The Financial Reporting Council (FRC) has announced PWC (PricewaterhouseCoopers LLP) has been fined £2.3 million in a disciplinary case relating to the audits of sub-prime lender Cattles Plc and Welcome Financial services Ltd for the year ended 31 December 2007.
A settlement agreed between the FRC’s Executive Counsel, PwC and the then audit engagement partner, Mr Simon Bradburn, has been approved by a legal member of the independent Tribunal Panel.
PwC and Mr Bradburn have admitted that their conduct fell significantly short of the standards reasonably to be expected of a Member Firm and a Member respectively in issuing unqualified audit opinions in respect of the 2007 Cattles and Welcome financial statements in circumstances where PwC (i) had insufficient audit evidence as to the adequacy of the loan loss provision and (ii) had failed to identify the fact that the impairment policy was not adequately disclosed and that the disclosures in those financial statements were not in compliance with IFRS 7.
The parties have agreed the following terms of settlement:
- A Fine of £3,500,000 reduced to £2,300,000 after mitigation and a settlement discount;
- A Severe Reprimand;
- A sum of £750,000 to be paid by PwC as a contribution to the Executive Counsel’s costs.
Mr Simon Bradburn
- A Fine of £120,000 reduced to £75,600 after mitigation and a settlement discount;
- A Severe Reprimand.
Gareth Rees QC, the Executive Counsel to the FRC, said “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. I welcome PwC’s and Mr Bradburn’s constructive approach which has enabled us to reach this settlement. The admissions of Misconduct have resulted in a significant saving in time and costs and the fines ultimately imposed have been reduced accordingly.”