Sanctions against PricewaterhouseCoopers LLP and Mr John Waters

Skip to main content Home News and events News Sanctions against PricewaterhouseCoopers LLP and Mr John Waters News types: Investigations Published: 16 July 2026 This Press notice concerns the outcome of an investigation into the relevant Statutory Audit Firm and Statutory Auditor (as defined in the FRC’s Audit Enforcement Procedure). It would not be fair to treat any part of this announcement as constituting or evidencing an investigation into, or findings in respect of the conduct of, any other persons or entities. Executive Counsel of the Financial Reporting Council (FRC) has issued a Final Settlement Decision Notice (FSDN) under the Audit Enforcement Procedure and imposed sanctions against PricewaterhouseCoopers LLP (PwC) and John Waters, audit engagement partner, in relation to the statutory audit of the consolidated financial statements of Babcock International Group Plc (Babcock) for the financial years ended 31 March 2019 (FY2019) and 31 March 2020 (FY2020). £100,000, discounted for the mitigating factor of exceptional cooperation by 12.5%, and further discounted for admissions and disposal by 32.5%). PwC will also pay Executive Counsel’s costs of the investigation. Babcock is a Public Interest Entity (PIE). It is a multinational corporation headquartered in the UK, and its shares are listed on the Main Market of the London Stock Exchange. It provides engineering services and other services (in the UK and internationally) in relation to maintaining, upgrading, operating and managing significant infrastructure and essential equipment. A number of its contracts are UK government contracts, including contracts with the Ministry of Defence. PwC and Mr Waters have admitted serious and numerous breaches[ [1] ] of Relevant Requirements in relation to the auditing of cash pooling; financing arrangements in relation to a specific overseas contract; capitalisation of certain costs on aircraft; an intangible asset; assessment of goodwill impairment; certain credit notes on aircraft; and two long-term contracts, across both audit years. Material restatements were made in the FY2021 financial statements to correct prior period errors associated with some of the breach areas. PwC and Mr Waters failed to exercise adequate professional scepticism and to obtain sufficient appropriate audit evidence in all those areas of the audits, and to achieve fair presentation and compliance with accounting standards in five areas. In these areas, they failed adequately to challenge management as to whether management’s accounting approach was compliant with the financial reporting framework, and demonstrated an insufficient audit response to the risk of material misstatement. With regard to Mr Waters’ position, he faced severe challenges in discharging his responsibilities as audit engagement partner, including as a consequence of being appointed to the FY2019 Audit at short notice, after the audit had commenced, and not having had the opportunity for any handover from his predecessor. The COVID-19 pandemic made the FY2020 Audit significantly more difficult. As part of the sanctions accepted by PwC, PwC has agreed to examine and report to the FRC on aspects of its processes in respect of the change of audit engagement partners during an ongoing audit and the response to indicators of increasing audit risk during an engagement. The Respondents’ exceptional level of cooperation during the investigation by Executive Counsel of the breaches is demonstrated by the following facts and matters: “In March 2023, the FRC announced sanctions against PwC and two audit engagement partners in relation to the FY2017 and FY2018 audits of Babcock and one of its subsidiaries. Following a separate investigation in relation to the FY2019 and FY2020 audits, PwC and the new audit engagement partner appointed in relation to those financial years have admitted serious and numerous breaches. These included significant contraventions of the fundamental requirements to perf