PwC is under investigation by the accounting watchdog over BT audits

 
Caitlin Morrison
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Chatham House
BT boss Gavin Patterson forfeited his bonus over the scandal

The Financial Reporting Council (FRC) has launched an investigation into the audits by PricewaterhouseCoopers (PwC) of BT Group's financial statements for the years ended 31 March 2015 to 2017.

The decision to investigate follows announcements by BT in relation to accounting issues in its Italian operations, the FRC said.

"We will continue to co-operate fully with the FRC in its enquiries. The regulator has a duty to investigate where they believe there is a public interest, in order to give confidence to the financial markets," a PwC spokesperson said.

"Audit quality is of paramount importance to the firm. The FRC’s annual reviews of our audit work, policies and procedures show a continued trend of improvement in our work and we use the FRC’s insights, together with our own reviews, to continuously improve how we deliver high quality audits."

The telecoms firm revealed in January that an overstatement of earnings in its Italian business would cost the group £530m.

Shares in the company dropped by as much as 20 per cent after the revelations. BT said third quarter revenue would be reduced by £120m as a result, along with a £100m decline in free cash flow. For 2016/17 as a whole, revenue will now be around £200m less than previously expected.

In May, the firm unveiled plans to cut 4,000 roles as part of an overhaul of international operations.

BT boss Gavin Patterson forfeited his bonus because of the problems in Italy, saying at the time: "I felt even if a bonus would be paid, I signalled that I didn’t think it would be appropriate for me to take it."

Earlier this month, BT picked KPMG as its new auditor, bringing its 33-year relationship with PwC to an end.

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