UK watchdog imposes penalties during review of group at centre of retail savings scandal
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.
LCF raised about £237 million 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. During the 2016 audit, PwC and its audit partner Jessica Miller admitted eight breaches, including a failure to apply sufficient professional scepticism with regard to the risk of fraud. The FRC said that during the year to April 2016, LCF issued £9.2 million in bonds and was growing even more rapidly by the time the audit report was signed.
EY and its audit engagement partner Neil Parker admitted six breaches relating to the 2017 audit, which included “a significant failure to gain a proper understanding of LCF’s business and internal controls, and to apply adequate professional scepticism”. During its 2017 financial year, LCF issued £53 million in bonds. Parker was handed a £47,250 fine and a severe reprimand.
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