Debate Magazine

They Had It Coming

Posted on the 14 June 2018 by Markwadsworth @Mark_Wadsworth

From City AM:
Big Four accountancy giant PwC has been slapped with a record £10m fine from the Financial Reporting Council (FRC) for its work auditing retailer BHS prior to its sale for £1.
The PwC partner who conducted the audit, Steve Denison, is also facing a personal fine of £500,000 from the FRC relating to his work on BHS in the year to 30 August 2014. Denison is said to have left the UK’s largest accounting firm last week after more than 30 years on the job, according to reports from Sky News.
A statement from the FRC said that PwC and Steve Denison have admitted misconduct, and accepted "substantial fines and non-financial sanctions".

From experience, auditors will pick up low level fraud sooner or later, i.e. people robbing the petty cash, forging invoices and so on, and so we can assume they deter it to some extent, even though detecting/deterring fraud is not one of the main purposes of an audit. (The actual stated purposes of an audit are so vague and lofty as to be meaningless.)
When it comes to higher level fraud, auditors are either so useless they don't notice it; or they are actually complicit in it.
BHS wasn't like Enron, it went out of business because it was badly run, not because of actual malice or dishonesty on the part of the directors, that's not fraud. But auditors turning a blind eye to a potential bankruptcy after the event, in order to bank the big fat audit fees, is IMHO an actual fraud in itself.


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