PwC fined £5 million for ‘misconduct’ in Connaught audit

17 August 2017 Consultancy.uk

Big Four accounting firm PwC has been charged with ‘misconduct’ over its auditing services and has to pay the £5 million, the largest fine ever to be administrated by the Financial Reporting Council, after the downfall of property services group Connaught in 2009.

The collapse of Connaught resulted in a loss of jobs for 10,000 former employees, as the firm was unable to repay the £220 million debt in 2010. Following the organisations collapse, the Financial Reporting Council (FRC) was made responsible for executing an initial five year investigation into PwC’s audit of Connaught in 2009. Seven years on, PwC has been handed a record-breaking £5 million fine due its inability to save social housing and public service outsourcing firm Connaught – having been initially thought to have been in line for an even larger £6 million.

The investigation came to an end after the FRC accused a retired partner PwC of misconduct, and while the individual was later fined £150,000 and reprimand, PwC had to pay an additional £1.5 million interim payment to reimburse the FRC’s legal costs. Evidence since gathered pointed the watchdog toward three different areas including mobilisation costs, long-term contracts and intangible assets, for which the consulting firm have now been held accountable.

PwC fined £5 million for ‘misconduct’ in Connaught audit

The £5 million fee is the highest ever issued by the FRC, but PwC has been on the receiving end of a number of hefty fines in recent years. In 2016 the firm was also fined £3 million for misdemeanours relating to its auditing services to the financial services group Cattles, which also resulted in that company’s bankruptcy. Four years before, PwC had to pay £1.4 million, as it was admonished for its role in compiling the reports for the Financial Services Authority on JPMorgan Securities Limited. Allegedly JPMorgan failed to separate client funds from the company funds, which not only implicated PwC, but also highlighted the shortcomings within the regulatory network themselves, something to which attention was called by a recent report presented to European Parliament.

In the presence of the Connaught tribunal in March PwC made a public apology regarding their failure to provide appropriate scepticism nor collect enough evidence for the audit of the 2009 accounts which were a follow up to profit warnings later in 2010. “Since 2010 when the case began, we’ve worked hard to improve our procedures and processes. Audit quality is of paramount importance to PwC and the FRC’s annual audit quality assessments have shown a trend of improvement in our work over several years.”

×

Ensuring data quality imperative for smart asset management

25 March 2019 Consultancy.uk

By implementing innovative Asset Performance Management systems, utilities firms can maximise their utilisation of assets and minimise maintenance costs across their portfolio. However, according to Louis Morgan of Smart Grid Forums, without securing quality management systems for the data which smart grids rely upon, companies risk missing out on the benefits of asset performance grids.

Smart asset management presents a major opportunity to professionals across the business spectrum. In this context, a new event hosted in London is looking to help smart-grid asset management professionals meet the needs of a changing energy industry with digital asset management. The first annual Grid Asset Management event is due to take place between the 14-16th of May 2019 at the Millennium Hotel in Knightsbridge, London.

The conference will bring together leaders and experts from across Europe, in order to benchmark their digitalisation roadmaps. In a piece posted on the Smart Grid Forums website ahead of the event, Louis Morgan, a Conference Producer at Smart Grid Forums, has outlined the importance of investing in innovative asset performance technology for utilities firms, which can help ensure long-term stability for assets management in the utility sector in the face of increased complexity  .

Ensuring data quality imperative for smart asset management

Traditionally, the decision to invest in a given asset was made on the basis of an expert’s judgement of the risks posed by its failure, having typically been assessed via a risk matrix or a similar qualitative method. After that, a decision would be taken as to whether it should be replaced. However, according to Morgan, as the pace of change and complexity increases, these methods can no longer provide the required level of certainty. Uncertainty about changes to consumption patterns and load profiles brought on by the energy transition produces a vast number of possible scenarios that investment planners must consider.

As a result, Morgan explained, “utilities are seeking to support their investment decisions with quantitative risk management methods, centralising expertise from across their operations into a consistent, numerical framework that accurately captures the risk posed by all kinds of asset failure to all stakeholders.”

Companies are doing this by turning to ‘smart grid’ utility management, or systems which work to invest in the maintenance and replacement of millions of assets spread across thousands of kilometres of network. However, this is by no means a silver bullet, and in the age of the smart grid, planning ahead is more complex than ever. To ensure the long-term stability of their grids, then, utilities must deploy standardised investment decision-making practises supported by advanced modelling capabilities.

Morgan elaborated that the best way of facing this problem is through the combination of condition, utilisation, reliability and demand data. In that case, risks can be quantified in financial terms and investment budgets can target the assets posing the highest total risk, thus deferring investment in lower risk assets and optimizing the long-term budget. However, decisions informed by these risk models “will only be as good as the data and the assumptions that support them”, meaning utilities must therefore find ways to improve the volume, variety, veracity and velocity of the data they employ in their investment planning models.

“This means digitalizing asset operations, rolling out sensors and implementing systems that integrate data from a range of internal and external sources in real-time,” Morgan expanded. “Utilities must also scour their business for expertise about different assets to ensure that their risk management frameworks accurately capture the true risks posed by asset failures.”

This is in keeping with a trend which goes well beyond utilities. Business leaders of all shapes and sizes are currently having to address how they manage data quality – as poor information being input into any automated system can essentially negate the efficiencies such systems bring to the table. To this end, robust data governance is critical.

Concluding his article, Morgan said, “It is clear that there is a great deal of opportunity for utilities to obtain significant business benefits from improving their investment planning capabilities. More accurate risk management, supported by a reliable data-driven method, will deliver better financial outcomes from investment activity... But to achieve these capabilities, a lot of work must be put in to establish the systems, processes and frameworks which underlie them. Utilities must also make difficult choices about how they quantify risk and the appropriate range of data to feed into their investment planning models.”

This topic will be tackled in-depth at this year’s Grid Asset Management 2019, a conference, exhibition and networking forum aimed solely at smart grid asset management professionals.