Firm issues apology following FRC hearing into contractor’s collapse

PwC has issued an apology after being fined £5m for misconduct over the audit of social housing specialist Connaught, which collapsed into administration seven years ago.

The firm also has to pay executive counsel’s costs and make an interim payment of £1.5m after the Financial Reporting Council (FRC) gave it a severe reprimand over its audit of Connaught’s books in 2009. The contractor collapsed the following year.

In a statement PwC said: “We are sorry that our work fell short of professional standards. Since 2010 when the case began, we’ve worked hard to improve our procedures and processes.

“Audit quality is of paramount importance to PwC and the FRC’s annual audit quality assessments have shown a trend of improvement in our work over several years.”

As well as PwC, the FRC slapped a fine of £150,000 on Stephen Harrison, a retired audit partner at the firm.

The FRC conducted a 12-day hearing following its investigation into the circumstances of Connaught’s collapse and earlier audit, finding misconduct in three areas: mobilisation costs, long term contracts and intangible assets.

Connaught went into administration in September 2010, months after issuing a profits’ warning and after its banks had rejected a three-year rescue plan that required a £50m cash injection.