When Audits Fail: PwC, Wyelands Bank, and the £2.9M Mistake
What happens when auditors fail to properly understand the business they’re auditing? That’s the question at the heart of a recent ruling from the UK’s accounting watchdog, the Financial Reporting Council (FRC), which fined PwC £2.9 million over serious failings in its 2019 audit of Wyelands Bank.
For business and accounting students, this case is more than a headline—it’s a real-world example of why audit quality, business understanding, and ethical awareness are essential in financial reporting.
Background: What Was Wyelands Bank?
Wyelands Bank wasn’t a household name, but it played a role in the complex global business empire of metals magnate Sanjeev Gupta. Acquired in 2016 by the Gupta Family Group (GFG) Alliance, the bank focused on invoice discounting and was closely tied to other GFG companies. By 2019, a striking 84% of its business came from GFG-linked firms, with £727 million in deposits from 15,000 savers.
That high level of concentration raised regulatory red flags. In 2019, the Bank of England’s Prudential Regulation Authority (PRA) ordered Wyelands to reduce its exposure to related parties. In 2020, the bank stopped lending altogether and began winding down. It was formally shut down the following year.
What Did PwC Get Wrong?
PwC was responsible for signing off Wyelands’ 2019 accounts—but the FRC found that the firm failed on multiple fronts:
- Understanding the Business: PwC did not fully grasp Wyelands’ close connections with the GFG Alliance—a critical oversight, given how heavily the bank relied on related-party transactions.
- Compliance and Regulation Checks: The audit fell short in assessing the bank’s compliance with laws and regulations.
- Going Concern Assumptions: PwC did not adequately challenge whether the bank could continue operating amid mounting risks.
- Loan and Credit Loss Assessment: The review of Wyelands’ loans and potential credit losses lacked rigour, which is especially serious given that loan impairments reached £61.3 million the following year.
In total, the FRC imposed a fine of £4.5 million, reduced to £2.9 million due to PwC’s cooperation. The lead audit partner, Jonathan Hinchliffe, was personally fined over £33,000 and no longer works at PwC.
Why Does This Matter?
As Claudia Mortimore from the FRC put it, the failures in this audit “stemmed from a single common cause”—PwC’s lack of understanding of the business they were auditing. This is a powerful reminder that:
- Auditing is not just box-ticking: It requires critical thinking, scepticism, and a deep understanding of the business model, ownership structure, and risk environment.
- Related-party transactions are red flags: Auditors must treat them with extra caution, especially when a company is closely tied to a complex or opaque business group.
- Regulators don’t just fine companies—they fine individuals: Audit partners can be held personally accountable for serious lapses in professional judgement.
Lessons for Future Professionals
For those studying accounting, finance, or business:
- Get to know the business: Whether you’re preparing accounts or auditing them, understanding how a company operates is foundational.
- Ethics and independence matter: Don’t be afraid to challenge what management tells you. Independence and objectivity are cornerstones of a trustworthy audit.
- Stay alert to changing risks: A shift in ownership or strategy—like Wyelands becoming part of GFG—can significantly alter the audit landscape.
Final Thought
PwC says it has since made major improvements to its audit quality and processes. But the Wyelands case serves as a cautionary tale: in audit, as in life, assumptions can be costly. For business students, it’s a real-world case study in the importance of doing your homework—and asking the tough questions.
