KPMG Fined £1.46 Million by UK Watchdog Over Audit Failings

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The Financial Reporting Council (FRC) assessed a £1.46 million penalties on KPMG for audit irregularities.
The Financial Reporting Council (FRC) assessed a £1.46 million penalties on KPMG for audit irregularities.

Britain’s accounting watchdog, the Financial Reporting Council (FRC), has imposed a fine of £1.46 million on KPMG for deficiencies in its audit of advertising company M&C Saatchi plc in 2018. 

The investigation was initiated following accounting errors discovered by M&C Saatchi, leading to the restatement of its 2018 accounts.

Breach Details:

KPMG and Adrian Wilcox, the audit engagement partner, admitted to breaches related to failures in auditing with sufficient professional skepticism regarding certain payments that inflated revenue by £1.2 million. 

Additionally, there were lapses in auditing journal entries across subsidiary companies and in documenting reasoning concerning the retention of rebates under a contract.

Sanctions and Fines:

If not for admitting to the breaches, KPMG would have faced a £2.25 million fine. Instead, it was fined £1.46 million, and Wilcox was fined £48,750 with a severe reprimand. KPMG also covered the investigation costs.

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Cath Burnet, head of audit at KPMG UK, expressed regret over the deficiencies in the 2018 audit of M&C Saatchi. She emphasized the firm’s commitment to learning from past cases and investing in audit quality, training, controls, and technology to enhance their audit practice.

Mitigating Factors:

The FRC cited KPMG’s cooperation and ongoing “audit improvement programs” as mitigating factors. These efforts reduce the likelihood of recurring failings identified in the M&C Saatchi audit.

Previous Enforcement Action:

KPMG faced a £21 million FRC fine in October for audit failures in the case of builder Carillion, indicating a pattern of deficiencies in its auditing practices.

James Adam

James Adam, a noted business writer for CEO Times Magazine, specializes in insightful industry analysis and executive profiles. Known for his clear, concise style, James offers readers an expert perspective on global business trends and market dynamics.

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