Another day, another fine for a Big Four auditor.
KPMG has been slapped with a record £21 million fine by the Financial Reporting Council (FRC) over its botched auditing of Carillion, the construction company that went spectacularly bust in 2018.
The FRC said that KPMG's audits of Carillion were "exceptionally bad" and that the firm had failed to "discharge its professional duties properly".
The fine is the latest blow to KPMG, which has been under increasing scrutiny in recent years over its auditing practices. The firm has been fined a number of times for audit failings, including a £14.4 million fine last year for misleading the FRC during spot checks on its audit of Carillion.
The Carillion collapse was one of the biggest corporate failures in British history. The company went bust with debts of almost £7 billion, leaving thousands of workers and suppliers out of pocket.
A public inquiry into the collapse found that KPMG's audits of Carillion were "deeply flawed" and that the firm had failed to spot a number of red flags, such as the company's aggressive accounting practices and its over reliance on debt.
The FRC's latest fine is a welcome sign that the regulator is taking a tougher stance on audit failings. However, it is clear that the Big Four auditors still have a long way to go to improve their standards.
This is just the latest in a string of audit failings by the Big Four. It is clear that these firms need to do much more to improve their standards.
Here's what needs to happen:
- The FRC needs to be given more powers to hold auditors to account. This could include the power to impose larger fines and to disqualify individuals from working as auditors.
- The Big Four auditors need to be split up. This would create more competition in the audit market and would make it more difficult for the Big Four auditors to collude.
- There needs to be more transparency in the audit process. This could involve requiring auditors to publish more detailed reports on their audits and to give shareholders a greater say in the appointment of auditors.
Only by taking these steps can we restore confidence in the audit profession and protect investors from audit failings.
Market leading tax fee protection insurance for businesses, sole traders and individuals. Protect yourself from accountancy fees in the event of an HMRC enquiry.
Having a Solar Protect Tax Investigation Insurance policy at your disposal means that should you be one of the many 1000's of businesses or individuals that are selected by HMRC each year to look into your tax affairs your own accountant (your tax return agent) can get on and defend you robustly.
You have the peace of mind knowing that your accountant's (your tax return agent) fees will be paid by the insurance without any Excess for you to find.
Tax Investigation Insurance is an insurance policy that will fully reimburse your accountant's (your tax return agent) fees up to £100,000 if you are subject to enquiry by or dispute with HMRC.
A Solar Protect policy will enable your accountant (your tax return agent) to:
- Deal with any correspondence from HMRC
- Attend any meeting with HMRC
- Appeal to the First-tier Tribunal or Upper Tribunal
- Having the security of knowing that fees will be met in full will enable your Accountant (your tax return agent) to defend your position robustly
Please click here for details.