UK FRC fines PwC over Wyelands Bank audit failures

UK's accounting watchdog Financial Reporting Council (FRC) has imposed a good of £4.5m ($5.82m) connected PwC for audit failures related to Wyelands Bank’s fiscal twelvemonth ending 30 April 2019.

PwC and the audit's lead, Jonathan Hinchliffe, person admitted to respective breaches of applicable requirements during the audit.

However; the good against PwC, primitively acceptable astatine £4.5m, has been reduced to £2.89m aft adjustments for practice and aboriginal resolution.

Additionally, PwC volition look a “Severe Reprimand”, a declaration of non-compliance, and an bid to instrumentality enactment to forestall aboriginal contraventions.

Similarly, Hinchliffe faces a reduced good of £33,412, a Severe Reprimand, and a declaration of non-compliance.

PwC and Hinchliffe, who are required to screen the Executive Counsel’s costs of the investigation, person admitted to breaches successful six areas of the FY2019 Audit.

These areas included hazard assessment, auditing of the Bank’s related enactment transactions, auditing of the bank’s compliance with laws and regulations, and auditing of the bank’s appraisal of going concerns.

It besides includes auditing of the bank’s loans and advances, and auditing of the bank’s proviso for expected recognition loss.

PwC served arsenic Wyelands Bank's statutory audit steadfast from 2015 to 2019, with Hinchliffe liable for signing the audit reports.

The bank, portion of the Gupta Family Group (GFG) Alliance since 2016, chiefly engaged successful commercialized concern with important vulnerability to related parties.

At the extremity of the 2019 fiscal year, Wyelands Bank held £727m successful deposits from much than 15,000 UK savers.

The FRC's probe revealed that PwC's audit squad failed to adequately measure the risks associated with the bank's lending practices, peculiarly its vulnerability to related parties wrong the GFG Alliance.

The squad besides neglected concerns raised by the Prudential Regulation Authority (PRA) regarding the bank's hazard concentration.

Following the audit, the PRA intervened successful September 2019, starring to a wind-down of the bank's operations and the repayment of depositors.

The FRC, however, has clarified that the breaches by PwC and Hinchliffe did not lend to the bank's closure.

FRC lawman enforcement counsel Claudia Mortimore said: “The audit breaches successful this lawsuit item the value for auditors to person a afloat knowing of the audited entity and its business. This is peculiarly important wherever determination has been a alteration of ownership and alteration successful the quality and standard of activities.

“In this audit, the risks astir the Bank’s rank of and engagement with the GFG Alliance, were not decently recognised and considered, contempt wide warnings to the Bank from the PRA. This led to a fig of superior failings, which had the imaginable to adversely impact retail depositors.”