Accounting watchdog fines PwC over audits of defence firm Babcock

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Big Four auditor to pay £5.62 million


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igFore auditing firm PwC has been fined £5.62 million by the Financial Reporting Council (FRC) after the regulator identified “multiple, serious breaches” in its audit of defense group Babcock’s 2017 and 2018 accounts.

Two earlier audit partners were also cleared.

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The fine follows an investigation related to long-term contracts that make up about 25% of Babcock’s revenue.

The FRC said that PwC had failed to challenge Babcock’s management in its audit of these accounts and had shown a “lack of competence, care or diligence”.

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As an example of the failings, it said there was “no evidence” PwC had read a contract that was worth £3 billion over a 30-year period.

FRC Deputy Executive Counsel Claudia Mortimore said: “The quality of these audits is well below the standards expected of statutory auditors. Of particular concern is the lack of applied skepticism and the failure to comply with some basic audit requirements.”

The FRC said it is still examining PwC’s audit of Babcock’s 2019 and 2020 accounts.

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