The UK Financial Reporting Council on Wednesday announced it fined PricewaterhouseCoopers for its 2017 and 2018 annual earnings audits of defence contractor Babcock International Group PLC.
The audit regulator said the £5.6 million fine is 25% lower than the originally planned £7.5 million, adjusted for ‘aggravating and mitigating factors’ and a discount for PwC admitting serious breaches.
FRC said PwC failed ‘to follow basic audit requirements, evidencing a lack of competence, care or diligence,’ on top of ‘repeated failures to challenge management and obtain sufficient appropriate evidence, reflecting a general reluctance to challenge management across these parts of the audits.’
The regulatory said that there was no evidence that the audit team in financial year 2018 or before obtained and read a 30-year public private partnership contract with financial year 2018 revenue of around £77 million and lifetime revenue of £3 billion.
FRC added: ‘One contract - with an initial value of around €640 million - was written in French, but the audit team neither possessed French language skills nor obtained a translation of the contract.’
In January, FRC said it also launched an investigation PwC’s audits of Babcock for financial years 2019 and 2020,. On Wednesday it confirmed this probe continues.
Babcock shares were 2.2% higher at 323.80 pence each in London on Wednesday morning.
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