KPMG hit with half of UK accounting fines as penalties hit new record

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UK accountancy firms were fined a record £46.5million last year, data showed on Thursday, with more than half of the total levied against KPMG after its involvement in a series of failures to audit and misconduct scandals.

The figures underscore the scale of the problems at KPMG, which audits more FTSE 100 companies than any other firm and is battling to clear a backlog of investigations into its work.

Fines across the sector reached £46.5million before rebates for admissions and settlements, up from £16.7million a year earlier, according to data from the Financial Reporting Council. This eclipsed the previous record of £42.9million in the year to March 2019.

The level of fines after remissions, which are awarded by the FRC to encourage companies to cooperate with its investigations, has reached a new record of £34.6million.

KPMG received four fines, more than any other firm, resulting in penalties of £23.9m against the group and its partners, reduced to £21m after remissions. He was also ordered to pay millions of pounds to cover the costs of FRC investigations.

The heaviest penalty against KPMG was a £13million fine for conflict of interest when it advised the restructuring and sale of mattress company Silentnight in 2011 to a private equity group it was trying to attract as a customer. He was also fined for his audits of Rolls-Royce, Conviviality and Revolution Bars.

The figures exclude the £14.4million fine imposed on KPMG this week, the largest ever in the UK, after an industry tribunal found its auditors had misled inspectors examining its audit of the 2016 accounts of Carillion, the collapsed contractor, and the 2014 accounts of British company Regenersis.

KPMG said last week that a sharp improvement in its scores in the FRC’s annual audit quality inspections showed its strategy was working. The watchdog welcomed the improvement but said it was “not a trend yet”.

Among other firms, Grant Thornton was fined three times, including for its audit of Patisserie Valerie, the cafe chain that collapsed due to suspected fraud in 2019. The UK’s sixth largest audit firm Revenue United was also fined for its failure audits. government contractor Interserve and retailer Sports Direct, now called Frasers Group.

PwC was fined for its audits of construction groups Kier and Galliford Try, while EY and Deloitte were penalized once each.

All of the fined firms reported rising profits in their most recent results, helped by the explosion in demand for transaction advice and advice and rising audit prices.

The number of non-financial sanctions imposed by the FRC, such as reprimands, exclusion from the profession or corrective measures, more than doubled to 62 in the year ending March.

“High quality financial reporting and auditing is essential to give users of financial statements confidence in the accuracy of these statements and to maintain confidence in UK businesses,” said Elizabeth Barrett, the app’s executive director. of the FRC.

The increase in non-financial penalties “reflects a continued focus on identifying the underlying causes of failure and achieving long-term positive change,” she said.

The number of people working in the FRC’s law enforcement division rose by more than a fifth to 64 in the year to March. The regulator has grown rapidly in anticipation of being renamed the Audit, Reporting and Governance Authority and gaining new powers as part of long-awaited sector reforms.

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