PwC incurs fine for professional negligence on an audit

One of the big four auditing firms, PricewaterhouseCoopers, has been fined £2.3 million by the Financial Reporting Council (FRC), the accountancy watchdog, over its auditing of the subprime lender Cattles and its biggest division, Welcome Financial Services, in 2007.

Simon Bradburn, PwC’s then audit engagement partner, was fined £75,600, reduced from £120,000 as part of a settlement.

The penalties come nearly a year after Cattles settled a lawsuit with PwC that alleged the accountants acted negligently in its auditing of the Yorkshire firm during the financial crisis, according to an article in The Guardian.

The lawsuit was brought on behalf of creditors to Cattles, which lent to people with poor credit histories and entered into a financial restructuring scheme in 2011.

Gareth Rees QC, 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 subprime lender and will send a strong signal to the audit community of the importance of upholding high standards of professional conduct in audit work.”

PwC said: “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.”

Professional Negligence Barrister  - myBarrister