The UK Financial Reporting Council dished out fines totaling more than R550 million to audit firms over the last year, according to its latest annual report for the year to March 2019. Roughly half of this was plonked on KPMG.

Significant fines imposed this year include:

  • £3.15 million for KPMG in relation to Quindell plc (discounted from £4.5 million for settlement);
  • £6.5 million for PwC in relation to BHS Limited (discounted from £10.0 million for early settlement);
  • £2.1 million for KPMG in relation to Ted Baker plc (discounted from £3.0 million for settlement); and
  • £3.0 million for Grant Thornton in relation to Nichols Plc and the University of Salford (discounted from £4.0 million for settlement).

Since the year end the FRC announced further closed cases with significant fines, including:

  • £6.0 million for KPMG in relation to Equity Red Star;
  • £4.0 million for KPMG in relation to The Co-operative Bank plc (discounted from £5.0 million for settlement); and
  • £4.2 million for Deloitte in relation to Serco Geografix (discounted from £6.5 million for settlement).

The FRC’s investigations in relation to the failure of Carillion plc are ongoing. “A key area of focus has been the financial performance of Carillion’s major contracts in both the construction and services divisions, and whether Carillion management and its auditors ensured that this was appropriately reported in its financial statements. The investigations are also considering conduct relating to pension liabilities, goodwill, cash disclosures and going concern,” says the FRC annual report.

“In addition to Carillion, our Enforcement Division has 40 other cases in progress, with more cases being opened each year than in the previous year. During the year the Conduct Committee opened 15 new investigations: 12 audit investigations under the Audit Enforcement Procedure (AEP) and three investigations into accountants under the Accountancy Scheme. The increase in the number of investigations opened, compared to two years ago (2016/17) is partly a result of the lower threshold for opening cases under the AEP, compared to the previous Misconduct test.”