The UK’s Financial Reporting Council (FRC) on Monday fined Accountancy and auditing firm PricewaterhouseCoopers (PwC) £1.75m during its financial year 2017 (FY17) audit of telecommunications company BT Group after it was found that the audit did not uncover evidence of fraud
The FRC reported that BT Group’s financial statements for the 2017 financial year had to be adjusted by £513m due to fraud, which was uncovered following investigations into BT Group’s Italian operations in 2016.
PwC conducted BT Group’s 2017 financial year legal audit, an audit required by law. Richard Hughes was the audit engagement partner and senior statutory auditor on the audit. Both PwC and Hughes were required to act in accordance with International Standards on Auditing in conducting the audit.
The FRC in its final settlement decision found that higher professional skepticism was required when it came to BT Italy’s adjustments, prior period error corrections and changes in accounting estimates. The FRC found that this level of professional skepticism had not been reached.
It was also found that neither party obtained sufficient and appropriate audit evidence on the debt adjustments. They were unable to determine whether changes in accounting estimates were appropriate for debt adjustments. Finally, the parties did not prepare audit documentation that would allow an experienced auditor to understand the nature, timing, and extent of the audit procedure with respect to the separation between corrections of prior period errors and changes in estimates.
PwC received a financial penalty of £2,500,000, which was reduced to an amount payable of £1,750,000 due to admissions and early settlement. Mr. Hughes received a financial penalty of £60,000, which was also reduced for the same reason to £42,000.
Claudia Mortimore, Deputy Executive Director of the FRC said what “[t]the sanctions imposed in this case, when certain elements of the post-fraud adjustments were not subject to the required professional level. [skepticism,] underlines this message and will serve as a timely reminder to the profession.”
Both parties have a period of 28 days from the date of this Final Settlement Resolution Notice to pay the financial penalties.
[ad_2]
Source link
