The Financial Accounting Resource Center™ is a comprehensive research service that provides the full text of standards, the latest news from the Accounting Policy & Practice Report ®,...
The U.K.'s accounting regulator fined KPMG LLP 3.15 million pounds ($4.2 million) for weaknesses in its audit of a technology company, Quindell Plc, as questions mount over both auditing standards in the U.K. and the efficacy of the watchdog itself.
The Financial Reporting Council said KPMG has “admitted that their conduct fell significantly short of the standards reasonably to be expected” in two areas of the audit: revenue recognition for legal services and the sale and purchase of software licenses.
The firm was reprimanded and originally fined $6 million, which was reduced to $4.2 million when it agreed to settle the case. William Smith, KPMG’s audit engagement partner for Quindell (since rebranded Watchstone Group Plc) will pay a $112,000 fine, reduced from the original $160,000.
A KPMG spokesman said in a statement: “We regret that some aspects of our audit for the year ended 31 December 2013 did not meet the required standards.”
“As we stated in our audit opinion for the following year, certain information given to KPMG contradicted representations previously made by former members of management. Nonetheless, we accept the FRC’s findings that in two specific areas of the audit, our challenge for the year ended 31 December 2013 should have gone further,” the spokesman said.
KPMG is also being investigated by the FRC for its audit of Carillion Plc, a construction and outsourcing group that collapsed in January. The FRC is expected to soon announce the results of its investigation of another Big Four firm, PricewaterhouseCoopers LLC, over its audit of BHS Ltd., a retailer that went into bankruptcy in 2016.
BHS had been sold the year before its collapse for 1 pound after publishing unqualified accounts for the year to Aug. 30, 2014.
The series of audit failures has led to political calls for investigations into auditing standards in the country, and the dominance of the Big Four accounting firms—Ernst & Young LLP, Deloitte LLP, KPMG, and PwC.
A parliamentary report into the collapse of Carillion also called the FRC “toothless” and “useless” and in April the government launched an independent review of the watchdog.
The government’s business department June 6 set out the scope of the review and called for evidence, saying that the FRC’s role and purpose, effectiveness, legal status, governance and leadership would be examined.
The review could lead to the FRC being closed or merged into the Financial Conduct Authority, which regulates U.K. financial services companies.
When the FRC announced the review in April, it said it would double the maximum fine that it could impose on Big Four firms for poor audit work to $13.3 million.
Its largest fine to date was the $6.8 million penalty imposed on PwC in August 2017 for its audit of RSM Tenon Plc, a professional services firm that went into insolvent administration in 2013.
To contact the reporter on this story: Michael Kapoor in London at firstname.lastname@example.org
To contact the editor responsible for this story: S. Ali Sartipzadeh at email@example.com
Copyright © 2018 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)