FRC fines Grant Thornton £650,000 over ‘inadequate’ audit

Grant Thornton and one of its Audit Engagement Partners have been fined £650,000 by the FRC in relation to the statutory audit of the 2016 financial statements of a publicly listed company.

The sanctions against the Big Four accountancy firm are:

• A fine of £650,000 for Grant Thornton (discounted for admissions and early disposal to £422,500),
• A fine of £20,000 for the Audit Engagement Partner (discounted for admissions and early disposal to £13,000)
• A declaration that the 2016 Audit report signed on behalf of Grant Thornton did not satisfy certain ‘Relevant Requirements’

The FRC said Grant Thornton and the Audit Engagement Partner will also pay all of executive counsel’s costs of the investigation.

The admitted breaches of ‘Relevant Requirements’ relate to the audit work carried out on the publicly listed company’s principal assets, and an area identified as a significant risk.

The FRC noted that the work done on the sample of those assets was “inadequate” and “failed” to select an audit sample that was sufficient to reduce the sampling risk to an acceptably low level.

The audit team also placed “undue reliance” on the company’s externally appointed experts in the valuation of the assets and did not appropriately consider the use of an auditor’s expert.

The FRC said: “The breaches by the audit team led to a failure to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions about the valuation of the assets.

“There were also failures to exercise sufficient professional scepticism and to prepare adequate audit documentation.  However, none of the breaches of Relevant Requirements were either intentional, dishonest, deliberate or reckless.”