September 26, 2020

PwC and KPMG Have the FRC Breathing Down Their Necks

The U.K.’s audit cops are curious as to why Eddie Stobart Logistics’ 2018 profits were overstated by £2 million, which resulted in shares of the company being suspended last August, a delay in publishing its 2019 interim results, and Eddie Stobart nearly going out of business.

So the Financial Reporting Council is now breathing down the necks of Eddie Stobart’s last two auditors—PwC U.K. and KPMG U.K., according to a Financial Times report on May 26:

The Financial Reporting Council said it was looking into the audited accounts completed by PwC for the 2018 financial year, and the audit carried out by KPMG for the 2017 financial year.

PwC was appointed to audit Eddie Stobart in 2018 after KPMG resigned, citing a breakdown in its relationship with management caused by difficulties in obtaining evidence during the audit of the 2017 accounts.

PwC signed off the full-year 2018 accounts, but then appeared to run into issues. It was accused last summer by a shareholder in the company of “dithering” over the long-delayed 2019 interim results. In February, the results revealed a string of writedowns of underperforming contracts and leases, a restatement of revenues and profits going back more than two years, and a reduction in the value of its assets of £169m.

PwC and KPMG said they would fully cooperate with the investigation, because Big 4 firms always claim their audit work is of the utmost quality regardless of how bad the circumstances really are.

UK regulator opens probe into PwC and KPMG audits of Eddie Stobart [Financial Times]

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