Sanctions against senior auditor and PwC in relation to RSM Tenon Group plc
News types: Investigations
Published: 16 August 2017
PricewaterhouseCoopers LLP (PwC) and Nicholas William Edward Boden, Senior Statutory Auditor and Audit Engagement Partner, have been fined and severely reprimanded after admitting Misconduct in relation to the audit of the financial statements of RSM Tenon Group plc, for the financial year ended 30 June 2011. This follows the delivery of a Formal Complaint by the FRC’s Executive Counsel in connection with their conduct on that audit last December.
PwC and Mr Boden, a member of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a Member and a Member Firm and that they failed to act in accordance with the ICAEW’s Fundamental Principle of Professional Competence and Due Care. The admitted acts of Misconduct include failures to obtain sufficient appropriate audit evidence and failures to exercise sufficient professional scepticism.
The Misconduct was extensive, comprising five separate admitted acts in relation to the following areas of the audit: the accrual of bonus payments, certain aspects in relation to the recognition of work in progress and amounts recoverable on contracts, the accounting for a lease, the assessment of the impairment of goodwill, and the calculation of goodwill in relation to a subsidiary.
The FRC’s Executive Counsel has agreed the following terms of settlement with Mr Boden and PwC, which have been approved by the independent Tribunal appointed to determine the Formal Complaint:
A fine of £6,000,000 reduced to £5,100,000 after a settlement discount
A severe reprimand
A sum of £500,000 to be paid towards the FRC’s Executive Counsel’s costs
A fine of £150,000 reduced to £114,750, after adjustment for mitigating factors and a discount for settlement
A severe reprimand.
Notes to editors:
- The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
- In relation to enforcement matters, the FRC is the independent, investigative and disciplinary body for accountants and actuaries in the UK dealing with cases which raise important issues affecting the public interest. In brief, the stages of the disciplinary process under the Accountancy Scheme are:
- Decision to investigate
- Decision whether to bring enforcement proceedings against Member Firm or Member and, if so decided, referral to Disciplinary Tribunal
- Tribunal hearing
- Determination and imposition of sanction and/or costs orders
- Under the Accountancy Scheme the FRC can start a disciplinary investigation in one of two ways: (i) the professional bodies can refer cases to the FRC; and (ii) the FRC may decide of its own accord to investigate a matter. The Conduct Committee will consider each case identified or referred to it and decide whether or not the criteria for an investigation are met.
- The criteria are specified in paragraph 5(1) of the Accountancy Scheme. A Member or Member Firm shall be liable to investigation under this Scheme only where, in the opinion of the Conduct Committee the matter raises or appears to raise important issues affecting the public interest in the United Kingdom and there are reasonable grounds to suspect that there may have been Misconduct or it appears that the Member or Member Firm has failed to comply with any of his or its obligations under paragraphs 14(1) or 14(2) of the Scheme.
- Investigations are conducted by Executive Counsel and the Enforcement division.