PwC hit with record £10m fine for BHS audit

PricewaterhouseCoopers (PwC) has been fined £10m for its handling of the BHS audits and the Taveta Group in 2014.

The sanction follows an investigation by the Financial Reporting Council (FRC) under the Accountancy Scheme which opened in June 2016 two months after the retailer’s collapse. PwC signed BHS off as a “going concern”. The retailer was then sold for £1 to Dominic Chappell’s Retail Acquisitions.

BHS collapsed a year later, costing 11,000 jobs and resulting in a pension deficit of £571m.

The investigation asked PwC why BHS’s directors assessment of the company was not disputed as it was signed off just days before it was sold, and why in that situation it would lose financial support from the Taveta Group.

The firm’s audit partner Steve Denison, who worked for the company for 33 years and has been a partner since 1982, has also been fined £500,000 and been barred from performing any audit work for 15 years.

These are the largest penalties to be handed out by the regulator, but the fines will be reduced by 35% to £6.5m and £325,000 respectively for early settlement.

Denison is also to remove his name from the register of statutory auditors and not to apply to have his name re-entered on the register for a period of 15 years.

PwC and Steve Denison both admitted to misconduct and accepted the fines and non-financial sanctions.

The firm has also been asked to monitor and support its Leeds Audit Practice and provide detailed annual reports about that practice to the FRC for the next three years.

It must also review and amend its policies and procedures to ensure that audits of all non-listed high risk or high-profile companies (including private companies which employ at least 10,000 individuals in the UK) are subject to an engagement quality control review.

PwC released a statement which said that it was “confident” that the incident was not “representative of PwC’s high quality work, and insisted it “fully cooperated” with the FRC including its “very early” admission.

It said: “We recognise and accept there were serious shortcomings with this audit work. We are sorry that our work fell well below the professional standards expected of us and that we demand of ourselves.

“We have agreed this settlement, recognising that it is important to learn the necessary lessons. At its core this is not a failure in our audit methodology, the methodology simply was not followed. As a result of our internal reviews we took swift action to enhance our monitoring procedures. We have agreed with the FRC to extend these further for an additional period.

“Whilst the failings did not contribute to the collapse of BHS over one year later, they were serious and this is reflected in the Financial Reporting Council settlement.”