PwC on the offensive at Mayflower tribunal

Lawyers for PricewaterhouseCoopers poured scorn on the AIDB’s case against
the firm this week, as it pledged to pursue costs for complaints already
dropped.

The firm is facing the first public tribunal of an accountancy firm over its
audit work at busmaker Mayflower.

Referring to the ‘red flags’ which the AIDB alleged should have given the
firm cause to worry about whether Mayflower could continue as a going concern,
Michael Pooles QC said: ‘They’re not even yellow flags… this is a company which
has its tough time, is well-managed, is investing hard, is still paying its
dividends and still pays its dividend in June 2003.

‘It was going through expansion into new and interesting areas… at the same
time relocating and modernising which involved capital investment of a
significant amount.’

Neither analysts nor non-executives nor any other groups picked up the issues
that the AIDB says PwC should have detected, Pooles said.

The firm has been remarkably successful thus far in its defence. Firms have
found it difficult to avoid regulatory censure in the past at the AIDB’s
predecessor body the Joint Disciplinary Scheme.

Last week the regulator dropped an allegation that PwC should have analysed
Mayflower’s invoicing system more closely to pick up what the AIDB had argued
were inappropriate practices.

The AIDB said it had dropped the claim after consulting with expert
witnesses. A further attempt to refine a new claim against PwC was thrown out by
the tribunal panel, for which the firm also wants to recover its costs.

PwC lawyers said that the firm was seeking costs in relation to the defence
of that claim. The body provides for costs, which could run into the tens of
thousands.

PwC has hired a QC and other top lawyers to defend itself in the first public
trial of an accountancy firm.

The disciplinary body outlined its claims against former Mayflower finance
director David Donnelly this week. He stands accused of not informing auditors
of a shortfall at the company’s Falkirk office.

While the AIDB has accused Donnelly of not disclosing the problems with
Mayflower’s Falkirk shortfall by 8 December, when a meeting was held with the
board, his lawyers held out that this expectation of Donnelly was ‘unrealistic’
since the problem was not known to Donnelly at that time.