PwC fined 4.55 million over audit of Redcentric

https://uk.reuters.com/article/uk-pwc-accounts-fine/pwc-fined-4-55-million-over-audit-of-redcentric-idUKKCN1TE0J1

June 13, 2019 / 2:17 AM / Updated 2 hours ago

PwC fined £4.55 million over audit of Redcentric

Huw Jones

LONDON (Reuters) - Britain’s accounting watchdog said on Thursday it had fined PwC 4.55 million pounds for failing to challenge management at IT services company Redcentric where a 20 million pound hole was later found in the books. The Financial Reporting Council (FRC) said it had also required PwC, one of the world’s “Big Four” accounting firms, to supplement the monitoring and support of its audit practice in the northern English city of Leeds. The watchdog said breaches were numerous and in certain cases basic or fundamental in nature.

Two partners, Jaskamal Sarai and Arif Ahmad, were fined 140,000 pounds each. Both, along with PwC, were given a severe reprimand. PwC also had to publicly declare that its audit reports did not satisfy the relevant requirements.
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Redcentric’s 2016 statements were extensively restated, with net assets written down by 15.8 million pounds, and a profit after tax of 5.3 million pounds was restated to a loss of 4.2 million pounds.

The FRC said Sarai and Ahmad had undertaken training in relation to applying professional scepticism to what a client tells them. “Professional scepticism was lacking in this audit. Had it been applied, it is likely that certain material misstatements would have been detected,” said Claudia Mortimore, the FRC’s deputy executive counsel.
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