PwC fined $19 million over costly LCF audit failures
LONDON, Aug 16 (Reuters) - Britain's financial regulator fined audit firm PwC 15 million pounds ($19.3 million) on Friday for failing to alert the watchdog that London Capital & Finance (LCF) might be involved in fraudulent activity ahead of its costly collapse for taxpayers.
The fine throws a spotlight on the longstanding debate about how far auditors should be responsible for spotting and flagging potential fraud.
PwC, one of the world's "Big Four" auditors, encountered "significant issues" through its 2016 audit of LCF, the investment firm that collapsed in early 2019, the Financial Conduct Authority said on Friday
UK property developer sues PwC alleging ‘negligent’ tax advice
Revelan is seeking about £6.6mn for loss and damages after claiming consulting firm ‘failed to accurately calculate tax due’
A UK property developer is suing PwC in London’s High Court, alleging that the Big Four accountancy firm provided “negligent” tax advice that landed the company with a £3mn bill to Britain’s tax authority.
Revelan, a commercial property developer formerly backed by US investment manager Ares, is seeking about £6.6mn for loss and damages after claiming that the consulting firm “failed to accurately calculate tax due” by the group over a five-year period, according to court documents obtained by the Financial Times.
The errors, some of which PwC admitted in a letter to HM Revenue & Customs, left Revelan with a bill totalling about £3mn to the tax authority, comprising outstanding tax liabilities, unpaid interest and penalties for late payment, the documents show.
It marks the latest lawsuit against a Big Four consulting firm regarding tax advisory work. Last month, rival EY settled a suit with HMRC over alleged misrepresentations made during the negotiation of a settlement with the tax authority.
In PwC’s case, the firm admitted making errors in its advice to Revelan in a letter to HMRC dated March 2023, which was disclosed in the court documents.
The Big Four firm said that “the tax affairs of our client are complex” and the errors “were unfortunately missed due to the significant complexity of their tax affairs”.
It added: “We believe that our client took reasonable care historically by taking advice from PwC in preparing the tax returns and they could not have taken any further action to prevent this error from happening.
“We therefore consider the error to have arisen as a result of a mistake made by PwC despite the client taking reasonable care and do not consider it to have been as a result of carelessness on the part of our client.”
The case against PwC, outlined in a 64-page court document that includes eight annexes, centres around the firm miscalculating Revelan’s tax liabilities and failing to properly index the so-called “tax written down value” of the group’s properties while acting as its adviser.
In the March 2023 letter, PwC said that because of “historical errors . . . additional indexation allowance has been claimed on various property disposals, which consequently increased capital losses claimed on the disposal of a number of properties”.
Revelan argued that “in provision of tax compliance and consulting services, PwC failed to exercise reasonable skill and care, and acted negligently and in breach of the duty of care which PwC owed the companies in the group”.
It is the first major lawsuit against PwC’s UK business since Marco Amitrano, the firm’s former consulting leader, took over as senior partner in July.
PwC, which has yet to file its defence with the court, said: “We will be robustly defending this claim.”