BHS audit partner at PwC faces fine and 15-year ban

Mark Kleinman, City editor

The PricewaterhouseCoopers (PwC) partner who audited BHS’s accounts in the year before its controversial sale by Sir Philip Green is facing a 15-year ban and the biggest personal fine in the history of the profession’s regulator.

Sky News can reveal that Steve Denison, who spent more than 30 years at the UK's biggest accounting firm, left PwC last week following urgent discussions with the firm about the conclusions reached by the BHS inquiry.

Mr Denison is expected to be hit by a £500,000 fine by the Financial Reporting Council (FRC) relating to the quality of the department store chain's audit in the year to August 30, 2014.

An insider said on Tuesday evening that the penalty had been reduced to £325,000 after Mr Denison agreed to settle.

Sources said the FRC penalties against Mr Denison and his former employer were expected to be announced on Thursday, although some details of the settlements were still being finalised and the timing could change.

The imposition of what effectively constitutes a lifetime ban for Mr Denison - who also chairs Yorkshire County Cricket Club (CCC) - will send shockwaves through the UK's accounting profession.

The former PwC partner is understood to have agreed to give an undertaking to remove himself from the register of statutory auditors, which is overseen by the Institute of Chartered Accountants in England and Wales (ICAEW), until 2033.

By agreeing to the removal, Mr Denison, who is thought to be 53, would be ruled out from formal audit work until he is in his late 60s.

It was unclear whether he would also have to step down from his role on the audit committee of Yorkshire CCC.

The FRC penalties will come almost two years to the day since it launched its probe into the audit of BHS, which itself came two months after the department store chain's collapse into administration.

Sir Philip had sold BHS for £1 to Dominic Chappell, a three-times bankrupt, barely a year earlier.

As part of the regulator's conclusions due to be announced this week, PwC will be hit by a £10m fine that will be reduced to around £6.5m after a discount for settling, according to an insider.

That decision will also constitute a record fine from the accountancy watchdog, with The Mail On Sunday reporting last weekend that PwC was braced for a fine of more than £5m.

The scale of the punishments for PwC and Mr Denison will inevitably raise questions about the FRC's motives at a time when its future is being scrutinised as part of a Government-commissioned review.

Greg Clark, the Business Secretary, asked Sir John Kingman, the former Treasury mandarin, to examine whether the FRC is fit for purpose following growing disquiet about apparent conflicts of interest and the pace.

The regulator has responded by issuing a wave of announcements from its enforcement division, including a £4.5m fine against KPMG for its audit work on Quindell, the insurance software group.

One person familiar with the BHS investigation said the penalties were understandably severe but said:

"PwC has fully cooperated with it and recognised the failings of their partner so that lessons can be swiftly learned."

Mr Denison was among the witnesses called to give evidence to an inquiry by MPs into BHS's collapse in 2016.

He told a hearing in May that year that there had been valid reasons for signing off BHS's accounts with a 'going concern' opinion shortly before Mr Chappell bought the retailer.

"The existing management team was trying to turn the business around, and had some success in driving costs down and reducing cash requirements; the cash requirements were lower than the losses shown; and there was a deal which would bring extra cash from the vendor and new cash from the purchaser.

"Compared with the plans, there was no material uncertainty."

BHS was owned by Taveta Investments, the holding company which also owns Arcadia Group, the parent of Top Shop and other high street brands.

BHS's collapse with the loss of about 11,000 jobs triggered a multitude of investigations, including by The Pensions Regulator and the Government's Insolvency Service.

Sir Philip agreed last year to pay up to £363m into BHS's pension scheme to end the threat of action against him by the pensions watchdog, and has faced no further action from the Insolvency Service.

Mr Chappell and other directors of his vehicle, Retail Acquisitions, are still mired in regulatory probes and legal proceedings brought by various bodies.

They also face lengthy bans from serving as company directors.

The FRC, PwC and Sir Philip all declined to comment on Tuesday evening.