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The Financial Reporting Council (FRC) has issued a financial sanction of £1.25m on Deloitte in relation to the statutory audit of the financial statements of the construction company SIG pls for the financial years ended 31 December 2015 and 31 December 2016.
The council also issued a £50k financial sanction against Simon Manning, Deloitte’s audit engagement partner.
According to the FRC, Deloitte and Manning both cooperated in the investigation and admitted the breaches. Therefore, a 27.5% discount has been applied to the financial penalties.
This comes as the firm and Manning admitted two breaches of Relevant Requirements in relation to audit of supplier rebates and cash, as they failed to obtain and document sufficient appropriate audit evidence and the testing of rebate debtor balances.
They also failed to exercise sufficient professional scepticism by failing to investigate indications that rebate debtor balances may have been overstated.
Jamie Symington, deputy executive counsel at FRC, said: “These breaches concerned two discrete areas of the audit of a particular subsidiary of SIG plc. They involved contraventions of requirements which are fundamental to the role of the independent auditor, and were associated with material misstatements in SIG plc’s accounts which had to be corrected.
“The breaches in respect of supplier rebates were made all the more serious by the fact that the FRC had highlighted these complex supplier arrangements as requiring particular attention from auditors.”
A spokesperson from Deloitte UK said: “We are disappointed that our work on the FY15 and FY16 SIG plc audits, relating to the audit of supplier rebates and cash, fell short of the high standards expected of us. We have learnt from the matters identified by the FRC and remain committed to audit quality and its continuous improvement.”
