LAWYERS for the Centro property group have lambasted the work done by the group's former auditor, PricewaterhouseCoopers, in 2007, telling the Federal Court it resulted in a "botched audit" that highlighted incompetence, carelessness and a lack of supervision inside PwC.
The strong criticism during a class actions case yesterday marks the first time Centro has attacked its former auditors for alleged errors that resulted in misclassifications of billions of dollars of short-term debts and failures to disclose post-balance-date items.
"No doubt PwC will try to put a benign spin on it," Centro Retail Trust's counsel Peter Jopling, QC, told the court yesterday. "This was a botched audit. PwC made some errors that in this case can only be described as extremely basic."
Mr Jopling said while audits could be easy or mundane or complex, the PwC audit team assigned to examine the Centro Properties and Centro Retail groups "simply did not perform in their role in a careful or professional manner".
In lively and extended criticism of the audit firm, Mr Jopling told the court that the senior audit partner in charge of the Centro file, Stephen Cougle, was the sole witness PwC would offer the court, which is hearing a complex, multi-party class action.
He said this was far from satisfactory as the court had a right to hear from the more junior members of the PwC team who compiled Centro's flawed 2006-07 accounts and who, he said, had participated in errors and mistakes that compounded.
"There may well be consequences for PwC," Mr Jopling told the court. "No one is saying that Mr Cougle should not be called, but when it comes to issues of professional negligence, omissions, misleading conduct and the like, a number of people came to some mistakes, particularly junior staff, graduates and the like.
"It is not good enough for Mr Cougle to enter the witness box and say he did not know about a particular audit step or that he relied on others."
Mr Jopling said PwC's audit team completely missed information that was "right in front of their noses", when they had inadequate information they lacked the initiative, time and inclination to follow it up or ask questions, and the work they did was "undertaken in a careless way".
Mr Jopling said the court would hear that Mr Cougle did not adequately supervise his team, especially the younger members, and Centro Retail suspected Mr Cougle had become overly complacent because he was coming to the end of his five years of examining Centro's accounts.
Mr Jopling also rejected PwC's suggestion that Centro had failed to tell the audit team everything. He said it was "an open and transparent audit and any suggestion that PwC was kept in the dark about anyone must really be rejected".
Frequently Asked Questions about this Article…
What is the Centro v PwC case about and why should investors care?
The case involves Centro property group accusing former auditor PricewaterhouseCoopers (PwC) of carrying out a "botched audit" in 2007. Centro lawyers say the audit led to misclassification of billions of dollars of short‑term debt and failures to disclose post‑balance‑date items — issues that can affect how investors read a company's financial health and disclosures.
What specific audit errors has Centro alleged PwC made?
Centro alleges PwC showed incompetence, carelessness and a lack of supervision. The legal complaint highlights missed information, basic errors, failure to follow up on inadequate information and misclassification of short‑term debt plus failures to disclose post‑balance‑date items.
How could misclassification of short‑term debt impact investor decisions?
Misclassifying short‑term debt can make a company's liquidity and near‑term obligations look better or worse than they actually are. For everyday investors, that can lead to misjudging risk, dividend safety or the company’s need to refinance — so accurate audit and disclosure matter for investment decisions.
Who is representing Centro and who did PwC put forward as a witness?
Centro Retail Trust's counsel in court was Peter Jopling QC. PwC offered its senior audit partner on the Centro file, Stephen Cougle, as its sole witness — a move Centro criticised and said junior team members who compiled the accounts should also give evidence.
What accounting items did Centro say were not properly disclosed?
Centro said PwC’s audit failures resulted in misclassification of billions of dollars of short‑term debts and in failures to disclose post‑balance‑date items, both of which are material disclosure issues for financial statements.
Did Centro claim it withheld information from PwC during the audit?
No. Centro rejected any suggestion that it kept PwC in the dark. The company said the audit was open and transparent and that claims they hid information should be rejected.
Why is Centro critical of PwC’s use of junior staff on the audit?
Centro’s lawyers argued the PwC audit team relied on junior staff, graduates and others who made errors that compounded. They say the senior partner did not adequately supervise the team and that those junior contributors should give evidence about the mistakes.
Could there be consequences for PwC as a result of the class action?
Centro’s counsel told the court "there may well be consequences for PwC." The article reports this comment but does not detail any specific outcomes — any consequences would depend on the court’s findings in the multi‑party class action.
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