The accounting giant PwC has been fined £15m by the financial conduct regulator in its first-ever financial penalty on an audit firm.
One of the so-called big four accounting firms, PwC was said by the Financial Conduct Authority (FCA) to have missed a number of audit red flags and failed to act immediately to report suspected fraud at a failed financial services firm.
PwC were the auditors of the firm, called London Capital & Finance (LCF), and were tasked with verifying company accounts.
During the audit process, PwC encountered “significant issues” as LCF provided inaccurate information and misleading information and a senior employee “acted aggressively” towards auditors, the FCA said.
But despite suspecting LCF was committing fraud and being obliged to report the suspicion to the regulator, PwC signed off on the accounts.
Even after it was satisfied that LCF’s 2016 accounts were accurate, PwC still had a duty to report previous concerns, the FCA said.
PwC should instead have “acted immediately”, the FCA said. “Their failure to do so deprived the FCA of potentially vital information.”
LCF has been described as a Ponzi scheme by its former investors. It has also been condemned by the financial watchdog for its “unfair and misleading” promotion of a financial product called minibonds.
It entered administration after the FCA ordered it to remove those promotions in 2019.
Thousands of investors were misled because they weren’t fully told of the risks of the product, the FCA said.
A Serious Fraud Office criminal investigation is open to look at LCF’s collapse.
Responding to the fine PwC said: “We have reached a settlement with the FCA to resolve an unintentional reporting breach.”
