PwC Fined Over $3 Million for Second Set of Botched Babcock Audits

Big Four accounting firm PwC has been fined more than £3.25 million by the Financial Reporting Council (FRC) for a second instance of botched audits concerning defense giant Babcock. This latest penalty follows a previous fine of nearly £6 million imposed on the firm for its work on Babcock's 2017 and 2018 accounts.

The new sanctions relate to PwC's audits of Babcock's financial statements for 2019 and 2020. The FRC cited "a failure to follow basic audit requirements" and a "lack of competence, care or diligence" as reasons for the penalty. Specifically, the firm and a partner, John Waters, admitted to whom a £59,000 penalty was also handed, admitted to "serious and numerous breaches."

According to the FRC, these breaches included significant contraventions of fundamental requirements to perform audits with adequate professional skepticism and to effectively evaluate whether financial statements complied with accounting standards and fairly presented underlying transactions. The regulator stated that the quality of these audits fell short of expected standards.

Babcock was compelled to restate some of its financial figures in 2021 to correct errors from prior years. PwC issued a statement acknowledging the findings, saying, "We're sorry that some aspects of these audits were not of the standard expected."

This latest fine marks another significant penalty for PwC, which has faced multi-million-pound fines in recent years for its auditing work at various major British companies. The FRC also announced last month that it was investigating PwC's work on the accounts of WH Smith.