The beat goes on
“The beat goes on, the beat goes on
Drums keep pounding a rhythm to the brain”
—Sonny & Cher
Auditing scandals continue as routinely as the changing seasons.
Rub of the Green
Private Eye #1424
05 Aug 2016
The parliamentary investigation into the demise of BHS could be
just the start of the troubles for PwC, the realtor's auditor.
As Eye 1422 pointed out, the firm approved BHS's accounts just five
days before the ill-fated takeover by Dominic Chappell's company in
March last year, without raising any question about whether it was a
going concern. Since it wouldn't have taken much business acumen to be
sceptical about the three-time bankrupt wide-boy, this looked reckless.
As the Commons work and pensions select committee noted: "We were
surprised that PwC did not more deeply question whether BHS was
genuinely being sold as a going concern."
It also emerged in the inquiry that the nature of support being given
by the green family's Taveta group was weakened dramatically two days
before the accounts were signed off. A rigorous auditor might have been
expected to investigate this a bit futher, given that there was no
certainly over the sale at that point. A clean audit certificate was
essential, and that is what BHS got—strangely (and conveniently) a
couple of months earlier than it had for previous years' accounts.
Evidence submitted to the committee showed how important clean audit
certificates were to Sir Philip Green. Some months before the sale, he
was reported by the pension trustees to be refusing to answer "moral
hazard" questions (ie how much he had taken out of the company) on the
grounds that PwC's clean audits covered him. In return, PwC's northern
office did very nicely out of the company, pocketing £335,000 in audit
fees and £2.9 million for other work. And as the MPs observed, PwC had
a "long-standing relationship with Sir Philip Green."
The Financial Reporting Council is now looking at PwC's work and "aims" to conclude its inquiry within two years.
Private Eye #1449
Ukraine's central bank last week banned the local arm of accountancy
firm PwC from auditing the country's banks after it failed to spot
risky loans and investments at the country's largest lender.
It said that the report issued by PricewaterhouseCoopers Audit LLC
"failed to highlight the credit risk exposure faced by Privatbank,
which led to the bank being declared insolvent and nationalised, with
substantial recapitalisation costs borne by the state."
Replace Privatbank with say, Northern Rock, and this would pretty much
describe what happened in the UK financial crisis. Similar could be
said at RBS (audited by Deloitte) and HBOS (KPMG). A parliamentary
committee did criticise PwC's work on the Rock, but here the Big Four
accountancy firms are considered too few to fail and would never be
denied their right to earn squillions glossing over unreliable numbers.
Britain lags somewhere behind Ukraine in cleaning up the beancounters.
top contents appendix previous next