KPMG hit with £700k fine from UK accounting watchdog

The Financial Reporting Council (FRC) has fined ‘Big Four’ auditor KPMG £700,000 for failing to apply “sufficient professional scepticism ”in relation to the statutory audit of the financial statements of a company for the 2015/16 financial year.

The FRC said its decision to issue the fines “does not question the truth or fairness” of the company’s FY2016 financial statements.

Instead, the breaches of Relevant Requirements related to the audit of items which were material to the consolidated income statement, although the scope of the breaches was “relatively limited in nature”.

They concerned the respondents’ “failure” to apply sufficient “professional scepticism”, or to obtain and document sufficient appropriate audit evidence, in relation to the statutory audit of the company’s reporting of two distinct categories of complex supplier arrangements; namely ‘Promotional Income’ and ‘Overrider Income’.

Nicola Quayle, a senior partner at the firm, was also handed a £45,000 fine, which was discounted to £29,250 for “admissions and early resolution”.

Claudia Mortimore, deputy executive counsel to the FRC, said: “This is a measured and proportionate package of sanctions, which balances on the one hand the limited nature of the breaches, which did not call into question the truth or fairness of the financial statements, with the fact that auditors should have been on alert to pay particular attention to these types of complex supplier arrangements.

“Professional scepticism remains at the core of an auditor’s duty and the FRC will take appropriate action where it has been lacking, as in this case.”

Quayle has agreed that she will not undertake Statutory Audits of Public Interest Entities for a period of two years.