PwC pays largest ever uncontested fine to Financial Reporting Council over Cattles audit sign-off
The Financial Reporting Council (FRC) today fined PwC £2.3m in relation to the 2007 audit of failed sub-prime lender Cattles.
The fines are the highest ever imposed by the FRC for an uncontested disciplinary hearing and only surpassed by the £3m of penalties accepted on appeal by Deloitte in connection with the failure of MG Rover.
Total fines of £3.5m were reduced to £2.3m following mitigation with additional costs to be paid of £750,000. Audit partner Simon Bradburn was fined £120,000, reduced to £75,600 after mitigation.
"PwC and Mr Bradburn have admitted that their conduct fell significantly short of the standards reasonably to be expected," the FRC said in a statement this morning.
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“The substantial fines imposed in this case reflect the seriousness of the audit failings in relation to the critical area of impairment provisioning in a sub-prime lender and will send a strong signal to the audit community of the importance of upholding high standards of professional conduct in audit work," said Gareth Rees QC of the Executive Counsel to the FRC.
"While the FRC has acknowledged that we had been deliberately misled by third parties, we recognise that certain aspects of this 2007 audit fell short of expected standards," a PwC spokesperson said.
Batley-based Cattles ran into difficulties in 2009 after a £840m black hole was discovered in its accounts.
Auditor PwC refused to sign-off Cattles' financial statements for 2008 and after its share price collapsed attempts to restructure the balance sheet failed.
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Last October, PwC and Cattles settled their long-running dispute in relation to the accounting-giant's sign-off of the 2006 and 2007 accounts, just days before the case was due to be heard at the High Court.