BT’s Italian accounting scandal is back in the spotlight, with regulators suggesting that PwC did not audit the company correctly
Back in 2017, BT was embroiled in an accounting scandal relating to its Italian unit, with the company forced to write down £530 million following a sophisticated case of accounting fraud.
The acknowledgement of the scandal saw BT’s stock market value nosedive by around £8 billion and triggered an enormous restructure that cut 4,000 jobs.
Criminal trials surrounding the fraud are still ongoing.
Now, the Financial Reporting Council has announced that the PwC and partner Richard Hughes did not apply “the necessary professional scepticism” to account adjustments made by BT in 2017, applying fines of £1.75 million and £42,000, respectively.
“The sanctions imposed in this case, where certain elements of the adjustments following a fraud were not subject to the required level of professional scepticism, underscore this message and will serve as a timely reminder to the profession,” explained Claudia Mortimore, FRC deputy executive counsel.
Both fines were reduced by 30% from their initial totals due to Hughes and PwC both admitting to the breaches early in the process.
Mortimore went on to explain that PwC’s audit was not readily understandable by third-party auditors.
“The respondents also failed to prepare audit documentation that was sufficient to enable an experienced auditor, having no previous connection with the audit, to understand the nature, timing and extent of the audit procedures performed,” she said.
PwC, the UK’s largest accounting firm, with revenues of £3.5 billion in 2020, apologised that part of its audit “were not of the required standard”, but emphasised that the regulator had not found the 2017 accounts to have been misstated.
“We have made significant investment in strengthening audit quality in recent years, which has been recognised in improved quality inspection results. We remain committed to maintaining and building on this progress through the delivery of consistently high-quality audits,” said the company in a statement.
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