KPMG agreed to pay a reduced penalty of nearly 1.5 million pounds (U.S. $1.9 million) assessed by the U.K. Financial Reporting Council (FRC) addressing admitted failings in the Big Four audit firm’s financial year 2018 work at advertising services company M&C Saatchi.
The firm earned a discount from an original penalty of £2.25 million (U.S. $2.9 million) for admissions and early disposal, the FRC announced in a press release Monday. KPMG received further leniency from the agency by improving its audit procedures to “reduce the risk of the failings identified during the M&C Saatchi audit recurring.”
Adrian Wilcox, the KPMG engagement partner on the audit, was ordered to pay a reduced £48,750 (U.S. $62,000).
The details: The FRC launched its investigation into KPMG after M&C Saatchi revealed in 2019 the discovery of accounting errors that led the company to restate its FY2018 profit in its FY2019 accounts, the agency said.
The probe found KPMG and Wilcox failed in areas including skepticism, journals testing, and documentation. The breaches were deemed serious, the agency said, because they “[related] to U.K. sub-consolidation adjustments affecting or potentially affecting a significant number of people in the United Kingdom, such as the public, investors, or other market users.”
The FRC acknowledged the challenges of the audit, including in obtaining audit evidence, in its decision notice. And though the agency lauded KPMG’s improvements in its procedures, it noted the changes have come, in part, because of other enforcement cases against the firm.
Firm response: “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,” said Cath Burnet, head of audit at KPMG UK, in an emailed statement. “We continue to invest significantly in audit quality—in our training, controls, and technology—to drive further improvements and resilience in our audit practice.”
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