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The UK accounting watchdog has imposed multimillion-pound fines on PwC and EY for failures in their audits of London Capital & Finance, the defunct investment group at the centre of one of the biggest retail savings scandals in recent years.
The Financial Reporting Council said on Tuesday that it had levied penalties of £4.9mn and £4.4mn against PwC and EY, respectively, for “multiple breaches” during their reviews of LCF’s accounts in 2016 and 2017.
Oliver Clive & Co, a smaller accounting firm, was handed a £42,000 fine for LCF’s 2015 audit.
LCF raised about £237mn from investors as it promised returns of up to 8 per cent through so-called minibonds. Its collapse in 2019 triggered criminal and regulatory investigations, as well as an inquiry into the Financial Conduct Authority’s supervision of the company.
“In each of these three audits the auditors failed to identify and assess the risks of material misstatement through understanding LCF’s business,” said Jamie Symington, deputy executive counsel at the FRC.
“These breaches are made considerably more serious by the fact that all of the auditors knew they were auditing an expanding business which was engaged in selling unregulated financial products to retail investors, and that potential investors might place reliance on the clean audit opinions.”
In a statement, EY said: “Our 2017 audit of London Capital & Finance fell short of our standards and for this we apologise. We have taken significant steps to address the issues identified and we are committed to learning from our mistakes.”
PwC did not immediately respond to a request for comment. Oliver Clive & Co could not immediately be reached for comment.