Reuters: Regulatory News: UK auditing watchdog plans tougher penalties

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UK auditing watchdog plans tougher penalties Apr 18th 2012, 15:52 Wed Apr 18, 2012 11:52am EDT * Watchdog moving to fines based on turnover, income * New cases in pipeline likely to face new fines regime LONDON, April 18 (Reuters) - Britain's auditing watchdog unveiled draft guidelines on Wednesday for imposing "credible" fines after top auditor PricewaterhouseCoopers (PwC) escaped earlier this year with a relatively light penalty. The Financial Reporting Council's accountancy and actuarial discipline board (AADB) said past fines were no longer an adequate benchmark for maintaining public confidence. It fined PwC, one of the world's "Big Four" auditing firms, 1.4 million pounds in January for wrongly telling local regulators for seven years that JPMorgan Securities was keeping client money safe. Although a record fine, it was a fraction of PwC's gross revenue which topped $29 billion in its financial year to end-June 2011. The present system is prone to haggling by companies at tribunal over the size of fines imposed, which are typically based on the severity of penalties handed out in the industry previously. Policymakers are also questioning why auditors gave banks a clean bill of health just before many had to be rescued with taxpayer money in the 2008-09 global financial crisis. The AADB said it wants the new guidance in place quickly as there are a number of disciplinary cases coming up. A public consultation will end July 11. "The time is right for a genuine debate about the appropriate level of sanction for professional misconduct by accountants," AADB Chairman Timothy Walker said in a statement. Disciplinary hearings take place before an independent tribunal which, on paper, has unlimited powers of sanction but typically bases fines on cases going back many years. The AADB wants the tribunal to fine auditing firms a percentage of annual turnover, with a similar approach based on total remuneration for punishing individual partners. The aim is to end up with fines that are "proportionate to the context in which the accountancy profession operates today, and will act as a credible deterrent to future misconduct". It would become a matter of course to take action against individuals and the auditing firm in all disciplinary actions. The top four accountancy firms -- also including KPMG, Ernst & Young and Deloitte -- audit 99 percent of British blue-chips. The four are bigger than many of their clients. Link this Share this Digg this Email Reprints

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