Financial accounts of failed department store chain BHS contained “incomplete, inaccurate and misleading” statements following failings by auditor PwC, a new report has ruled.
The Financial Reporting Council (FRC)’s probe into PwC’s handling of BHS said the auditor “should have concluded that a material uncertainty existed” over its ability to continue trading as a going concern outside of Sir Philip Green’s Taveta empire.
BHS collapsed a year after Green sold the business to Retail Acquisitions – a consortium led by three-time bankrupt Dominic Chappell – sparking the loss of thousands of jobs and leaving a £571m black hole in its pension scheme.
The FRC report, a copy of which has been seen by The Sunday Times, has been the subject of a legal wrangle since June, when Green sought an injunction to block its publication.
The tycoon argued that “serious criticisms” within the report could cause Taveta or its directors “potentially irreparable harm”.
But a judge rejected Green’s application and the report is set to be made public in the coming days.
The documents do not contain any findings on BHS following the 2014/15 audit by PwC. The firm has already been fined £6.5m and Steve Denison, the partner in charge of auditing Taveta, has been handed a 15-year ban and a record £500,000 fine.
The report makes eight allegations against PwC and Denison, claiming he spent just two hours auditing BHS prior to its sale in early 2015, delegating much of the work to a junior colleague.
It states that Denison and PwC “failed to guard” against threats to their independence, carrying out eight times more non-audit work than audit work for Green in the 2014/15 financial year.
The report adds that PwC failed to include adequate warnings about what would happen to BHS if Taveta withdrew financial support and therefore did not take into account the impact of its sale to Retail Acquisitions.
That came despite PwC’s tax team separately claiming that BHS was already “effectively bust”.
Denison’s lawyer, Jane Howard of Reed Smith, wrote to the FRC on Friday to argue that the report was not an “accurate, fair and balanced view of events” and said it had omitted key facts.
But Howard added that Denison consented to the report’s publication “in the interests of finality”.
PwC said it was “sorry that our work fell well below the professional standards expected of us”.