The Financial Reporting Council has reportedly penalized PricewaterhouseCoopers (PwC), the UK-based professional services network of companies, and former partner, Jonathan Hook, over Kier and Galliford Try audit failures.
According to reports, failures to adequately audit revenues earned under certain complex long-term contracts are at the heart of the violations.
Reports are claiming that a lack of professional skepticism as well as an unsatisfactory challenge to management's assertions led to the supposed failures.
PwC was fined over £3 million ($3.7 million) for failing to adequately challenge costs and revenues recognized by the management of Galliford Try on big and complicated long-term construction contracts at the time of 2018 and 2019 audits.
The level of cooperation PwC showed during the investigation resulted in the fine being reduced from the initial £5.5 million ($6.8 million).
Meanwhile, PwC was also fined £1.96 million ($2.4 million) for failing to conduct a thorough audit of Kier's long-term contracts, mostly during 2017 audit. This fine amount was also brought down from the initial £3.35 million ($4.1 million).
Hook, who left PwC a year ago, was penalized over £135,000 ($169188) and given a harsh reprimand for his failures.
With respect to Kier's case, PwC is also expected to evaluate and report certain audits done in 2022-2023 to the FRC, featuring long-term contacts as well as the impact of rectification steps undertaken in.
Claudia Mortimore, deputy executive counsel, FRC, stated that meticulous auditing of long-term contract accounting is highly crucial in the audit of construction firms, where numerous contracts are stretched over several years.
Mortimore further added that auditors are not just required to gather sufficient acceptable audit evidence supporting the accounting of the contracts, but they should also adopt sufficient professional skepticism, which is critical so that investors have trust in the financial statements.
The FRC stated that the violations were neither deliberate, dishonest, or careless. It further expressed that PwC and Hook cooperated well with the investigation. The early-stage where admissions were made is also indicated in the discount given to the financial punishments.