UK’s Auditing Authority Slaps A Penalty Of $8.9 Mn On PwC For Serious Breaches In Babcock Audits

For "severe breaches" discovered in audits of defence contractor Babcock International Group PLC, Britain's auditing authority UK Financial Reporting Council has fined PwC a penalty of 7.5 million pounds ($8.9 million). This was announced by the regulator on Wednesday.

According to the council, the penalties are related to failings on audits of Babcock's accounts up to the end of March 2017 and 2018, as well as one of its subsidiaries in the latter year.

The regulator further added that the penalty was reduced by 25 per cent to 5.6 million pounds due to an early resolution. 

As per the media reports, the FRC said breaches identified on PwC's audits of Babcock included repeated failures to challenge management and obtain sufficient appropriate evidence.

The regulator further stated that the firm also showed a lack of competence, care and diligence. 

"We're sorry that the work in question was not of the standard required and that we demand of ourselves," a PwC spokesperson said, as per the reports.

However Babcock is not a party to the FRC investigation. It stated that it had conducted a review of its contracts and balance sheet which reported initial findings in April 2021, resulting in a write-off of around 2 billion pounds.

Two PwC partners - Nicholas Campbell Lambert and Heather Ancient - were also fined 200,000 pounds and 65,000 respectively, discounted to 150,000 pounds and 48,750 pounds respectively. The FRC's investigation into PwC's statutory audits of the Babcock group financial statements for 2019 and 2020 is ongoing.