PwC Faulted for BCCI Audits

From the days when it was known simply as Price Waterhouse, a late-1980s scandal raises its head once again.
Stephen TaubApril 20, 2006

PricewaterhouseCoopers has been ordered to pay nearly £1 million ($1.78 million) in fines and costs by the Joint Disciplinary Scheme (JDS), Britain’s accountancy watchdog, for its work on three audits of Bank of Credit and Commerce International in the late 1980s, according to Accountancy Age.

BCCI, which collapsed in 1991 under a debt load of some $1.6 billion — the world’s largest banking scandal at the time — was also infamous as the subject of U.S. and U.K. probes into money laundering, drug trafficking, and arms dealing.

PwC, then known as Price Waterhouse, was faulted for issuing inappropriate unqualified audits for 1987, 1988, and 1989, reported Accountancy Age, because it failed to properly disclose the related-party relationship between BCCI and another Cayman Islands group, ICIC. That failure put the accounting firm effectively in breach of International Accounting Standard 24, the JDS reportedly found.

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The watchdog agency levied a fine of $268,000 and imposed costs of $1,473,000 for its work on the BCCI audits.

Accountancy Age stressed that according to the JDS, there was no question as to the honesty and integrity of the Price Waterhouse staff who worked on the BCCI audit.

In a statement, current PwC chairman Keiran Poynter reportedly added: “Throughout this matter we have consistently said that Price Waterhouse was deceived, as indeed criminal convictions have proved.”