The UK Accountancy and Actuarial
Discipline Board (AADB) has launched an investigation into the
conduct of PricewaterhouseCoopers UK (PwC) during its time as
auditor of defunct UK financial services company Cattles.
Cattles, a publicly-listed company,
had 183 branches across the UK and in 2007 reported net assets of
£595 million ($984 million).
The investigation will focus on the
preparation, approval and audit of the financial statements of
Cattles and its subsidiary Welcome Financial Services for the year
ended 31 December 2007.
It will also examine the preparation, approval
and review of the interim financial statements of Cattles for the
six months to 30 June 2008; and statements covering the financial
position and performance of Cattles and Welcome Financial Services
Limited between 28 February 2008 and 20 February 2009.
The company’s activities included non-standard
consumer credit, debt recovery and invoice finance, providing
customers who do not have access to mainstream credit facilities
with unsecured personal loans, second charge secured loans and hire
purchase for cars.
In April 2008, Cattles announced a rights
issue to raise an extra £200 million and in its third-quarter
results, issued in November, showed its instalment arrears had
risen from 7.2 percent to 7.4 percent in four months.
Subsequently, the board delayed issuing its
preliminary 2008 results in February 2009 and suspended its lending
to new customers.
Later in the month, the lender warned its
profit before tax would be substantially lower than current market
expectations sending its share price plummeting.
Fitch Ratings steadily moved Cattles’ credit
rating from an affirmed BBB rating in June 2008 through to a BB+
downgrade in December 2008, dropping to CC by June 2009.
The firm’s finance director James Corr and the
finance director of its principal lending arm Welcome Finance,
along with four other executives, have been fired.
A PwC spokesperson said the firm would fully
co-operate with the AADB investigation but that it would
“vigorously” defend its work.