PwC fined £4.5m over Wyelands Bank audit

The Financial Reporting Council (FRC) has announced that PwC has been fined £4.5m for the unsatisfactory audit of the financial statements of Wyelands Bank for the financial year ended April 30, 2019. The sanction was reduced to £2.89m for co-operation and admissions but the firm has still been severely reprimanded and issued with an order requiring it to take specified action designed to prevent the recurrence of the contravention. Alongside this, Jonathan Hinchcliffe, the statutory auditor responsible for the bank, has been fined £55,000 but this has been reduced to £33,412 for co-operation and admissions. He has also been severely reprimanded. PwC and Hinchliffe admitted breaches of Relevant Requirements in relation to six areas of the FY2019 Audit. These came in the form of risk assessment, auditing of the bank’s compliance with laws and regulations, auditing of the bank’s related party transactions, auditing of the bank’s assessment of going concern, auditing of the bank’s loans and advances, and auditing of the bank’s provision for expected credit loss. According to the FRC, the breaches primarily stemmed from a single common cause: the failure of the audit team to properly understand the bank’s lending and adequately consider the risks posed by its actual and potential exposure to related parties in the GFG Alliance. The audit team also failed to properly examine concerns raised by the bank’s regulator, the Prudential Regulation Authority (PRA) in that regard. In addition, they failed to exercise appropriate professional scepticism in relation to a number of aspects of the audit. By March 2020 the bank had stopped entering into new credit transactions and commenced a wind down of its business. In March 2021 the PRA required the Bank to repay its depositors, which it has done, but it is not alleged that the breaches by PwC and Hinchliffe caused or contributed to the closure of the bank. Claudia Mortimore, deputy executive counsel, said: "The audit breaches in this case highlight the importance for auditors to have a full understanding of the audited entity and its business. This is particularly important where there has been a change of ownership and change in the nature and scale of activities. “In this audit, the risks around the bank’s membership of and involvement with the GFG Alliance were not properly recognised and considered, despite clear warnings to the Bank from the PRA. This led to a number of serious failings, which had the potential to adversely affect retail depositors." Accountancy Today has contacted PwC for comment.

PwC fined £4.5m over Wyelands Bank audit

By March 2020 the bank had stopped entering into new credit transactions and commenced a wind down of its business

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