PwC faces record-breaking £10m fine over poor BHS audit

Big Four accountancy giant PwC has been slapped with a record £10m fine from the Financial Reporting Council (FRC) for its work auditing high street retailer BHS, prior to the chain's sale for just £1.

The PwC partner who conducted the audit, Steve Denison, is also facing a personal fine of £500,000 from the FRC relating to his work on BHS in the year to 30 August 2014.

Denison is said to have left the UK’s largest accounting firm last week after more than 30 years on the job, according to reports from Sky News.

A statement from the FRC said that PwC and Steve Denison have admitted misconduct, and accepted "substantial fines and non-financial sanctions".

The fines will be reduced by 35 per cent to £6.5m and £325,000 respectively for early settlement, approved by an independent tribunal.

The numbers represent the biggest fines ever issued by the FRC, personal or otherwise, following its decision to double fines for poor auditory work by major firms from this month.

A PwC spokesperson told City A.M.: “We recognise and accept that there were serious shortcomings with this audit work and that it is important to learn the necessary lessons. We are sorry that our work fell well below the professional standards expected of us, and that we demand of ourselves."

"We have agreed this settlement, recognising that it is important to learn the necessary lessons."

"As a result of our internal reviews we took swift action to enhance our monitoring procedures. We have agreed with the FRC to extend these further for an additional period."

PwC will now subject all its audits of non-listed high risk or high profile companies to an engagement quality control review. An additional monitoring of its Leeds Audit Practice is also required, with detailed annual reports about that practice to be submitted to the FRC for the next three years.

The FRC’s inquiry into BHS began two months after the retail chain filed for administration in April 2016. A year earlier, Retail Acquisitions, a firm owned by serial bankrupt Dominic Chappell, purchased BHS from Topshop owner Sir Philip Green for just £1.

The high street firm's collapse resulted in the loss of around 11,000 jobs across the UK, with The Pensions Regulator and the government’s Insolvency Service later conducting formal investigations.

At a 2016 inquiry by MPs into BHS’ collapse, Denison said he had valid reasons to label BHS’ accounts a “going concern” shortly before the sale went ahead.