the "respondents" failed to treat debt adjustments with the "necessary professional scepticism".
The regulator, said: "The respondents did not approach the audit of BT’s treatment of the debt adjustments with the necessary professional scepticism and they failed to adequately document their audit work across the entirety of the BT Italy adjustments."
According to the FRC, PwC and Hughes admitted breaching the rules in relation to the audit of adjustments disclosed by BT in its accounts for the year to the end of March 2017, which were made after the Italian fraud was uncovered.
In addition to the fines, both PwC and Hughes were issued with severe reprimands by the FRC. The penalties were reduced from £2.5m for PwC and £60,000 for Hughes after they held their hands up to the failure in proceedings.
"The sanctions imposed in this case, where certain elements of the adjustments following a fraud were not subject to the required level of professional scepticism, underscore this message and will serve as a timely reminder to the profession," Claudia Mortimore, deputy executive counsel at the FRC, said in a statement.
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A PwC spokesperson said: "The FRC’s finding relates to a narrow element of the audit and the regulator has not found that the 2017 financial statements for BT were misstated, or that the sum of the BT Italy adjustments was wrong."
"We have made significant investment in strengthening audit quality in recent years, which has been recognised in improved quality inspection results."
It comes after Boston-based global management consultancy Bain & Co was banned from tendering for UK government contracts for three years following its role in a corruption scandal involving South Africa's national tax offices.
PwC was the largest accountancy firm in the UK in 2020 with revenue of £3.5bn, of which £754m was for auditing services.
Shares in BT were up 0.9% in afternoon trade in London on Monday.
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