21 Nov 2017
Auditing giants that make up the Big Four group should be hit with tougher fines for delivering “seriously poor work”, a review into the regulator’s sanctions regime has found.
The report, commissioned by accounting watchdog the Financial Reporting Council (FRC), said while it did not consider it “appropriate” to set a tariff or range of financial sanctions, “in certain circumstances a fine of £10 million or more could be appropriate for cases involving seriously poor audit work, carried out by a Big Four firm.”
Such a penalty, before any discount, could be “appropriate as being commensurate with the seriousness of the wrongdoing and a meaningful deterrent,” the panel stated.
The study also recommended considering the use of non-financial sanctions “to enhance the quality of future audit and accountancy work,” and the adjustment of settlement discount provisions to encourage timely settlement.
The FRC had commissioned an independent panel to review sanctions imposed under its enforcement procedures following feedback that its penalties were too low.
Firms in the Big Four Group – KPMG, Deloitte, PWC and KMPG – have landed in hot water over the years and paid various penalties.
In October Ernst & Young was hit with a £2,75 million penalty, reduced to £1,8m, for misconduct in the audit of the financial statements of computing supplier Tech Data.
EY Senior Statutory Auditor Julian Gray was also reprimanded and fined 90,000, which was reduced to £59,000 for his role.
The charges related to three audit areas, which included a failure to obtain reasonable assurance about whether the financial statements as a whole were free from material misstatement as well as failure to obtain sufficient appropriate audit evidence and exercise sufficient professional scepticism.
Last year PwC was hit with a £5.1m fine for failures in its audit of accountancy firm RSM Tenon, and a year before that it was ordered to pay three million pounds over the botched audit of UK lender Cattles.
PHOTO: by Nordiske Mediedager
You can claim CPD minutes for this content, by signing up to our CPD WalletFREE CPD Wallet