PwC under investigation over BHS audit

The Financial Reporting Council (FRC), the UK accounting watchdog, has launched an investigation looking into PricewaterCoopers (PwC) audit of collapsed retailer BHS. The investigation aims to look into the audit carried out by the accountancy firm a year before the high street retail group was sold off by Sir Philip Green's Arcadia for 1 pound, in an agreement which saw 215 million pounds in debt written off.

The FRC already conducted a preliminary investigation which confirmed a "suspension of misconduct" and led the way for the formal investigation. Following the collapse of BHS in the April, the sale of the group to Retail Acquisition has come under closely inspection.

Both MPs and several parliamentary committees have questioned how Philip Green was able to sell off a loss-making business with such a deep pension deficit to a man who had been declared bankrupted and had little to no retail experience. During the parliamentary inquiry, committees also questioned the role advisers held in the sale.

If the FRC investigation, which is set to look into BHS's financial statements for the year to August 30, 2014, does find evidence of misconduct carried out on PwC's behalf, the case will be passed along to an independent tribunal and defended in court. If the tribunal agrees with the findings from FRC then PwC may be handed hefty fines, and the individual advisors involved could be banned from working as an auditor.

At the moment it remains unclear how long the investigation will take, as it is depended on the cooperation of external parties, such as lawyers and auditors. "It's obviously of high public interest and we will resolve it as soon as we can," said FRC spokesperson Peter Timberlake to the BBC. "But it's important that we do the right job." PwC fully intends on cooperating with the FRC on the investigation.

Photo: By Gibboboy777 (Own work) [CC BY-SA 4.0], via Wikimedia Commons