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    HomeFinancial/RegulationPwC fined £175m for sub-standard audit of BT Italia's accounts

    PwC fined £175m for sub-standard audit of BT Italia’s accounts

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    The accounting scandal dates back to 2015 and 2016 in BT Global’s Italian unit

    Auditor PwC has been fined £2.5 million and severely reprimanded by the UK’s Financial Reporting Council (FRC) for a “lack of professional scepticism” regarding its audit of BT Italy after an accounting scandal came to light in 2016.

    This was discounted to £175 million after PwC admitted that its auditing on BT’ Global Services’ (as it was known then) 2016-2017 annual accounts had not been sufficiently robust. Likewise a fine of £60,000 levied on PwC partner Richard Hughes who led the audit was reduced to £42,000.

    An adjustment of £513 million in the wake of fraudulent activities being made public was not properly investigated, nor did the auditor leave a proper audit trail, according to the FRC.

    BT first acknowledged accounting issues with its Italian unit in October 2016 and set aside £145 million to rectify it. However, over the next few months it became clear that the problem was more far reaching and serious than had been thought, and BT raised the provision to £500 million.

    In January 2017, news about the scandal wiped more than 20% – about £8 billion – off BT’s share price and put the then CEO, Gavin Patterson, and his strategy and execution under the spotlight.

    KPMG was appointed as BT Group’s auditor in 2018. All four of the UK’s biggest auditing houses have been subject to severe criticism for poor performances.

    The criminal trial resulting from the scandal is still in progress in the Italian courts. There have been allegations of fraud, double billing, fake contract renewals, inflated revenues, bogus transactions linked to bonus targets and hiding BT Italia’s actual financial performance.