# PwC hit with $8.9 million penalty for ‘serious breaches’ on Babcock audits
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-09
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: PwC audited fined £7.5m for 'serious breaches' on
Meta Description: Britain's auditing watchdog fines PwC for 'serious breaches' in audits of Babcock International, including failures to challenge management and
URL: https://financedigest.com/pwc-hit-with-8-9-million-penalty-for-serious-breaches-on-babcock-auditshtml

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By Iain Withers

LONDON (Reuters) -Britain’s auditing watchdog has imposed a 7.5 million pound ($8.9 million) penalty on PwC for “serious breaches” found in audits of engineer Babcock International, the regulator said on Wednesday.

The Financial Reporting Council (FRC) said the penalties related to failings on audits of Babcock’s accounts up to the end of March 2017 and 2018, as well as one of its subsidiaries in the latter year.

The fine was discounted by 25% to 5.6 [million pounds](https://www.financedigest.com/britain-announces-205-million-pound-auction-for-renewable-power-projects.html "Britain announces 205 million pound auction for renewable power projects") due to early resolution, the regulator said.

Auditing firms have faced tighter political scrutiny over the quality of their work in recent years, following a slew of high profile [accounting scandals linked to some of Britain’s](https://www.financedigest.com/what-can-accountants-learn-from-great-britains-olympic-team.html "What can accountants learn from Great Britain’s Olympic team?") best-known companies including retailer BHS and builder Carillion.

The FRC said breaches identified on PwC’s audits of Babcock included repeated failures to [challenge management](https://www.financedigest.com/the-top-5-microsoft-365-challenges-and-how-to-manage-them.html "The top 5 Microsoft 365 challenges and how to manage them") and obtain sufficient appropriate evidence.

The firm also showed a lack of competence, care and diligence, the regulator said, citing one example where it found no evidence the audit team had read a 30-year [contract with lifetime revenue of 3 billion pounds written in French](https://www.financedigest.com/french-energy-suppliers-will-let-struggling-bakers-renegotiate-contracts-le-maire.html "French energy suppliers will let struggling bakers renegotiate contracts – Le Maire").

In this case, the audit team neither possessed French [language skills nor obtained a translation of the contract](https://www.financedigest.com/researchers-propose-a-new-proof-carrying-smart-contract-language.html "Researchers Propose a New Proof-Carrying Smart Contract Language"), the FRC said.

We’re sorry that the [work in question was not of the standard required and that we demand](https://www.financedigest.com/apples-australian-workers-go-on-christmas-strike-demanding-better-wages-work-terms.html "Apple’s Australian workers go on Christmas strike demanding better wages, work terms") of ourselves,” a PwC spokesperson said.

Babcock, which was not a party to the FRC investigation, said it had conducted a review of its contracts and balance sheet which reported initial findings in April 2021, resulting in a write-off of around 2 [billion pounds](https://www.financedigest.com/shell-to-evaluate-25-billion-pound-british-investments-after-windfall-tax.html "Shell to ‘evaluate’ 25 billion pound British investments after windfall tax").

This established an appropriate baseline for the [financial performance of the group,”](https://www.financedigest.com/mazars-to-acquire-financial-modelling-consultancy-and-training-provider-corality-financial-group.html "Mazars to acquire financial modelling consultancy and training provider, Corality Financial Group") a Babcock spokesperson said.

Two PwC partners – Nicholas Campbell Lambert and Heather Ancient – were also fined 200,000 pounds and 65,000 respectively, discounted to 150,000 pounds and 48,750 pounds respectively.

The FRC’s [investigation into PwC’s statutory audits of the Babcock group financial](https://www.financedigest.com/australia-financial-crimes-regulator-opens-investigation-into-britains-entain.html "Australia financial crimes regulator opens investigation into Britain’s Entain") statements for 2019 and 2020 is ongoing.

($1 = 0.8460 pounds)

(Editing by Sinead Cruise and Jason Neely)


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