PricewaterhouseCoopers (PwC) has been hit with a £5.1m fine for misconduct in the auditing of RSM Tenon prior to the business being bought by Baker Tilly.
The Financial Reporting Council (FRC) fined and severely reprimanded PwC and Nicholas William Edward Boden, a senior statutory auditor and audit engagement partner at the firm after they admitted misconduct in relation to the audit of the financial statements of RSM Tenon Group plc, for the financial year ended 30 June 2011.
The FRC said the failings were extensive, covering five separate areas – the accrual of bonus payments, the recognition of work in progress and amounts recoverable on contracts, the accounting for a lease, the assessment of the impairment of goodwill, and the calculation of goodwill in relation to a subsidiary.
PwC and Boden, a member of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a member and a member firm and that they failed to act in accordance with the ICAEW’s fundamental principle of professional competence and due care. They admitted failing to obtain sufficient appropriate audit evidence and exercising sufficient professional scepticism.
Baker Tilly acquired RSM Tenon out of administration in 2013, including its advice arm RSM Tenon Financial Management. Towry then acquired the advice arm from Baker Tilly a year later
PwC’s £6m fine was reduced to £5,100,000 after a settlement discount, but the firm also received a severe reprimand and was ordered to pay £500,000 costs.
Boden was fined £150,000, which was reduced to £114,750, after adjustment for mitigating factors and a discount for settlement. He also received a severe reprimand.
Proceedings against Russell McBurnie, RSM Tenon Group plc’s former finance director, are still ongoing.
