FRC hits PwC with record £5m fine over RSM Tenon audit ‘misconduct’

UK accounting watchdog the Financial Reporting Council said it had issued PwC the largest ever fine it has issued, along with a “severe reprimand”.

RSM Tenon, which was the UK’s tenth biggest auditor by income fee and listed on the FTSE SmallCap index when PwC was its auditor, was sold to accountancy rival Baker Tilly after being put into administration in in 2013.

The FRC said an initial penalty of £6 million was slapped on PwC but this was reduced to a the still record £5.1 million fine after a settlement discount was agreed.

The watchdog also imposed a fine of £114,750 on Nicholas Boden, a PwC audit engagement partner, in relation to the RSM collapse.

The sanctions related to “extensive” misconduct, the FRC said, with five separate instances in the RSM Tenon audit in the financial year to the end of June 2011 highlighted by the regulator.

These included misconduct around the accrual of bonus payments, determining amounts recoverable on contracts, the accounting for a lease and the calculation of goodwill of a subsidiary.

“The admitted acts of misconduct include failures to obtain sufficient appropriate audit evidence and failures to exercise sufficient professional scepticism,” the FRC said.

PwC also has to pay £500,000 towards the FRC’s legal costs.

Proceedings against RSM Tenon’s former finance director, Russell McBurnie, remain ongoing, the FRC said.