The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving,...
June 9 — The U.K. Financial Reporting Council has launched investigations into two leading financial services companies in the U.K.
FRC, which sets and enforces accounting, auditing and actuarial standards in the U.K. and Ireland, said June 8 that it would examine Deloitte LLP's work in preparing, approving and auditing of the financial statements of companies within Serco Group plc for the financial years ended December 31, 2011 and December 31, 2012.
U.K-based Serco Group, is an international outsourcing company that runs transportation, aviation and criminal justice systems.
The probe comes on the heels of a June 6 FRC statement that it would look into the ethical aspects of non-audit services that KPMG Audit plc provided. The services took place during its audit of the financial statements of U.K. clothing retailer Ted Baker plc and an affiliate for the periods ended January 26, 2013 and January 25, 2014.
No Ted Baker plc employees are being investigated, the council noted.
The Ted Baker group reported 456.2 million pounds ($660 million) in revenues for the year ended Jan. 30, 2016, a 17.7 per cent increase from the previous year.
Both Deloitte LLP and KPMG Audit told Bloomberg BNA in June 9 e-mail responses to questions that they would cooperate fully with the FRC investigations.
FRC began the inquiry into Deloitte LLP in response to information the council received from the U.K. Serious Fraud Office. This office is an independent U.K. government agency that is conducting a separate criminal investigation, begun in 2013, into electronic monitoring contracts that Serco and a competitor, G4S, provided in England and Wales.
Serco reported revenues of 3.17 billion pounds for 2015, down from 3.95 million pounds in 2014.
“Deloitte is committed to upholding the highest professional standards,” Deloitte LLP said in its e-mail, and “we take this investigation seriously.”
KPMG Audit said in its e-mail that it has always worked to ensure that the non-audit services it provides to audit clients meet both the letter and the spirit of regulatory requirements.
“However, we recognise that the application of principles requires the exercise of professional judgment and, in this instance, the FRC's view may differ from our own,” KPMG Audit said.
An FRC audit quality review, published in May 2016, of KPMG LLP and KPMG Audit that covered February 2015 to January 2016 called on KPMG to undertake an in-depth review of its consultation and approval processes for providing non-audit services.
“In particular, it should consider the appropriateness of such services in light of the changes to Ethical Standards which take effect in June 2016,” the review said.
In response, KPMG said that it's currently assessing its approach to consultations by professional staff in providing non-audit services.
This assessment includes considering:
FRC currently is investigating KPMG Audit's role in reporting on the Bank of New York Mellon's compliance with U.K. client asset rules (11 APPR 624, 7/3/15).
The Financial Conduct Authority, a U.K. enforcement agency, fined BNY Mellon affiliates 126 million pounds in April 2015 for failing to comply with the FCA's custody rules on client assets.
In addition, FRC started a preliminary inquiry in January 2016 into the KPMG affiliate's audit of Halifax Bank of Scotland, which collapsed in October 2008 (12 APPR 07, 4/8/16)(
FRC didn't indicate a timetable for completing the Deloitte LLP and KPMG Audit investigations, which will be carried out by its executive counsel and its enforcement division.
To contact the reporter on this story: David R. Jones in London at email@example.com
To contact the editor responsible for this story: Laura Tieger Salisbury in Washington at firstname.lastname@example.org
The FRC statements are available at https://www.frc.org.uk/FRC-Press/Press.aspx
FRC's audit quality review of KPMG is available at https://www.frc.org.uk/Our-Work/Publications/Audit-Quality-Review/Audit-Quality-Inspection-Report-May-2016-KPMG-LLP.pdf
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 email@example.com.
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 firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)