KPMG has been fined £1.5 million (€1.75 milion ) by the UK accounting regulator for “serious failings” in its audit of M&C Saatchi, one of Britain’s best-known advertising agencies.
The Financial Reporting Council said on Monday that it had imposed the fine on the Big Four firm for failing to meet audit requirements during its review of M&C Saatchi’s accounts for the year to December 2018.
“KPMG’s audit did not meet the required quality standards in a number of respects amounting to serious audit failings and breaches of audit standards,” said Claudia Mortimore, deputy executive counsel at the FRC.
Adrian Wilcox, a partner at KPMG who was responsible for the 2018 audit, was also fined nearly £50,000.
The disclosure of accounting errors had forced M&C Saatchi to adjust its reported profits for 2018 and previous years.
Trading in the company’s shares was suspended for 10 weeks in 2020 as PwC, its new auditor, struggled to establish the group’s true financial position in the wake of the accounting scandal, which first came to light in 2019.
M&C Saatchi was for years one of the UK’s most respected advertising networks — best known for its work for the Conservative party — but has recently struggled with tougher trading conditions and boardroom battles over its future.
The £1.5 million penalty marks the 16th fine KPMG has received since 2018. Last October, it was hit with a record £21 million penalty for failures in its auditing of collapsed government contractor Carillion.
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Among the failings on the M&C Saatchi audit, the FRC said KPMG did not apply sufficient professional scepticism over a client payment that increased revenues by £1.2 million. KPMG also failed to properly audit journal entries across a number of subsidiary companies, the FRC said.
Cath Burnet, head of audit at KPMG UK, said: “We are committed to dealing with, and learning from, our past cases and regret that aspects of our 2018 audit of M&C Saatchi plc fell short of required standards.
“We continue to invest significantly in audit quality, in our training, controls and technology, to drive further improvements and resilience in our audit practice.” - Copyright The Financial Times Limited 2024
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