Watchdog to probe PwC’s auditing of RSM Tenon

Embattled RSM Tenon, Britain’s only listed accountancy firm, earlier this year revealed a £12.1m black hole in its accounts for 2010 and 2011, which it blamed on “significant errors and a change in accounting policy”.

Big Four professional services firm PwC, which has offices in Leeds, Hull and Sheffield, employing almost 800 people in the region, said it would “vigorously” defend its audits and other work carried out for the company.

RSM Tenon warned over profits for the third time in three months in January, prompting the departure of its Yorkshire-raised chief executive Andy Raynor and chairman Bob Morton.

In the spring, RSM won itself some time by extending its banking facilities until October and unveiled plans to slash about 10 per cent of its workforce or about 300 jobs as well as “rationalise” offices, starting by merging its Wakefield and Harrogate offices onto its Leeds site. RSM Tenon, which in the past also had an office in Sheffield, now has 120 employees in the region across two offices in Leeds and Hull.

In the six months to the end of December, the UK’s seventh-biggest accountancy firm, and major adviser to entrepreneurs and small to medium-sized enterprises (SMEs), recorded pre-tax losses of £70.6m.

The Accountancy and Actuarial Discipline Board (AADB), part of the Financial Reporting Council, confirmed it had launched an investigation into the conduct of certain members of the Institute of Chartered Accountants in England and Wales, and of PwC as auditors of RSM Tenon.

It said the scope of the investigation covers the preparation, approval and audit of the 2010 and 2011 financial statements of RSM Tenon and its subsidiary companies. The regulator also said it was looking at RSM Tenon’s admission to the main market of the London Stock Exchange and the acquisition of RSM Bentley Jennison, which happened in late 2009.

New chief executive of RSM Tenon Chris Merry said in spring that the firm now has “a clear action plan to drive near term profitability and cash generation”.

Adrian Martin, who took over as chairman, announced he was quitting after just a few months in the role. RSM Tenon said it will fully co-operate with AADB’s investigation.

Yorkshire-based sub-prime lender Cattles was planning a claim against PwC over its auditing of the troubled firm. But PwC reiterated yesterday that it was not aware of a claim against it.