PwC slammed over £4.5m for audits of Wyelands Bank
PwC fined £4.5m (reduced to £2.9m) by the FRC for audit failures at Wyelands Bank, owned by GFG Alliance. The fines stem from inadequate understanding of lending practices and related-party risks, despite PRA warnings. PwC acknowledges the issues and is committed to improving audit quality.
Regulatory sanctions
The Financial Reporting Council (FRC) has fined PwC over £4.5 million for auditing Sanjeev Gupta's Wyelands Bank to 30 April 2019. The fine was reduced to £2.9 million for admissions. Auditor Jonathan Hinchliffe, who was involved in the audits, was fined £55,000, reduced to £33,400 for admissions. The bank, owned by GFG Alliance, entered wind-down in 2020 after serious regulatory failures.
Failures in audit
The FRC found that the audit team failed to properly understand the lending behavior of the bank and neglect to fully consider the risks posed by its related party exposure within the GFG Alliance. The team also failed to examine issues raised by the Prudential Regulation Authority (PRA) and exercise proper professional skepticism in several areas of the audit. These breaches highlight the need for auditors to gain a good understanding of the entities they audit, especially in cases of changes in ownership and change of business activities.
Response and commitment to improvement
Claudia Mortimore, deputy executive counsel FRC, emphasized the gravity of the failures in audit: "The failures in audit here highlight the importance of auditors developing a full understanding of the audited organisation and its business. This is particularly important where there is significant change in ownership and change in nature and extent of activities. In this case, the risks of the bank's membership of and dealings with the GFG Alliance were not sufficiently identified and addressed despite clear warnings from the PRA."
PwC acknowledged the failure and apologized, stating, "We acknowledge and apologize that some aspects of this piece of work did fall short of the standards expected. Since 2019, we've launched a multi-year programme to enhance audit quality and have seen deep change to our audit practice. Recent supervision reports confirm the improvement and investment in audit quality, which remains our top priority."
