Britain’s accounting watchdog has fined PwC a record five million pounds ($6.5 million) over the way it checked the books of collapsed social housing maintenance company Connaught.
The Financial Reporting Council (FRC) also fined Stephen Harrison, a retired PwC audit partner, 150,000 pounds for misconduct in relation to the 2009 audit of listed Connaught, which went into administration in the following year.
PwC, one of the world’s top four accounting firms, and Harrison both received a severe reprimand.
The watchdog said in a statement that following an FRC investigation and a 12-day hearing, an independent tribunal found audit misconduct in relation to mobilization costs, long term contracts, and intangible assets.
“PwC were also ordered to pay the (FRC) Executive Counsel’s costs and to make an interim payment on account of 1.5 million pounds,” the FRC said.
PwC said it was sorry that its work fell short of professional standards.
“Since 2010 when the case began, we’ve worked hard to improve our procedures and processes. Audit quality is of paramount importance to PwC and the FRC’s annual audit quality assessments have shown a trend of improvement in our work over several years,” PwC said in a statement.
The independent tribunal asked the FRC in March to open an investigation into its own operations after news leaked that the watchdog was pressing for a 6 million pound fine.
The FRC said on Thursday it could not comment further on the internal investigation at this stage.
The watchdog is seeking to raise its profile and crack down harder on misconduct after a series of accounting scandals prompted some lawmakers to question its effectiveness.
Earlier this year it asked the government for more powers.
The FRC’s largest fine had been a 4 million pound penalty imposed on another “big four” accounting firm, Deloitte, last year in relation to an audit of Aero Inventory. ($1 = 0.7742 pounds)