PwC has been fined £4.55m for "numerous" breaches after a £20m hole was found in the accounts of Redcentric.
The auditor - one of the world's so-called big four - was found by the Financial Reporting Council (FRC) to have shown a "serious lack of competence in conducting the statutory audit work".
Two individuals from PwC were also fined £200,000 each - discounted to £140,000. PwC's own fine was reduced from £6.5m.
Claudia Mortimore, deputy executive counsel to the FRC, said: "The sanctions reflect the seriousness and extent of the breaches. Professional scepticism was lacking in this audit.
"Had it been applied, it is likely that certain material misstatements would have been detected.
"As this is the second Final Decision Notice involving PwC Leeds' office in recent years, we have mandated that the firm supplements its ongoing monitoring and support for that office, to further improve the quality of audit work in the future."
The account scandal that plagued Redcentric started at the end of 2016 and ran throughout 2017.
The errors have been investigated by both the FRC and the Financial Conduct Authority.
In response to its fine, PwC said: "Since the work in question was completed we have taken numerous steps to strengthen processes."
Redcentric's net assets were written down by £15.8m, with a profit before tax swinging from £5.3m to a loss of £4.2m.
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