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FRC: PwC LLP and Stephen Harrison fined for Misconduct in relation to Connaught plc

PwC and Stephen Harrison, a retired PwC audit partner, have been severely reprimanded and fined £5m and £150,000 respectively for Misconduct in relation to the 2009 audit of Connaught plc, a FTSE 250 company which went into administration in 2010.  Following a Financial Reporting Council (FRC) investigation and a 12 day hearing, the independent Tribunal, chaired by the Rt Hon Sir Stanley Burnton, made findings of Misconduct in relation to three areas of audit: mobilisation costs, long term contracts and intangible assets.

PwC were also ordered to pay the Executive Counsel’s costs and to make an interim payment on account of £1.5 million.

Notes to editors:

  1. The Financial Reporting Council’s (FRC) Conduct Committee will consider publication of the Tribunal Report in due course, in accordance with paragraph 9(13) of the Accountancy Scheme.
  2. The 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 the investigation of public interest cases for the accountancy and actuarial professional bodies, by way of the FRC’s Accountancy and Actuarial Schemes. These independent arrangements have also applied to complaints, referrals or call-ins made on or before 16 June 2016 in relation to statutory audit cases. 
  3. Since the FRC’s statutory designation on 17 June 2016 as the Competent Authority for audit in the UK, the FRC enforces breaches of requirements in audits of Public Interest Entities and other Retained Matters under the FRC’s new Audit Enforcement Procedure and delegates the enforcement of all other audit related matters to the professional bodies.  The FRC also sets auditing and ethical standards, monitors audit quality and oversees audit regulation in the whole under its Competent Authority designation.
  4. 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.

  • All Press enquiries should be directed to:
    • Rita Carolan, Communications Manager, on telephone: 020 7492 2307/ 07428 149096 or email: r.carolan@frc.org.uk.

 

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