PwC Fined USD 4.4 Million By U.K. Regulator FRC Over Babcock Audit Failures

PwC has been fined around USD 4.4 million by the United Kingdom’s Financial Reporting Council (FRC) for audit failures related to aerospace and defence company Babcock International Group. The regulator said PwC and audit engagement partner John Waters admitted breaches of auditing requirements in the company’s 2019 and 2020 financial statement audits.

The FRC found issues related to cash pooling arrangements, overseas contract accounting, and goodwill impairment assessments. The regulator said PwC failed to obtain sufficient audit evidence and did not apply adequate professional scepticism during the audit process. The FRC reduced the penalty from an initial amount of over USD 7.4 million after considering PwC’s and Waters’ cooperation during the investigation. The regulator noted that the issues were not intentional or linked to financial benefit. PwC said audit quality remains a focus and acknowledged that some aspects of the audits did not meet expected standards.