So say the folks at the Financial Reporting Council in the U.K., which fined Grant Thornton £650,000 earlier today for crapping up the audit of a publicly listed company in 2016.
The name of the company wasn’t released by the FRC, which is bogus, and neither was the name of the engagement partner at GT who also was fined £20,000.
Normally the FRC names the company whose audit was botched—usually by a Big 4 firm or Grant Thornton—and it names the engagement partner, if the FRC deems punishment is necessary. But not this time, which seems like a slight to shareholders.
The London Evening Standard reported:
The FRC can keep details of a fine quiet if it decides releasing the information will not be in the public interest or unfair to those involved.
The decision to not name the company or partner was made by the FRC’s 10-member conduct committee chaired by David Childs, the former managing partner of magic circle law firm Clifford Chance.
The company at the centre of the audit had done nothing wrong and faced no action, a possible motivation for the FRC’s decision to withhold the name.
While the FRC withholding the name of the public company is unusual, Grant Thornton being punished for bad auditing isn’t unusual. In its most recent audit inspection report, the FRC said GT would be “placed under increased scrutiny due to sustained poor results.” Poor is an understatement: 26% of Grant Thornton’s audits reviewed in the past five years required “significant” improvement, while another 15% required some sort of improvement.
Here’s what happened in GT’s latest auditing disaster, according to an FRC release:
The admitted breaches of Relevant Requirements relate to the audit work carried out on the Company’s principal assets, and an area identified as a significant risk. The work done on the sampling of those assets was inadequate and failed to select an audit sample that was sufficient to reduce the sampling risk to an acceptably low level. The audit team also placed undue reliance on the Company’s externally appointed experts in the valuation of the assets and did not appropriately consider the use of an auditor’s expert. The breaches by the audit team led to a failure to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions about the valuation of the assets. There were also failures to exercise sufficient professional skepticism and to prepare adequate audit documentation. However, none of the breaches of Relevant Requirements were either intentional, dishonest, deliberate or reckless.
That last sentence plus the cooperation provided by Grant Thornton and the engagement partner during the course of the FRC’s investigation, plus the engagement partner’s previously unblemished record, plus the steps GT is taking to try not to suck at auditing anymore resulted in the firm’s fine being reduced to £422,500 and the partner’s fine being reduced to £13,000.