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The Financial Reporting Council has issued a fine and imposed sanctions against KPMG and Anthony Sykes in relation to the statutory audit of the financial statements of TheWorks.co.uk plc.
KPMG was handed a fine of £1.75m, then reduced to £1.023m, as well as a declaration that the audit report signed on behalf of the firm did not satisfy the relevant requirements and an order requiring the firm to take action to prevent the recurrence of breaches.
Sykes was given a sanction of £75,000, then reduced to £43,875, and a declaration that the audit signed did not comply with the relevant requirements.
According to the FRC, KPMG’s audit was flawed by a number of failings, including failure to respond to variances in stock counts identified during controls testing and omitting the test results from the audit file.
Both KPMG and Sykes have admitted the breaches of relevant requirements relating to the audit of inventory existence and their co-operation resulted in the significant discounts applied to the financial sanctions.
Claudia Mortimore, deputy executive counsel, said: “The admitted failings, which critically undermined KPMG’s approach to the audit of inventory at a retail entity, were rudimentary and should not have occurred. The financial and non-financial sanctions, which include measures intended to enhance KPMG’s second line of defence function, are aimed at preventing a repetition of such failings in the future.”
Cath Burnet, head of audit, KPMG UK, said: “We accept that elements of our work for the audit of The Works did not meet the professional standards required.
“Audit quality remains our number one priority and we continue to invest significantly in training, controls and technology to drive further improvements.”
