Audit highlights incompetence, carelessness and lack of supervision inside PwC, Federal Court told.
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 did Centro allege about PwC’s 2007 audit of the Centro groups?
Centro’s lawyers told the Federal Court the 2007 PwC audit was a “botched audit,” alleging incompetence, carelessness and a lack of supervision that led to serious audit errors in the Centro Properties and Centro Retail groups’ 2006–07 accounts.
What specific audit errors did Centro say PwC made?
Centro alleged PwC misclassified billions of dollars of short‑term debts and failed to disclose post‑balance‑date items, missed information that was “right in front of their noses,” and undertook work in a careless way according to the court submissions.
Who was the PwC witness named in the Federal Court hearing about the Centro audit?
PwC’s senior audit partner on the Centro file, Stephen Cougle, was the sole witness PwC offered the court, according to Centro’s counsel, who said the court should also hear from more junior members of the audit team.
Why did Centro’s lawyers criticise PwC’s supervision of the audit team?
Centro argued the senior partner did not adequately supervise junior staff, that mistakes by graduates and junior team members compounded, and that the audit team lacked initiative, time or inclination to follow up on important information.
What is the legal context of the dispute between Centro and PwC?
The criticisms were made during a complex, multi‑party class action in the Federal Court, with Centro’s lawyers claiming professional negligence, omissions and misleading conduct arising from the 2006–07 audits.
How could alleged audit errors like misclassifying short‑term debt affect everyday investors?
As the article highlights, alleged misclassification of billions in short‑term debt and failures to disclose post‑balance‑date items can make company accounts misleading, which is important for investors who rely on audited financial statements to assess a company’s financial health.
How did PwC respond to Centro’s accusations in court?
PwC put forward Stephen Cougle as its witness and suggested Centro may not have told the audit team everything; Centro’s counsel rejected that claim, saying the audit was open and transparent and that suggestions PwC was kept in the dark should be rejected.
Could there be consequences for PwC as a result of the Centro case?
Centro’s counsel told the court there may well be consequences for PwC, but the article notes this is an allegation being heard in the class action — any actual consequences would depend on the court’s findings.
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