Audit giants in dock AGAIN over company collapses

0
79


Two of Britain’s biggest accountancy firms set to be hauled over coals over accusations of failures in their audit practices

  • KPMG and PwC may have to make hefty payouts if the cases do not go their way 
  • KPMG is facing allegations from the FRC about about its audits of Carillion
  • PwC is being sued by the administrators of the Providence Investment Fund 


Two of Britain’s biggest accountancy firms are set to be hauled over the coals over accusations of failures in their audit practices. 

KPMG and PwC may have to make hefty payouts if the cases do not go their way.

The KPMG complaint starts today at a disciplinary tribunal which is expected to take up to five weeks. 

Accusations: KPMG and PwC may have to make hefty payouts if the cases do not go their way

Accusations: KPMG and PwC may have to make hefty payouts if the cases do not go their way

The firm is facing allegations from accounting watchdog the Financial Reporting Council (FRC) that it gave false or misleading information about its audits of doomed outsourcer Carillion. 

The case against PwC is set for May. PwC is being sued for £25m in the Guernsey Royal Court by the administrators of the Providence Investment Fund. 

PwC was Providence’s auditor when the investment firm collapsed in 2016, owing investors more than £40m. Providence claimed to invest in complex Brazilian debt financing – but instead, 97 per cent of investors’ money financed the wider group, according to papers filed by administrators Teneo. 

Guernsey-based Providence was, in fact, running a ‘fraudulent Ponzi scheme’, Teneo has alleged, and PwC was ‘negligent’ when it signed off the firm’s accounts. 

Antonio Buzaneli, a Florida businessman who founded Providence, has been sentenced to 20 years in prison in the US after being charged with investment fraud at the parent company. 

The British lawsuit, which points the finger at PwC, will cause ripples across the industry. It is the first case of auditor negligence to be heard in the Guernsey courts. One source close to the case said: ‘Many feel the whole of the Guernsey financial services industry will be in the dock.’ 

Any money reclaimed by Teneo would be used to help pay off Providence’s debts. 

Originally Teneo’s claim concerned one Providence fund, but it has been rolled together with another claim centred on the firm’s investment management arm, which was also audited by PwC and ran several other funds. 

Teneo claims that PwC’s negligence also caused losses to investors in those other funds. 

PwC could be on the hook for £21m of damages, plus costs. It said: ‘We believe this claim is misconceived.’ KPMG is likely to be slapped with a heavy penalty by the FRC. 

KPMG has previously pointed out that it self-reported the alleged wrongdoing by its employees.

Advertisement

LEAVE A REPLY

Please enter your comment!
Please enter your name here