UK financial watchdog fines PwC $4.4 million over Babcock audit

July 16 (Reuters) - Britain's Financial Reporting Council fined PwC and a former audit engagement partner roughly £3.3 million ($4.4 million) over failings in the audit of defence contractor Babcock's 2019 and 2020 financial statements, the regulator said on Thursday.

Here are some details:

• The FRC said PwC admitted to breaches in areas including cash pooling, financing arrangements, aircraft-related costs, goodwill impairments, an intangible asset and long-term contracts.

• According to the regulator, "the auditors failed to exercise sufficient professional scepticism, obtain adequate audit evidence and adequately challenge management's accounting treatment in several areas."

• "We're sorry that some aspects of these audits were not of the standard expected. Audit quality is a constant focus for the firm and the impact of our commitment to continuous improvement has been underlined by recent inspection results," PwC said in a statement.

• The regulator said the failings contributed to material restatements made in Babcock's FY21 financials to correct errors linked to some of the audit areas under investigation.

• In addition to the fines and reprimands, PwC has agreed to review and report to the FRC on its processes for changing audit engagement partners during an audit and responding to signs of rising audit risk.

• PwC has faced several sanctions in recent years, including a fine in 2025 over failings in its audit of Wyelands Bank and in 2022 related to its audit of BT Group's Italian accounts.

($1 = 0.7395 pounds)

(Reporting by Atharva Singh in Bengaluru; Editing by Sonia Cheema and Nivedita Bhattacharjee)