PwC faced the Inquisition at a UK parliamentary committee, charged with investigating the ongoing fiasco that was Northern Rock. As you recall, PwC was not only Northern Rock’s auditor, but collected almost $1.4 million in additional fees as a consultant advising them on issues related to the securitization of the subprime assets via their phantom organization Granite.
One juicy possibility is that PwC will be forced somehow via litigation or pure shame into giving back all their fees. This I’ve got to see!
PricewaterhouseCoopers has been criticised by a parliamentary committee for helping Northern Rock to sell its mortgage assets while also acting as its auditor.
The Treasury select committee heard today that PwC was paid £700,000 last year for writing 10 “comfort letters” for Granite, the company that Northern Rock uses to raise funding through the wholesale money markets by selling on its mortgages.
Michael Fallon MP questioned whether PwC should have earned fees from the Granite operation while also earning £1.1m for auditing Northern Rock and its subsidiaries.
“You’ve audited and provided comfort letters for the biggest banking disaster in 150 years,” Fallon told PwC’s head of assurance Richard Sexton.
These letters were used by Granite to reassure potential purchasers that the financial information contained in its sale prospectuses was accurate. Northern Rock’s reliance on Granite forced it to seek emergency funding when the wholesale money markets dried up this summer.
Fallon suggested that PwC should repay its fee to the taxpayer, now that Northern Rock’s emergency borrowing was approaching £30bn.
The accountancy firm was also criticised for not recognising the potential problems at the bank, but Sexton insisted that it had carried out the work of an auditor competently, and had not advised Northern Rock on the securitisation of its mortgages.