INVESTIGATION LAUNCHED INTO FAILED SHOPPING CENTRE GROUP AUDIT

Accountancy watchdog the Financial Reporting Council has launched an investigation into big four firm PwC’s auditing of shopping centre and leisure group Intu Properties plc.

The audit and accountancy regulator will look at PwC’s handling of Intu’s 2017 and 2018 accounts, a period before the firm’s collapse into administration. Following a drop in rents brought on by Covid restrictions, Intu – which had owned some of the UK’s largest shopping and leisure centres as well as properties in Spain – had suffered massive debt problems and struggled to get lenders to agree an 18 month standstill period that would give it breathing space.

The 3,000-strong firm eventually went into administration in June 2020 following failed rescue talks and breaches of debt covenants with lenders. Problems were apparent prior to that as accounts for 2018 – one of the periods under investigation – show debts of £4.8bn and subsequent accounts for following year show the firm made a £2bn loss with then chief executive Matthew Roberts acknowledging “material uncertainty in relation to Intu’s ability to continue as a going concern”.

A statement from the FRC said: “The Financial Reporting Council has commenced an investigation in relation to the audits conducted by PricewaterhouseCoopers LLP of the consolidated financial statements of Intu Properties plc for the years ended December 31, 2017 and December, 31 2018.

The decision was made at a meeting of the FRC’s Conduct Committee on January 24, 2023. The investigation will be conducted by the FRC’s Enforcement Division under the Audit Enforcement Procedure.”

A spokesperson for PwC said: “We will co-operate fully with the FRC in its enquiries. Delivering consistently high quality audits remains our primary focus and we continue to make significant investment in our audit practice.”

Intu had owned major shopping complexes such as Manchester’s the Trafford Centre, Gateshead’s Metrocentre and Dudley’s Merry Hill, among others. PwC resigned as auditor in April 2019 following a competitive tender process.

The FRC has investigated and fined the Big Four accountants on a number of occasions in recent years following a rash of company failures that raised questions over the standard of audits. FRC fines on auditors reached a total of £33.3m last year, up 77% on the previous 12 months.