Where Were the Accountants? PwC Fined – But the Audit Failures Start with Poor Financial Reporting
Accountants responsible to compile financial statements should take careful note of the recent £2.9 million sanction handed to PwC by the UK’s Financial Reporting Council (FRC) for its flawed 2019 audit of Wyelands Bank. While the headlines focus on the audit failures, a deeper question lingers: How were the financial statements prepared without the required dislosures?
Accountants, not auditors, are responsible for the preparation and fair presentation of financial statements. In this case, key disclosures were either missing, inadequate, or misrepresented — and that is squarely the accountant’s domain.
The Core Problem: Missing or Misleading Information
Wyelands Bank, owned by Sanjeev Gupta’s GFG Alliance, had become heavily exposed to related-party transactions. By 2019, 84% of the bank’s business came from entities within the GFG group, yet this wasn’t properly disclosed or flagged in the financial statements. The financials failed to:
Clearly identify and disclose related-party risks
Highlight the concentration of exposure
Adequately address going concern considerations
Show sufficient provisions for expected credit losses.
These are not audit matters at first instance — these are accounting and financial reporting failures.
What Should Accountants Have Done Differently?
South African accountants preparing financial statements, especially for companies with complex group structures, should take away the following lessons:
✅ Understand and Disclose Related-Party Transactions
Section 33 of IFRS for SMEs (or IAS 24 for full IFRS reporters) requires disclosure of the nature, volume, and balances of related-party transactions. If 84% of your client’s revenue is from “sister” companies, this must be made crystal clear in the notes.
✅ Assess and Explain Concentration Risk
When income or assets are linked to a single group of entities, accountants must assess and disclose this risk. This is particularly important where group companies might be cross-dependent or share financing arrangements.
✅ Evaluate Going Concern with a Professional Eye
If the business relies on related-party funding, has exposure to distressed companies, or faces regulatory scrutiny — the going concern assumption must be reassessed and properly documented. Boilerplate statements are not enough.
✅ Own the Financial Statements
Financial statements belong to the entity, not the auditor. Accountants must ensure that financials reflect all material matters, including regulatory concerns, related-party risks, and provisions for doubtful debts.
Then Came the Audit…
PwC’s auditors were fined for failing to detect and respond to these deficiencies. The FRC listed six serious breaches in their work, including poor risk assessment, lack of scepticism, and failure to engage with regulator warnings. However, by the time the audit began, the damage had already been done: the financial statements were already wrong. The question who should be blamed remains open.
