The U.K. Financial Reporting Council (FRC) on Tuesday announced a reduced penalty of approximately 3.4 million pounds (U.S. $4.3 million) against KPMG for failures in its fiscal year 2010 audit of car maker Rolls-Royce.

The Big Four firm was faulted for red flags undocumented in its work at Rolls-Royce, which in January 2017 agreed to an $800 million global resolution with authorities in the United States, the United Kingdom, and Brazil following a lengthy investigation into allegations of bribery and corruption. The FRC said KPMG failed to address matters identified in its audit, namely two sets of payments made by Rolls-Royce to agents in India, that would go on to form two of the 12 counts of conspiracy to corrupt, false accounting, and failure to prevent bribery included in the automotive company’s deferred prosecution agreement reached with the U.K. Serious Fraud Office.

KPMG received a severe reprimand but avoided a £4.5 million (U.S. $5.6 million) penalty because of admissions and early disposal. The firm must cover costs of the investigation, commission an external review into its policies and procedures regarding an audited entity’s compliance with laws and regulations, and declare its 2010 audit did not satisfy relevant requirements.

Anthony Sykes, engagement partner on the audit, received a reduced fine of £112,500 (U.S. $141,000) and was also severely reprimanded.

The FRC further investigated KPMG’s audits at Rolls-Royce Holdings for the years ended 2011-13 but found no breaches.

The details: Sykes was aware of the potential of noncompliance at Rolls-Royce regarding the India payments as early as June 2010, according to email correspondence included in the FRC’s decision notice. He discussed the matter with a money laundering reporting officer at KPMG, according to the FRC, and met with general counsel and other senior leaders at Rolls-Royce to obtain further information.

Sykes did not record these meetings in his audit report, which also did not include any specific reference to the existence of the India issues, according to the FRC. The opinion “wrongly decided” Rolls-Royce “could not have infringed laws or regulations, and the possible effect on the FY2010 financial statements could not be material,” the regulator stated. As a result, KPMG and Sykes “failed to exercise a sufficient degree of professional skepticism as to the information they were given by their client.”

The FRC’s executive counsel did not assert the breaches resulted in the financial statements being materially misstated, as the counsel “does not know what would have been discovered had [KPMG and Sykes] exercised a sufficient degree of professional skepticism.”

“It is essential that auditors are alive to the risks of companies’ noncompliance with laws and regulations and conduct work in this area with care and sufficient professional skepticism,” said FRC Deputy Executive Counsel Claudia Mortimore in a press release. “This is particularly so when the audited entity is in a sector where such risks are known to be prevalent.”

KPMG response: Jon Holt, chief executive of KPMG in the United Kingdom, addressed the fine in an emailed statement.

“When I came into my role as chief executive, I said that we would move swiftly to resolve and learn from our outstanding regulatory cases,” Holt said. “I am pleased we have now concluded this historic matter, and I’m sorry that elements of our work in the FY2010 audit of Rolls-Royce Group plc did not meet the professional standards required.

“In addition to resolving legacy cases, we are also investing significantly in training, controls, and technology to improve quality and resilience in our audit practice.”

The penalty is the third KPMG has received from the FRC this year, after the firm was fined £875,000 (then-U.S. $1.15 million) in March for audit failings in its work at bar chain Revolution Bars Group and £3 million (then-U.S. $4.1 million) in January for failings at alcohol retailer Conviviality. KPMG is set to pay an impending fine of £14.4 million (U.S. $18 million) over its botched audits at collapsed construction company Carillion and software firm Regenersis.