ACC2204AuditandAssurance Assignment
- Subject Code :
ACC2204
- Country :
Australia
CaseStudy One
NowPWCfined2.5m overBTauditfailure
By LucyWhite,9 August2022,ScottishDailyMail
PWChasbeen fined2.5m foritsaudit ofBT afterafraudatthetelecomgiant's Italian arm.
The accounting giant failed to properly challenge BT's 2017 results, the Financial Reporting Council(FRC) said, even after the discovery of the fraud a year earlier wiped billions off BT's value andpromptedacriminal trialwhich is still ongoing.
RichardHughes,PwC'saudit engagementpartner forBT,wasalso fined60,000.
Thepenaltieswerereducedto1.75mand42,000respectivelyforPwC'scooperationandadmissions.
The wrongdoing at BT happened in 2015 and 2016. Prosecutors in Milan claimed BT Italia and anetworkofstaff soughtto inflaterevenues andconceal lossesof250m inasophisticatedfraud.
When the scandal came to light in 2016, after a whistleblower alerted bosses, BT adjusted its financialstatements by around 513m. While the FRC did not say these results were misstated, or that the totalsum of the adjustments was wrong, it did find that PwC had failed to apply the 'necessary professionalscepticism' when checking the numbers. The paper-trail which showed how PwC approached its auditworkwas also inadequate, theFRC added.
Of the 23 originally accused of fraud at BT, a former manager of BT Italia has already been jailed forayear,while theex-chief executive,GianlucaCimini, died two years ago.
A spokesman for PwC apologised for not meeting the 'required standard', adding: 'We have madesignificant investment in strengthening audit quality in recent years, which has been recognised inimproved quality inspection results. We remain committed to maintaining and building on thisprogress.'
Questions
- Explainthetermprofessional scepticismasitrelates toan
- RevieweachofthefivefundamentalprinciplesfromAPES110CodeofEthicsfor
Professional Accountants and apply the principles to explain the extent to which each principlesupportstheneed for professional scepticismfor auditors.
