I don’t know about you guys but in this weird and depressing time we’re living in, I take a little bit of comfort in finding some shred of pre-coronavirus normalcy in my day-to-day life. And I found something this morning, thanks to Reuters: KPMG U.K. was fined by the Financial Reporting Council for piss-poor auditing.
Britain’s accounting watchdog fined KPMG and a senior partner on Thursday for failing to challenge what a client was telling them about certain complex supplier arrangements.
The Financial Reporting Council (FRC), which did not name the company being audited, said KPMG’s fine was discounted from £700,000 to £455,000 for early settlement. Senior partner Nicola Quayle was fined £45,000, reduced to £29,250 for early settlement.
In addition, KPMG was required to undertake a quality performance review of three audits for which Quayle, the former senior partner at KPMG’s Manchester office, is the auditor and report the results to the FRC, according to Reuters.
Quayle, an auditor for 23 years and a former non-executive board member of KPMG U.K., will also be required to “undertake appropriate training, in a format to be agreed with the FRC.”
The Queen’s KPMG got a slap on the wrist for failing to obtain and document sufficient audit evidence in relation to supplier-funded rebates, Reuters reported.
Here’s what the FRC’s press release says about KPMG’s sloppiness:
Whilst 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 Respondents’ failure 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 the facts that:
1. 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;
2. both KPMG and Ms Quayle have poor recent regulatory records; and
3. Ms Quayle held senior management responsibilities within KPMG.
According to the FRC notice, Quayle was the lead auditor for four statutory audits that “have been the subject of adverse audit quality reviews by the FRC between 2012 and 2016; two received grade 2B (‘acceptable overall with improvements required’), and two (one of which was the FY 2016 audit) received grade 3 (‘significant improvements required’).”
So, thanks KPMG and thanks Nicola. Even though you took it on the chin a little bit today, you made me feel (for a little bit anyway) that life was somewhat back to normal.