Kier and Galliford audits by PWC ‘under investigation’

The accounting watchdog has launched an investigation into PWC’s auditing of Kier and Galliford Try’s accounts.

The Financial Reporting Council (FRC) started looking into PWC’s work on the contractors’ accounts after concerns were raised during a routine quality check, according to the Financial Times. The treatment of long-term contracts and revenue recognition is reportedly being scrutinised by the FRC.

PWC was Galliford Try’s auditor until late 2019, when it was replaced by BDO as part of a normal rotation of accountants.

Galliford Try was forced to restate its accounts in 2020 when the FRC concluded it had been wrong to add £100m to its balance sheet. The contractor had previously said it was likely to receive the money as a result of a claim against Transport Scotland over the Aberdeen Western Peripheral Route contract. It ended up receiving £32m from the claim.

The FRC also found fault with Galliford Try’s accounting of claims on other projects, claims made against its supply chain, the way it transitioned to new accounting standards and its cashflow statements. Overall, the company was forced to reduce its net assets for its 2018 financial year by £94.3m and its 2019 financial year by £72.4m.

Kier fell foul of the watchdog in 2018 when it ruled that a £40m profit on a business sale should have been classed as coming from a discontinued rather than continuing operation. The restatement changed its previous results from a £25.8m group pre-tax profit to a £14.2m pre-tax loss. The post-tax profit of £11.8m was unchanged.

The FRC is already investigating BDO’s audit of the 2019 accounts of the collapsed NMCN and KPMG’s auditing of Carillion.

The FRC and PWC have been contacted for comment.