KPMG and PwC Get a Scolding From The FRC

 

Two of the world's largest accounting firms, KPMG and PwC, have been fined by the Financial Reporting Council (FRC) for their audits of Eddie Stobart Logistics.

KPMG was fined £877,500 for its 2017 audit of the lorry company, and also fined one of its former partners, Nicola Quayle, £45,000. PwC was fined £1.9 million for its 2018 audit of Eddie Stobart.

The FRC found that both audits had failed to meet certain requirements, including gathering enough relevant and appropriate evidence regarding the services provided by Eddie Stobart during certain transactions. This prevented them from attributing the revenue generated by those services and recognising it upfront in the financial year.

In a statement, KPMG said it "accepted the findings of the FRC and has taken steps to improve its audit processes". 

PwC said that it "is committed to high quality audits and takes the findings of the FRC seriously." The firm said that it has "implemented a number of actions to address the issues identified" and that it is "confident that our audits meet the highest standards."

The sanctions against KPMG and PwC are the latest in a series of fines and reprimands that have been handed down to the Big Four firms in recent years. In May 2022, KPMG was fined £14.4 million for its audit of Rolls-Royce.

The FRC's actions are a sign that it is taking a tougher stance on audit quality. The regulator has said that it wants to see the Big Four firms "raise their game" and improve the quality of their audits.

The sanctions against KPMG and PwC will also have a knock-on effect on the companies that they audit. Investors and other stakeholders will be more likely to question the reliability of the financial statements of companies that are audited by these firms.

This could lead to higher costs for companies, as they may need to invest more in their internal controls and risk management systems. It could also make it more difficult for companies to raise capital from investors.

The sanctions against KPMG and PwC are a reminder that the audit function is vital to the financial markets. Investors and other stakeholders rely on auditors to provide an independent and objective assessment of a company's financial statements.

When audits fail to meet the required standards, it can have a significant impact on the markets and the businesses that are affected. The FRC's actions are a step in the right direction to ensure that the Big Four firms take their audit responsibilities seriously.

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A Year of Influence - #ICAEWROAR

 

See the figures that shapes our yearly #ICAEWROAR accountancy influencer ranking.

Ken Frost, @ken_frost, took a spot among the top 10 with topics including #tax, #insurance, #HMRC

— ICAEW (@ICAEW) June 21, 2023

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ICAEW in Hot Water Over Lavish CEO Severance Package

 

The Institute of Chartered Accountants in England and Wales (ICAEW) is facing intense scrutiny over a secret six-figure severance package being handed to its retiring chief executive, Michael Izza.

The payment, which could amount to as much as twice Izza's annual base salary of £492,000, has been met with anger and disbelief by many in the accounting profession.

It comes at a time when the ICAEW is already under fire for its retention of fines imposed on audit firms. In 2021, the ICAEW pocketed a £13.5 million penalty from Silentnight, the mattresses retailer, rather than using the money to reimburse pensioners who had been disadvantaged by corporate governance failings.

The ICAEW has defended the payment to Izza, saying that it is "in line with market rates" and that it is "appropriate" given his length of service and achievements.

However, critics argue that the payment is excessive and that it sends the wrong message at a time when the ICAEW is supposed to be promoting high standards of corporate governance.

"This is a staggering amount of money to pay to someone who is already very well-paid," said one industry insider. "It's a slap in the face to the thousands of accountants who work for the ICAEW and who are paid a fraction of what Izza is getting."

The ICAEW has said that it will publish the full details of the severance package in its next annual report. However, that is unlikely to do much to quell the anger that is already brewing.

This is just the latest in a series of controversies to hit the ICAEW in recent years. The organization has been criticized for its handling of the Carillion collapse, its close ties to the Big Four audit firms, and its failure to crack down on widespread corporate fraud.

The decision to hand Izza a six-figure severance package is likely to further damage the ICAEW's reputation and raise questions about its commitment to transparency and accountability.

The ICAEW is in hot water. They're handing a lavish sum to their retiring CEO, Michael Izza, amid a row over fines imposed on audit firms.

People are angry. They say the payment is excessive and sends the wrong message.

The ICAEW has defended the payment, saying it's in line with market rates. But critics say that's not good enough.

This is just the latest in a series of controversies to hit the ICAEW. They're in danger of losing the public's trust.

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