PwC was fined £4.55m (about R67m) by the UK’s accounting watchdog over failings in its handling of technology firm Redcentric, giving fresh ammunition to critics calling for a breakup of the so-called Big Four auditing firms.
The penalty was reduced from £6.5m (about R97m) 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 (about R2m) 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.
This latest transgression adds to the scrutiny of PwC, Deloitte, EY and KPMG, which together control more than 90% of UK 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.
The council'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 £20.8m (about R309m).
"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 £30m (about R445m) "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.