News February 2017 Investigation in respect of PricewaterhouseCoopers LLP’s audit of Redcentric plc

Investigation in respect of PricewaterhouseCoopers LLP’s audit of Redcentric plc

27 February 2017
PN 11/17

The Financial Reporting Council (FRC) has commenced an investigation under the Audit Enforcement Procedure into the conduct of PricewaterhouseCoopers (PwC) LLP, in relation to the audit of the financial statements of Redcentric plc (Redcentric) for the years ended 31 March 2015 and 31 March 2016. 
The decision to investigate follows Redcentric’s announcement dated 23 December 2016 of the conclusion of an independent investigation into Redcentric’s accounting practices and the consequent restatement of the company’s consolidated financial statements and other financial information relating to those years.  

The FRC’s investigation will consider, but not be restricted to, issues regarding misstated accounting balances.

Notes to editors:
  1. 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.
  2. To meet its responsibility as the UK competent authority in respect of audit enforcement, the FRC operates the Audit Enforcement Procedure.  This procedure applies to the investigation and sanctioning of breaches of the various requirements of the statutory auditors of Public Interest Entities (PIEs) and any other cases retained by the FRC including AIM companies with a market capitalisation in excess of €200m. 

    In brief, the stages of the Audit Enforcement Procedure are:
  • Initial case examination and decision to investigate
  • Investigation
  • Decision by Executive Counsel as to whether to issue a Decision Notice;
  • Referral to Enforcement Committee; and
  • Referral to a Tribunal.

    In order for a matter to be referred for investigation by the FRC’s Executive Counsel under the Audit Enforcement Procedure, the FRC’s Conduct Committee is required to decide whether there is good reason to investigate an Allegation in relation to a Statutory Auditor and/or a Statutory Audit Firm.
  1. 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
  • Investigation
  • 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.