Financial Reporting Council imposes sanctions against KPMG
KPMG gets a £700,000 fine in relation to the statutory audit of the financial statements of a company for the 2015/16 financial year.
The Financial Reporting Council (FRC) today announces the imposition of sanctions against KPMG LLP and Nicola Quayle (formerly the Senior Partner for Manchester), in relation to the statutory audit of the financial statements of a company for the 2015/16 financial year.
The FRC imposed imposed a financial sanction of £700,000 (discounted for admissions and early disposal to £455,000), and a reprimand on KPMG. The firm also agrees to a declaration by Executive Counsel that, as a result of the adverse findings set out in the Final Decision Notice issued by the FRC, the Statutory Audit Report did not satisfy the Relevant Requirements.
Also, within a period of two years from the date of the Decision Notice, KPMG will have to undertake a quality performance review (QPR) of three Statutory Audits for which Ms Quayle is the Statutory Auditor, such QPRs to be conducted by a Statutory Auditor from KPMG’s London office. KPMG will have to report the results annually to the FRC.
The FRC imposes a financial sanction of £45,000 (discounted for admissions and early resolution to £29,250) on Ms Quayle, as well as a reprimand. Ms Quayle will also be required to undertake appropriate training, in a format to be agreed with the FRC.
Whereas the Decision Notice does not question the truth or fairness of the company’s FY2016 financial statements, the breaches of Relevant Requirements related to the audit of items which were material to the consolidated income statement, albeit the scope of the breaches was relatively limited in nature. They concerned the failure of KPMG and Ms Quayle 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”.
The seriousness of the breaches was aggravated by a number of facts, including that the FRC had made auditors aware, through publications in 2014 and 2015, that complex supplier arrangements would be an area of particular attention in its reviews.
In accordance with the FRC’s Publications Policy, the FRC Executive having considered representations from the company has concluded that in all the circumstances naming the company is not fair and necessary in this case.
