Financial Supervisory Authority of Norway finds PwC failed to obtain sufficient audit evidence on bank expected credit losses and breached independence rules on additional services

The Financial Supervisory Authority of Norway has published an inspection report on Pricewaterhousecoopers AS, concluding that the firm breached the Auditor Act in its audit of a listed bank’s expected credit losses on loans and breached EU audit regulation requirements when providing additional services to the bank. On the audit engagement, the authority found insufficient appropriate audit evidence and insufficient professional scepticism, citing weaknesses in testing the bank’s credit risk classification processes, identification of significant increases in credit risk and defaults, and the assessment of collateral values for individually assessed exposures. It also noted that shortcomings in the audit work may have affected required communications to the audit committee and the bank regarding internal control weaknesses. On non-audit services delivered in 2024, two services were provided without prior audit committee approval, which the authority assessed as a combined gross breach, alongside failures to report the breaches to the audit committee, to register/report them internally as required, and to document independence assessments on an adequately informed basis, including incomplete service descriptions and the absence of an engagement letter for one service. The report records that PwC began corrective work during the inspection and is asked to consider further strengthening, referencing similar observations in a 2023 review.