UK regulator probes PwC over BT's Italian accountancy scandal

Audit giant failed to spot frauds

The UK's Financial Reporting Council (FRC) is to investigate PwC's audits of BT, following an accountancy scandal at the telecom firm's Italian unit.

The accountancy regulator will probe PwC's consolidated financial statements of BT Group for the years ended 31 March 2015 to 2017, in the wake of the scandal which forced a writedown of £530m.

BT's share price plunged when the news emerged in January 2017, and has yet to recover the £8bn which was wiped off its value.

A BT spokesman said: “We note the FRC’s announcement that it has commenced an investigation into the audits by PWC. It would be inappropriate for us to comment further at this stage.”

The company has faced a difficult year, with profits plunging 19 per cent to £2.4bn during 2016/17 amid record fines of £342m fines due to a failure to compensate ethernet customers, and a job cuts programme of 4,000.

Audit quality

PwC said it will continue to co-operate fully with the FRC in its enquiries. "The regulator has a duty to investigate where they believe there is a public interest, in order to give confidence to the financial markets," it said.

"Audit quality is of paramount importance to the firm. The FRC’s annual reviews of our audit work, policies and procedures show a continued trend of improvement in our work and we use the FRC’s insights, together with our own reviews, to continuously improve how we deliver high quality audits."

Last month, the FRC dropped its investigation into PwC's work in auditing Tesco, after the supermarket group had admitted to a £263m black hole in its accounts in 2014. The shortfall later grew to £326m because it had incorrectly booked payments from its suppliers early. ®