PwC hit with record fine by the Financial Reporting Council over RSM Tenon audit 'misconduct'

Rebecca Smith
The watchdog said it had
The accounting watchdog said it had "severely reprimanded" PwC (Source: Getty)

The Financial Reporting Council (FRC) has fined PwC £5.1m for "misconduct" in relation to a 2011 financial year audit for RSM Tenon.

PwC was initially slapped with a £6m fine, though that was reduced to £5.1m following a settlement discount, making it the highest the FRC has achieved to date. The watchdog also handed a £114,750 fine to Nicholas Boden, a PwC audit engagement partner, in relation to the matter.

Professional services firm RSM Tenon went into administration in 2013, and the accounting watchdog said today PwC had been "severely reprimanded after admitting misconduct". PwC's conduct "fell significantly short" of expected standards, it added.

The admitted misconduct includes failure to obtain sufficient appropriate audit evidence, and failure to exercise sufficient "professional scepticism".

The watchdog added proceedings against RSM's former finance director were still ongoing.

PwC said in a statement:

We are sorry that aspects of the audit carried out in 2011 fell short of professional standards. We cooperated fully with the FRC during its lengthy investigation and accept its findings.

We continually review and update our audit processes in response to both internal reviews and external inspection findings. Audit quality is of paramount importance and our annual audit quality reviews show year-on-year improvements.

Read more: Ukraine's central bank pulls plug on PwC bank audit rights over PrivatBank

The fine is the latest headache for the big four accounting firm. Earlier this month, it was announced PwC will pay $1m to settle allegations of shortcomings in a compliance audit of Merrill Lynch.

And last month, Ukraine's central bank said it had pulled the plug on PwC's domestic bank auditing rights, after it failed to identify a $5bn balance-sheet hole at the country's largest lender in previous audits.

PwC Ukraine said it was "very disappointed" with that decision, and will examine "all options for reversing this decision".

Read more: PwC fined $1m for Merrill Lynch compliance failure

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