Register to get free articles
Want unlimited access? View Plans
Already have an account? Sign in
The Financial Reporting Council has issued two final settlement decisions against KPMG and PwC over the statutory audits of the financial statements of Eddie Stobart Logistics (ESL) for FY17 and FY18.
Against KPMG, the FRC has issued a £1.3m sanction, discounted to £877k, as well as a severe reprimand, a declaration that the 2017 audit report did not satisfy the relevant requirements and an order requiring KPMG to take specified actions to prevent the re-occurrence of the contravention.
Against PwC, the FRC has issued a £3.5m sanction, discounted to £1.9m, a severe reprimand, a declaration that the 2018 audit report did not satisfy the relevant requirements and an order requiring PwC to take actions to prevent the contravention from reoccurring.
ESL, a company operating in the supply chain, transport and logistics business, was listed on the Alternative Investment Market.
KPMG performed the 2017 audit and resigned as auditor in 2018, because of a breakdown in their relationship with ESL’s management, following difficulties in obtaining sufficient appropriate audit evidence. PwC was subsequently appointed for the 2018 audit.
However, ESL in July 2019 announced that a review had been conducted into its prior year financial statements. Following this review, in 2020 ESL disclosed significant prior year accounting adjustments to the 2017 and 2018 financial years.
The admitted failings related to the audit work carried out on property transactions entered into by ESL, dilapidations, accounting for a subsidiary company and property lease accruals.
Claudia Mortimore, deputy executive counsel, said: “There were some serious failings admitted in this case; although they were not pervasive throughout the audit. The case highlights the importance of, firstly, the auditor’s work in ensuring that disclosures in financial statements enable users to understand the impact of particular transactions on the entity’s financial performance; and secondly, ensuring that advice received in technical consultations is effectively implemented.
“The respondents’ exceptional cooperation in the investigation has been recognised in the discount to the financial sanction.”
