PwC probed over audits of construction groups Kier and Galliford Try

23 February 2022 Consultancy.uk 2 min. read
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As the UK’s accounting watchdog attempts to pressure the UK’s top accounting firms over a decline in standards, it has launched a new investigation into two PwC auditing contracts. The probe will examine the firm’s work for two of Britain’s biggest construction companies.

Four years on from its collapse, the spectre of Carillion still looms large across the British professional services market. The firm provided facilities management and construction services to the UK public sector, before an accounting black hole saw the Wolverhampton based company fall into liquidation, seeing thousands of jobs lost, and jeopardising the delivery of a number of keystone services.

In the months following Carillion’s infamous downfall, news began to mount regarding the conduct of the UK’s top professional services firms, in relation to its collapse. Not only was KPMG publicly lambasted for its role as auditor to the firm, but its Big Four competitors EYDeloitte and PwC were accused by MPs of “feasting” on the company’s “carcass” – bringing their dual responsibilities as auditors and consultants into question.

PwC probed over audits of UK construction contractors

In the years since, the UK’s Financial Reporting Council (FRC) has found itself struggling to bring the gang of four to heel in this regard. Along with some regulatory shifts to discourage top professional services firms taking both accounting and advisory work from clients, this has chiefly taken the form of investigations, reprimands, and record fines.

In 2018, this saw PwC stung with the largest ever FRC fine for its auditing of now-defunct retailer British Home Stores – and while that figure has since been surpassed, PwC has once more found itself the subject of a major FRC probe. This time, according to reports from the Financial Times, PwC is being investigated by the over its audits of construction giants, Kier and Galliford Try – seeing the Big Four tied to ailing construction firms once more, and evoking the ghosts of Carillion in the process.

The FRC’s probe into PwC’s audit of Galliford Try comes after the construction firm was accused of overstating its revenues from the Aberdeen bypass project by £80 million in a 2018 interim report. Following those claims, Galliford replaced PwC with BDO as its auditor. Meanwhile, in 2019, construction contractor Kier also revealed it made a £40 million accounting error, while using PwC as its auditor – with the huge addition to the group’s debt causing its share price to plummet. PwC continues to audit Kier’s accounts.

If the FRC finds that PwC failed in its duties, the watchdog has the power to impose fines on the auditor, alongside other penalties. However, according to sources quoted by the Financial Times, PwC will likely seek to settle any case with the watchdog, instead of facing a public tribunal. Any settlement would likely be in the millions, the sources added.