Watchdog puts PwC audit of Berkeley under spotlight
Monday 16 September 2013
Accountant PwC became the latest "Big Four" firm to fall into the sights of the UK's industry watchdog today.
The Financial Reporting Council flexed its muscles again today as it launched an investigation into whether PwC was independent when auditing developer Berkeley in the year to 30 April 2012 due to a former partner, Glyn Barker, joining Berkeley in January 2012 as a non-executive director a month after leaving PwC.
The latest move comes a week after the FRC's independent tribunal fined Deloitte £14 million for failing to manage conflicts of interest over advice to doomed car maker MG Rover and the Phoenix Four.
The rules state that accounting staff leaving to join the board of a company which the firm audits should not be in the "chain of command" or have been involved in any material matters of audit judgment for at least two years before joining the company. Sources close to the situation said Barker had not been involved in the Berkeley audit or on the leadership team, but added that he collected feedback from the Berkeley board on PwC on its performance. It is unclear whether this was enough to put him in breach of the FRC's rules.
The independence of PwC is not in question for any other financial year. According to Berkeley's annual report, PwC earned £130,000 in audit fees for the year to April 2012 - dwarfed by the £1.32 million it picked up in non-audit fees for a variety of services, including tax advice and services on its cash return to shareholders.
In January 2012, PwC was fined £1.4 million for failing to pick up that investment bank JP Morgan had not being keeping client money separate from its own. Berkeley declined to comment while PwC said it was assisting the FRC with its investigation.
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