FRC under pressure to publish BHS audit probe

The chair of the House of Commons' work and pensions committee, MP Frank Field, has written to the Financial Reporting Council (FRC) asking why it has yet to publish the report into PwC's audit of BHS

In a letter to FRC chief executive Stephen Haddrill, the MP notes that it is more than three weeks since a High Court judgement was passed allowing the report to published, saying: ‘More than a month has now passed since Mr Justice Nicklin gave permission for the FRC to publish its report on PwC’s audit of BHS. That investigation—the findings of which were accepted entirely by PwC—led to the levying of a record fine. But its contents have still not seen the light of day'.

Mr Field expressed concern that no firm date had been given for the publishing of the report, which is thought to be highly critical of PwC, and suggested that the committee would publish its own copy, noting that the option was ‘open to the Committee, when it meets again in September, to consider whether to report that document to the House of Commons so that it can be published’.

He also asks what involvement the Taveta group and its representatives have in the processes the FRC is currently following, and whether the Insolvency Service has had access to the settlement documents held by the FRC.

The FRC fined PwC £6.5m in June for its part in the collapse of the retailer BHS. Philip Green, who sold the chain to former bankrupt Dominic Chappell, recently applied for an injunction to prevent the accounting watchdog from publishing the report on the grounds that the report would cause 'potentially irreparable harm' to the directors and employees of Taveta, the Green-owned company that made the sale.

At the High Court, Mr Justice Nicklin rejected the application and allowed the report to be published, but did note that there was a duty of fairness in the FRC's actions towards vulnerable parties.

In an earlier letter, dated 13 July 2018, Mr Field argued that, ‘PwC’s failure over BHS is not an isolated incident when it comes to the going concern basis. It feels like once again this is a case of skewed incentives working against the best interests of ordinary stakeholders, such as employees and pensioners.

‘On the one hand you have management teams who have little incentive to openly admit to the risk of their companies collapsing and on the other you have an audit team whose whole audit approach would need to be reassessed if it was felt that the going concern basis was not appropriate’.

The collapse of BHS in 2016, prompted by a £571m pension deficit, led to the closure of 146 shops and the loss of 11,000 jobs. During Philip Green’s ownership of the company, he and other investors collected more than £580m in interest payments, rent agreements and dividends.

Report by James Bunney

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