PwC Charged $625.3M For Colonial Bank Fraud Scheme

ByPYMNTS

Following a non-jury trial in March, a federal judge has said that PricewaterhouseCoopers LLP (PwC) must pay the Federal Deposit Insurance Corp. (FDIC) $625.3 million after failing to detect fraud between a client and a mortgage lender. Colonial Bank, which was PwC’s client, and Taylor, Bean & Whitaker, which was the mortgage lender, ended up failing to do so in 2009, Reuters reported.

The FDIC, which was the bank’s receiver, had alleged that PwC negligently audited the bank between 2003 and 2005, as well as in 2008. In her decision, U.S. District Judge Barbara Rothstein ruled that PwC’s negligence was most likely the proximate cause of the FDIC’s damages. Rothstein also said that the accounting firm “is responsible for the full measure of damages resulting from its negligence.”

Alabama-based Colonial was one of the 25 largest banks in the U.S., and Taylor Bean, which was based in Florida, was the country’s 12^th biggest mortgage lender.

Forty percent of audits inspected by the International Forum of Independent Audit Regulators (IFIAR) included serious problems, according to news from Financial Times. The IFIAR found accounting lapses in about 40 percent of the 918 audits of public companies in 2017. The inspections targeted businesses with complex accounting needs or those with risky situations, such as merger and acquisition activity.

The IFIAR said the most common issue identified in its inspections was a failure by auditors to “assess the reasonableness assumptions,” followed by a failure to “sufficiently test the accuracy and completeness of data or reports produced by management.”

The analysts’ report found that 41 percent of issues identified by regulators’ auditing inspections in 2017 were related to issues of independence and ethics, such as an auditor having a financial relationship with a client. The publication said the IFIAR’s conclusions add to skepticism over the reliability of major accounting and auditing firms around the world, following the high-profile collapse of several conglomerates due to accounting failures.