Record Fine and 'Severe Reprimand' for PwC over Audit Failings

Financial auditor PricewaterhouseCoopers (PwC) has been hit with a record £1.4million fine for "very serious" misconduct by accountancy regulators, who also slammed the firm for not taking action against the staff responsible.

The Accountancy and Actuarial Discipline Board (AADB) dished out the fine along with a "severe reprimand".

PwC had been reporting to the Financial Services Authority (FSA) on investment bankers JP Morgan Securities Limited's (JPMSL) compliance with client money regulations from 31 December, 2002 to 31 December, 2008.

Rules state that client money must be kept separate from a company's money, which JPMSL did not do in some situations. The issue came to light after an internal investigation by JPMSL, whose findings were reported to PwC.

The AADB report highlighted a lack of staff responsibility for the breach of rules, saying it was "surprised and concerned that no partner of PwC has been named in relation to this matter".

It also noted that no action had been taken against any individual, nor had any reason been given for this shortcoming.

"We must simply trust that there has been no bargaining of PwC's admission against an agreement on anonymity of individuals in this firm... who are responsible for this serious state of affairs," the report said.

"PwC accepted that it did not carry out its professional work in relation to these reports with due skill, care and diligence and with proper regard for the applicable technical and professional standards expected of it," read a statement from AADB.

"As a consequence, PwC wrongly reported to the FSA that JPMSL had maintained systems adequate to enable it to comply with the client money rules throughout the relevant period and was in compliance with the client money rules," the statement added.

AADB further said that PwC had "failed to identify, and consequently did not report, that JPMSL had not at all times held client money separate from the firm's money".

PwC was initially going to be slapped with a £2 million fine, but it was reduced "for cooperation and other mitigation".

"We are pleased that this matter has now been concluded," a PwC spokesman said.

"We regret that one aspect of our work on the private client money report to the FSA fell beneath our usual high standards.

"When the issue was identified, and before any complaint had arisen, we took action to ensure that staff received additional training in the client monies area."