Stiffer U.K. audit penalties posing more problems?
Legal experts are unconvinced record fines against audit firms imposed last year by the U.K.’s corporate governance regulator will necessarily improve audit quality.
While some firms might be tempted to shy away from large companies as audit clients because of the risks involved, thereby affecting competition, others are likely to recognize larger fines are in line with rising fee income and simply a typical risk to doing business.
In its July enforcement review, the Financial Reporting Council (FRC) revealed a record 19 cases were resolved in the year 2022/23, with financial sanctions of 40.5 million pounds (U.S. $51.6 million) imposed. That total included a then-record penalty of £20 million (then-U.S. $24 million) against KPMG for dishonesty regarding its audits of Carillion and Regenersis, a figure surpassed in October when KPMG was assessed a £26.5 million (then-U.S. $32 million) fine, before reductions, for its broader Carillion failings.