PwC Fined for Audit Failings in Wyelands Bank Case

PwC has been fined £2.9 million for several breaches in its audit of Wyelands Bank, a defunct lender previously owned by metals magnate Sanjeev Gupta. The Financial Reporting Council (FRC) revealed that the audit of the bank’s 2019 financial statements failed to meet regulatory standards.

The investigation, which began in the summer of 2021, uncovered significant shortcomings in PwC’s execution of its audit responsibilities. It found notable issues with how auditors assessed the bank’s compliance with laws and regulations, scrutinised related party transactions, and evaluated the bank’s loan provisions and overall financial health.

PWC received an initial fine of £4.5 million, which was subsequently reduced to £2.9 million due to the firm’s cooperation during the investigation. Jonathan Hinchliffe, the director responsible for the audits, was also penalised with a fine of £55,000, later adjusted to £33,412.

This case sheds light on the critical need for auditors to maintain a comprehensive understanding of the entities they examine. The FRC indicated that the failures stemmed from a systemic issue within PwC, where the auditing firm’s lack of insight into Wyelands Bank’s operational changes led to significant oversights in risk assessment.

Wyelands Bank had been in operation since 1980, but it became part of the Gupta Family Group (GFG) Alliance in 2016. By 2019, the lender was primarily engaged in invoice discounting, a sector that raised concerns over its concentration of risk, especially given its heavy reliance on the GFG group for business.

Following warnings from the Bank of England’s Prudential Regulation Authority, Wyelands ceased lending activities in March 2020, initiating a wind-down process. The move came ahead of the authority’s directive for the bank to repay its depositors, a process now concluded.

The implications of this audit failure extend beyond financial penalties for PwC. Industry observers emphasise the importance of rigorous auditing standards, particularly during times of significant organisational change. The FRC’s findings spotlight the necessity for auditors to possess a detailed understanding of the business dynamics at play.