PwC Investigated over RSM Tenon Audits

on Aug 15, 2012

Auditor PricewaterhouseCoopers (PwC) is being investigated by the UK Accountancy & Actuarial Discipline Board (AADB) over audits carried out for the accountancy and business advisory firm RSM Tenon Group (TNO:LSE). The regulatory investigation has been launched into the accounting errors discovered in the audits of Tenon for the years 2010 and 2011, the AADB announced.

Earlier this year, RSM Tenon said it found “significant errors” in its 2010 earnings. Rectifying these errors, which included incorrect accounting for the cost of employee bonuses, meant that pre-tax profit for the prior year was cut by £12.1 million. The firm restated its accounts, reporting a drop in revenue of nine per cent to £107.8 million and reducing its overall profit to £683,000 from £7.5 million. Serious concerns about the quality of PwC’s work have been raised, but the accountancy firm claimed that Tenon had misled them during the audit.

The AADB, which takes on the highest-profile misconduct cases in the UK accounting profession, is probing the role of the unnamed individual accountants in the affair, as well as that of PwC. The investigation will also cover the preparation, approval and review of financial information provided by RSM Tenon at the time of its transfer to the main market of the London Stock Exchange in 2010 and the acquisition of chartered accountants RSM Bentley Jennison, the London-based accounting regulator said in a statement.

!m[](/uploads/story/256/thumbs/pic1_inline.png)“We will be cooperating fully with the AADB investigation. We will be vigorously defending our audits and other work carried out for RSM Tenon Group,” said PwC in a statement. Tenon also stated that it is ready to cooperate with the Accounting Board in the probe: “RSM Tenon Group PLC notes that the Accountancy and Actuarial Discipline Board has decided to investigate the conduct of members and member firms of the Institute of Chartered Accountants in England and Wales in connection with aspects of the preparation of RSM Tenon’s financial information in respect of 2010 and 2011. RSM Tenon will fully cooperate with the AADB and their investigation,” a spokesperson for the company said.

The accounting probe of PwC comes after in January the firm was fined a record £1.4 million for errors in its audits of clients money accounts at US bank JP Morgan Chase (JPM:NYQ). The accountancy firm failed to discover that billions of dollars of clients money had not been ringfenced properly, which resulted in customers’ money being mixed up with the bank’s funds.

Earlier this month, there was another stream of concerns around PwC as one of the four largest international accountancy firms – PwC, Deloitte, KPMG and Ernst & Young – also known as the Big 4. The collaboration between a PwC technical expert and the Cypriot government on a new EU accounting directive has raised concerns amongst some auditors about links between the Big 4 and those that regulate them. Rival company Mazars called for a “thorough review” of secondments by the Big 4 to those charged with regulating the profession. Both PwC and the Cypriot government said the process of selecting the PwS expert was “fully transparent” and the practice of providing government support was “well established”. Notwithstanding their statements, the case has prompted analysts’ comments that the Big 4’s monopoly on the audit of listed firms has started shaking.


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