£6.5m fine for PwC over auditing controversy

Global accountancy firm PwC has been fined £6.5m following an investigation by the Financial Reporting Council (FRC) over its cloud computing company, Redcentric.

However, the fine is under review and could be reduced to £4.55m after PwC admitted its mistakes.

The FRC reported that there was a ‘serious lack of competence’ with PwC’s auditing, and two of their partners have received further fines of £200,000 each. A further two staff in the company’s Leeds office will be fined £140,000 each.

According to the FRC, Redcentric’s 2016 annual financial statement was widely restated with errors. Net assets were written down by £15.8m, and £5.3m in pre-tax profits restated to be a £4.2m loss.

Claudia Mortimore, Deputy Executive Counsel to the FRC, said: “The sanctions reflect the seriousness and extent of the breaches. Professional scepticism was lacking in this audit. Had it been applied, it is likely that certain material misstatements would have been detected. 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.”