UK watchdog opens probe into PwC audit of Cattles

LONDON, July 23 (Reuters) - Audit firm PricewaterhouseCoopers [PWC.UL] is to be investigated over its financial oversight of troubled British sub-prime lender Cattles CTT.L, the UK's accountancy watchdog said on Thursday.

If PwC is found to have acted improperly as Cattles’ auditor it could face an unlimited fine or the withdrawal of practising licenses.

PwC said it would fully cooperate with the investigation by the Accountancy and Actuarial Discipline Board (AADB). “We... will vigorously defend our work,” it said.

Cattles sacked its finance director and five other senior executives earlier this month after the firm failed to set aside enough funds to cover bad loans, saddling it with an 850 million pound ($1.4 billion) hole in its accounts.

Cattles, whose shares were suspended in April, blamed the debacle on a “breakdown in internal controls.”

The AADB said the probe would cover PwC’s conduct in three areas:

-- the preparation, approval and audit of the financial statements of Cattles and its Welcome Financial business for the year to Dec. 31, 2007

-- the preparation, approval and review of the interim financial statements of Cattles for the six months ended June 30, 2008

-- public statements covering the financial position and performance of Cattles and/or Welcome Financial Services between Feb. 28, 2008, and Feb. 20, 2009.

An independent tribunal will rule on any disciplinary complaints that emerge from the investigation and decide whether to impose any sanctions. (Reporting by Tim Castle; Editing by Tim Dobbyn)