Probe centred on three sets of annual accounts filed by pair

The Financial Reporting Council has fined PwC and one of its former partners nearly £5m for breaches in its audit of three sets of accounts filed by Galliford Try and Kier.

The penalties handed out by the financial watchdog relate to Galliford Try’s 2018 and 2019 accounts and Kier’s 2017 accounts.

It said the Galliford Try breaches centred on “the audit of the revenue and costs recognised on a large and complex long term construction contract. [These] relate to compliance with applicable accounting standards; insufficient challenge of management’s assertions and lack of professional scepticism.”

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The financial watchdog said PwC had tightened up procedures following its probe

PwC was fined just over £3m, reduced from £5.5m, while audit engagement partner Jonathan Hook, who retired last summer after nearly four decades at the business, was fined just under £83,000 and handed a severe reprimand.

In a separate ruling, the FRC said PwC and Hook, now a non-executive at T Clarke, both admitted breaches in relation to the audit of long-term contracts within Kier’s construction division.

It said the pair “failed to obtain sufficient appropriate audit evidence; perform adequate testing or carry out substantive procedures on the Company’s accounting estimates; prepare sufficient audit documentation to support conclusions reached and carry out the audit with sufficient professional scepticism”.

It added that they “failed to identify and correct errors in the Company’s income and cash flow statements relating to the presentation of gains on corporate disposals completed in the 2017 financial year”.

For these breaches, PwC was fined £1.96m, reduced from £3.35m, while Hook was handed a fine of just over £52,500 and a severe reprimand.

The FRC said both PwC and Hook had cooperated with the investigations and had made early admissions which resulted in the reduced fines. It added that it did not think “the breaches were intentional, dishonest or reckless”.

It said PwC had also introduced several initiatives to tighten up procedures in the relevant areas following its probe.

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