PwC fined over Kier Group and Galliford Try audits
The accounting giant had missed mistakes in the books.
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Your support makes all the difference.Audit giant PwC and one of its employees have been fined a combined £3.1 million for mistakes that forced construction giant Galliford Try to restate its finances by tens of millions of pounds.
The two were also fined another £2.1 million for their audit of Kier Group, another construction giant.
The Financial Reporting Council (FRC) published a long list of reasons for the fines, and the severe reprimands that they came with.
Galliford Try was forced to reduce its reported profit by 22% for the financial year ending June 2018.
Rigorous auditing of long-term contract accounting is particularly important in the audit of construction companies, where many contracts are spread over a number of years
The FRC said that PwC and its audit engagement partner Jonathan Hook had not properly challenged or corroborated what management at Galliford said.
They also did not gather the appropriate evidence around a contract to build a bypass in Aberdeen.
There were similar problems in the audit of Kier Group.
The auditors missed errors in the company’s income and cash flow statements in the 2017 financial report, the authority said.
This meant there were mistakes in the company’s 2017 financial statements.
FRC deputy executive counsel Claudia Mortimore said: “Rigorous auditing of long-term contract accounting is particularly important in the audit of construction companies, where many contracts are spread over a number of years.
“Auditors must not only ensure that they obtain sufficient appropriate audit evidence to support the accounting of the contracts, but also apply sufficient professional scepticism.
“This is vital so that investors can have confidence in the financial statements.”
Since these audits were completed we have invested heavily in an ongoing programme to strengthen audit quality, which has included measures to support the audit of long-term contracts
The authority said that PwC and Mr Hook had shown a “good” level of co-operation with its investigation into Kier and “excellent” co-operation on the Galliford Try probe.
PwC said: “We are sorry that aspects of our work were not of the required standard.
“Since these audits were completed we have invested heavily in an ongoing programme to strengthen audit quality, which has included measures to support the audit of long-term contracts.
“We have seen the positive impact of the actions we’ve taken through improved inspection results and other quality indicators over recent years, and we remain committed to the delivery of consistently high quality audits.”