The accountancy watchdog of the United Kingdom has initiated a damning indictment against PwC because of its handling of BHS following its £1 sale by Philip Green to Dominic Chappell, the serial bankrupt.
The Sunday Times was able to see a leaked version of the unpublished report that was made by the Financial Reporting Council (FRC). Reportedly, it says that the failures by the big four auditor implied that there were “incomplete, inaccurate and misleading” statements about the financial longevity of BHS after it was sold off by Green.
The transfer of ownership over to Chappell hastened the public downfall of the store a year later, with a £571 million hole cropping up in the company’s pension fund, while the jobs of 11,000 employees were lost. Later, Green pummelled £363 million into the BHS pension scheme after a legal action that was initiated by the pensions regulator, which concluded as a result of the settlement.
PwC was accused by the report of carrying out eight times more non-audit work as compared to audit work for Green in the period of 2014 and 2015 and for not being able to take into account how the sale to Chappell would have an impact to the business, even after PwC had already concluded that BHS was already “effectively bust.”
PwC has already been imposed with a £6.5m fine for its role in the scandal. It was reduced from a record-breaking £10 million following its agreement to an early settlement.
A PwC spokesperson stated: “We are sorry that our work fell well below the professional standards expected of us and that we demand of ourselves. This is unacceptable and we agreed the settlement recognising that it is important to learn the necessary lessons.”
He added: “Whilst the failings did not contribute to the collapse of BHS over one year later, they were serious and this is reflected in the Financial Reporting Council settlement.”
The FRC has also come under massive criticism for its part in regulating auditors in the aftermath of the collapse of Carillion, the outsourcer. Some MPs wanted to break up the “oligarchy” of the so-called Big Four – Deloitte, KPMG, EY, and PwC.
A review headed by John Kingman, the former treasurer, into the FRC is ongoing.