$1.1 Billion Error in Australian MNC? Yes, Says Mum PwC Partner
SYDNEY, Australia – In the latest development concerning the debt classification error in Australian MNC Centro Properties Group, a PricewaterhouseCoopers partner admitted he was silent on the matter on the belief that he needed not to say again what the firm’s accounting manager has already raised at a “high level.”
Late in 2010, the Big Four accounting firms gave the same sound to the House of Lords Economic Affairs Committee in an inquiry to their role in the 2008 financial meltdown, with Deloitte senior partner and chief executive John Connolly telling the Lords that the decision of signing off a bank’s accounts as a ‘going concern’ was made on grounds that the government would offer its support whatever would transpire thereafter.
At issue in Centro’s case is the $1.1 billion error in the classification of its debts in which Stephen Cougle, a PwC partner, failed to identify as short-term debt and was due for payment on December 2007.
Cougle admitted he kept silent about the debt classification error in the Australian MNC in a meeting attended by Centro’s audit committee members in September 2007.
According to Cougle, he believed the debt classification error did not have to be raised again since Paul Belcher, accounting manager of the Australian MNC, has already raised the $1.1 billion error.
Cougle told the Federal Court in Melbourne that Belcher raised the issue at a “high level,” meaning there was no detail offered regarding it. However, Belcher previously denied Cougle’s claim, saying he said nothing about the error during the meeting.
Cougle’s claims also contradict the statement of PwC auditor Andrew Cronin who said his request for Belcher to draw the directors’ attention to the revised accounting standards at the committee was failed by Belcher.
Subsequently, the Australian Securities and Investments Commission has filed charges against eight officers of Centro Group for allegedly breaching their duties when they signed the accounts that contained the debt classification error.
Late last week, the ASIC also tagged PricewaterhouseCoopers and KPMG in the suit for allegedly failing to interpret the accounting standards changes that were implemented after 2005.
The suit claimed that a KPMG partner failed to interpret the changes in accounting standards and was subsequently forced to agree to an undertaking while Deloitte had allegedly misinterpreted the information posted on Centro’s website.
In addition, Cougle admitted that before finalization of the accounts, PwC staff received letters from two banks confirming Centro’s more than US$500 million short-term debts on top of the US$1.1 billion. This amount was likewise omitted by PwC in Centro’s accounts.
In a hearing with the court on April 13, the final changes made to the Australian MNC’s accounts proposed by PwC and Centro officers have been allegedly omitted in the published accounts signed by the directors.