THE FRC has launched a probe into PwC and its senior statutory auditor and audit engagement partner, Stephen Harrison, over its conduct while auditor of Connaught, the social housing maintenance provider.
The accounting and audit watchdog’s executive counsel delivered two disciplinary formal complaints which allege that Harrison and PwC “failed to act with competence and due care in relation to the audit of the financial statements for the firm and its subsidiaries for the year ended 31st August 2009.
It also alleges that their “conduct fell significantly short of the standards reasonably to be expected of a member or member firm of the ICAEW”.
In 2010, Connaught buckled leaving creditors with losses of at least £39m and the axing over 1,400 staff.
The collapse of the FTSE 250 support services group was one of the biggest corporate failures of the recession, putting 10,000 jobs in jeopardy, and has led to a lengthy and complicated administration process.
That year, KPMG was appointed administrators of Connaught and its subsidiaries, and unearthed thousands of unprocessed invoices at its head office.
It proved lucrative for work KPMG, which earned at least £6.4m for their efforts.
A sokesman for PwC said: “We are disappointed that over five years after the event the FRC has decided to pursue complaints against the firm. We have cooperated fully with the FRC throughout their lengthy investigation and will now consider its concerns and respond appropriately.”
Stephen Hill, Connaught’s group FD and David Wells, its deputy financial director responsible for the group’s treasury management, are also implicated in the probe regarding “the preparation and approval of Connaught’s interim financial statements for the six months ended 28 February 2010”.
The FRC allege that Stephen Hill and David Wells breached the fundamental principle of integrity in relation to the accounting treatment of a short term loan provided by a related party shortly before the half year end, and that their conduct fell significantly short of the standards reasonably to be expected of members of the ICAEW.
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