KPMG fined for audit breaches in Carr’s Group review
Auditing giant KPMG has been penalised £1.25m ($1.69m) by the Financial Reporting Council (FRC) for significant breaches of audit independence rules.
This fine relates to KPMG’s 2021 audit of Carr’s Group, a supplier of farm and machinery products.
The FRC has released a Final Settlement Decision Notice against KPMG and its audit engagement partner, Nick Plumb.
This notice pointed out a breach of compliance in the financial statements associated with Carr’s Group during the auditing process.
The regulator found that KPMG and Plumb contravened the ethical standard by depending on the work of another firm, identified as “Firm X.”
This firm had been responsible for the audit for more than five years, surpassing the permitted duration and raising significant concerns regarding objectivity.
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataMoreover, Firm X had also delivered specific tax and accountancy services to an associated entity of Carr’s Group.
The prolonged tenure of the lead audit partner further intensified the issues related to compliance and independence in the audit.
FRC deputy executive counsel Jamie Symington said: “A fundamental objective of any audit engagement is that the intended users trust and have confidence that the audit opinion is professionally sound and objective.
“It is of fundamental importance therefore that when seeking to rely on the work of a component auditor, the group audit firm can be satisfied that its independence is not compromised as a result of conditions that would compromise the independence of another firm on whose work it relies.”
In this case, whilst the quality of the audit work performed by the two firms is not brought into question, the breaches were serious.
KPMG and Plumb missed a number of opportunities in FY21 to establish the facts underpinning the breaches, the watchdog said.
“The breaches in the current case involve the failure to identify bright-line prohibitions designed to secure the independence of the Statutory Auditor. The Respondents’ failings in this regard were of a basic and fundamental nature,” Symington added.
Sign up for our daily news round-up!
Give your business an edge with our leading industry insights.
Content Original Link:
" target="_blank">
