Accounting firms KPMG and PwC have been fined over their audits of Eddie Stobart Logistics (ESL) for “not satisfying the relevant requirements”.
UK accounting regulator, the Financial Reporting Council (FRC), said there were “numerous, serious and pervasive failings” in PwC’s 2018 audit of ESL and “some serious failings” in KPMG’s 2017 audit. PwC was fined £1.99m and partner Philip Storer £51,000 and both were given severe reprimands.
KPMG was fined £877,000 and former partner Nicola Quayle £45,500 and both were also severely reprimanded.
All received reductions for co-operating with the FRC inquiry.
In its decision notice, the FRC said KPMG had resigned as auditor in 2018 due to “a breakdown in their relationship with ESL’s management, following difficulties in obtaining sufficient appropriate audit evidence.” PwC was then recruited for the 2018 audit.
The FRC said the admitted failings related to audit work carried out on property transactions entered into by ESL and the disclosure in the financial statements regarding those transactions.
The FRC said: “These transactions had a significant effect on ESL’s financial performance, and without the profit generated from them, ESL would have been in a loss-making position.”
PwC apologised for its work not being of the required standard: “We are focused on ensuring the consistent delivery of high quality audits and, in the years since this work took place, the significant and continuous investment we have made in strengthening audit quality has been borne out through improved inspections results, said a PwC spokeswoman.
Cath Burnet, head of audit at KPMG UK, said: “We are committed to resolving, and learning from, our past cases and regret that elements of our work fell short of required standards in this instance.
“This development marks another step forward in dealing with these matters, and we continue to invest significantly in audit quality, in our technology and training, to drive further improvements.”
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