Pwc Fined £10m Over BHS Audit Failures

The Financial Reporting Council (FRC) has hit PwC with a fine of £10m for misconduct in relation to the 2014 audits of BHS and the Taveta Group, prior to the sale of the high street chain for £1. 

The regulator has also fined PwC audit partner Steve Denison £500,000 and barred him from operating as an auditor for 15 years. Denison has been at the Big Four firm for over 30 years and a partner since 1982.

In addition to the financial penalties, PwC is required to monitor and support its Leeds audit practice and provide detailed annual reports about that practice to the FRC for the next three years.

India’s securities regulator recently banned the Global Accountancy firm PwC from auditing listed companies in the country for two years, after it failed to spot a $1.7bn fraud at the defunct Satyam Computer Services.

PwC have also been BoU auditors and have previously audited Crane Bank.

BoU had earlier contracted PwC to carry out forensic audit on Crane Bank.

The developments raise concerns about the professional conduct of PwC which has for many years conducted high level audits of government institutions and commercial banks.

The Big Four firm has also given an undertaking to review and amend its policies and procedures to ensure that audits of all non-listed high risk or high-profile companies (including private companies which employ at least 10,000 individuals in the UK) are subject to an engagement quality control review.


The FRC has severely reprimanded both PwC and Denison. The fines will be reduced by 35% to £6.5m and £325,000 respectively for early settlement.

An FRC spokesperson told Accountancy: “The settlement agreement was made on 31 May 2018. The new sanctions guidance, implementing the Clarke report, did not come in to effect until 1 June 2018. So this case was settled under the old, pre-Clarke, guidance.”

“The £10m is based on the extent and seriousness of the misconduct,” He said.

The £10m figures reflects the move towards issuing larger fines in recent years, which has been reinforced by the recommendations of an independent review of FRC sanctions undertaken by former Court of Appeal Judge Sir Christopher Clarke, which suggested introducing a fine of £10m or more for seriously poor work by a Big Four firm and greater use of non-financial penalties.

It also marks a much swifter response to audit failures, as the FRC has completed the investigation and issued fines and disciplinary measures within two years of opening the probe.

PwC had audited BHS for seven years since it became part of the Taveta Group in 2009.

In a statement, PwC said: ‘We recognize and accept there were serious shortcomings with this audit work.

“We have agreed this settlement, recognizing that it is important to learn the necessary lessons. At its core this is not a failure in our audit methodology; the methodology simply was not followed,” It reads.

“As a result of our internal reviews, we took swift action to enhance our monitoring procedures. We have agreed with the FRC to extend these further for an additional period. We have fully cooperated with the FRC throughout, including making a very early admission,” Reads the statement.

This record fine for PwC, even if it is settled early, follows a £5m fine over the Connaught social housing audit issued in May 2017, and last August a fine of £5.1m, reduced from £6m after settlement, for ‘extensive’ misconduct over the audit of the financial statements of RSM Tenon Group, the former accounting consolidator.

The FRC investigation into the BHS audit under the Accountancy Scheme opened in June 2016, two months after the retailer collapsed, having been sold by then-owner Sir Philip Green to Dominic Chappell’s Retail Acquisitions Ltd (RAL) for £1 a year earlier.

A subsequent work, pensions (DWP), business, innovation and skills (BIS) joint select committee inquiry was highly critical of PwC’s role as external auditor to BHS in the run-up to the sale, and of Denison who had been lead audit partner since 2008.

The committee said BHS Group’s 2012–13 and 2013–14 annual report and accounts made clear that the company was a ‘going concern’ on the basis of financial support provided by the wider Taveta Group.

The 2013–14 annual report and accounts were signed off on 6 March 2015, just days before the sale of BHS to RAL and while the key substance of the deal was still being negotiated. The committee questioned why, despite being aware that BHS was due to be sold imminently and, in such a situation would lose the ongoing support from Taveta, PwC did not dispute BHS’s directors’ assessment that the business remained a going concern.

In the run-up to the sale of the business to Dominic Chappell, BHS changed its reporting, pulling forward the audit of BHS and filed accounts in March, not May.

BHS was originally bought by Philip Green in 2000 and taken private; prior to that it was listed on the FTSE 100.


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