PwC thrashed in leaked BHS audit report

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BHS PwC

The Financial Reporting Council has accused PwC of making “incomplete, inaccurate and misleading” statements about BHS’s financial health just before it was sold off for £1.

According to a leaked report on the audit of BHS, as seen by The Times, the FRC said PwC  “should have concluded that a material uncertainty existed” about the retailer’s chances of survival after Sir Philip Green sold it to former bankrupt Dominic Chappell in 2015.

The leaked report reportedly includes eight allegations against PwC, such as how it allegedly did not factor in the impact of the sale to Chappell even though its own tax team said the retailer was “effectively bust” at the time.

BHS collapsed 13 months after Chappell acquired it, leaving behind a £571 million pensions black hole which affected 22,000 employees and former employees.

News of the leaked audit report comes amid growing pressure from Westminster for the FRC to make its findings public.

Last week, work and pensions committee chairman Frank Field MP wrote to FRC to demand why it had still not yet published its report.

It has been around a month since the watchdog slapped PwC with a historic £6.5 million fine over the audit it carried out on BHS’s financial statements, whereby it gave the former department store retailer a clean bill of health for the year ending August 30, 2014.

PwC audit partner Steve Denison also signed off the BHS accounts as a “going concern” just days before Green sold it to Chappell.

A PwC spokesman said the firm was “sorry that our work fell well below the professional standards expected of us and that we demand of ourselves”.

He added that PwC’s settlement in the FRC investigation reflected that “whilst the failings did not contribute to the collapse of BHS over one year later, they were serious”.

The FRC has not commended on the leaked report.

Speculation is rife that the auditing watchdog’s report would be critical of the conduct of directors of Taveta Investments, the holding company for Green’s Arcadia Group retail empire, of which BHS was a part for 15 years.

The unpublished report already sparked a legal challenge from Taveta last month, which wanted to restrict the publication of the full report but was struck down by the High Court.

Despite this, the FRC has delayed publishing the report as it sought legal advice.

The collapse of BHS also triggered a parliamentary inquiry and investigations by the Serious Fraud Office.

Additionally, the Insolvency Service’s chief executive Sarah Albon has already written to the FRC, arguing that new evidence from in the BHS audit report could prompt the service to reopen its investigation into the former directors of the collapsed retailer.

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