Big Four firm PwC has been fined over £4.5m over its audits of Sanjeev Gupta’s Wyelands Bank.
Accountancy watchdog Financial Reporting Council (FRC) issued financial penalties to PwC and Jonathan Hinchliffe over the audits for the financial year ended 30 April 2019.
The bank – owned by Gupta Family Group Alliance (GFG Alliance) – entered a wind down in 2020 by the banking regulator Prudential Regulation Authority (PRA) over significant regulatory failings.
Last year, the bank’s former chief executive Iain Mark Hunter was fined almost £120,000 by the banking regulator.
It is not alleged that the breaches by PwC and Hinchliffe caused or contributed to the closure of the bank.
The decision today by the FRC came as a result of PwC and Hinchliffe admitting to breaches in relation to six areas of the FY2019 audit.
The statement on Wednesday morning said that the breaches stemmed primarily from a single common cause: the failure of the audit team to properly understand the bank’s lending and adequately consider the risks posed by its actual and potential exposure to related parties in the GFG Alliance.
The audit team also failed to properly examine concerns raised by the PRA in that regard.
Additionally, the auditors failed to exercise appropriate professional scepticism in relation to a number of aspects of the audit.
The sanctions imposed against PwC included a £4.5m fine, reduced to £2.9m for admissions.
Meanwhile, Hinchliffe was fined £55,00, reduced to over £33,400 for admissions.
Commenting on the matter, Claudia Mortimore, FRC deputy executive counsel, said: “The audit breaches in this case highlight the importance for auditors to have a full understanding of the audited entity and its business. This is particularly important where there has been a change of ownership and change in the nature and scale of activities.”
“In this audit, the risks around the bank’s membership of and involvement with the GFG Alliance were not properly recognised and considered, despite clear warnings to the bank from the PRA. This led to a number of serious failings, which had the potential to adversely affect retail depositors,” she added.
A PwC spokesperson said: “We acknowledge and apologise that aspects of this piece of work fell short of the required standards. Since 2019 we have undertaken a multi-year programme to enhance audit quality and have, as a result, seen significant changes to our audit practice. Recent supervision reports reflect the improvement and investment made in audit quality, which remains our top priority.”
