PwC Admits JP Morgan Audit Failings

PWC HAS ADMITTED to mistakes in relation to a formal complaint over its audit of JP Morgan Securities (JPMSL) for the seven years to 31 December 2008.

Accountancy and Actuarial Disciplinary Board chief Cameron Scott welcomed the firm's "responsible" position, saying: "Those that accept mistakes can learn lessons from them."

PwC failed to report that JPMSL's Futures and Options business did not segregate client money, in contravention of rules set out by the Financial Services Authority.

The firm lacked "due skill, care and diligence" and did not give "proper regard" to technical and professional standards, the AADB found.

A sub-committee of the Financial Reporting Council, the AADB has referred the case to an independent panel to decide on imposing sanctions. Led by a senior lawyer, other panel members include an accountant and one non-expert.

Cameron said firms accepting AADB decisions is "not normal, but very welcome". In 2008, McClure Watters admitted shortcomings over the audit of the Emerging Business Trust, and a current AADB case is expected to end with the firm admitting fault in the near future.

PwC's disciplinary hearing is likely to take place in late September or early October. Any findings could feed back into ongoing internal review at the FRC, potentially sparking revised guidance on the audit of client assets.