UK to probe PwC's audits of BT after Italian scandal
BT lost a fifth of its value in January after a £530m (€600m) writedown, partly due to financial irregularities found at the Italian division. The Financial Reporting Council, which can fine auditing firms and accountants and ban individuals from the accountancy profession in England and Wales, said it would investigate PwC’s audits from 2015 to 2017.
FRC is now expected to gather evidence before drafting any formal complaint. FRC has open investigations into each of the “Big Four” global accounting firms, which include PwC. The four firms audit more than 95% of the biggest 350 London-listed companies, despite efforts to draw in new competitors.
BT filed a criminal complaint in Italy in April that accused several of its former executives and other staff of unlawful conduct. Current and former staff said efforts to hide the Italian unit’s performance had gone on since at least 2013. BT said this month it would drop PwC, its auditors since 1984, after an evaluation found “areas for improvement”.
It said it would move to KPMG, another one of the “Big Four”. PwC said it would continue to cooperate with the FRC, saying the regulator had a duty to investigate where it believed there was public interest and to give confidence to financial markets.
“The FRC’s annual reviews of our audit work, policies and procedures show a continued trend of improvement in our work and we use the FRC’s insights, together with our own reviews, to continuously improve how we deliver high-quality audits,” a PwC spokesman said.
The Serious Fraud Office (SFO) declined to comment whether it planned a criminal investigation into BT. PwC was also auditor of Tesco that agreed a £129m deferred prosecution deal with the SFO in April over a 2014 scandal. The SFO has charged three former Tesco directors with fraud and false accounting.
But PwC escaped sanction by the FRC, which this month ended an inquiry into the auditor because it said there was no prospect of a tribunal deciding a sanction.
