KPMG has been fined £4.5 million over its audit of insurance firm Quindell.
The Financial Reporting Council (FRC) has fined both KPMG and audit engagement partner William Smith over misconduct in the year to December 2013.
The FRC said: “KPMG and Mr Smith, members of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a member and a member firm and that they failed to act in accordance with the ICAEW’s fundamental principle of professional competence and due care.”
“The misconduct related to two audit areas, and included failure to obtain reasonable assurance that the financial statements as a whole were free from material misstatement, failure to obtain sufficient appropriate audit evidence and failure to exercise sufficient professional scepticism.”
KPMG was fined £4.5 million, while William Smith was fined £120,000.
The FCA started their investigation into KPMG’s 2013/14 auditing in 2015 after almost £1 billion was wiped off the value of Quindell in 2014.
When Gotham City Research released a note calling Quindell “country club built on quicksand”, investors questioned the group’s value sending shares in the firm to plunge.
KPMG commented: “Audit quality, and professional scepticism in particular, is of paramount importance to our firm. We have cooperated fully throughout the FRC’s investigation, and have already updated our audit processes and procedures to address the areas of concern.”
“We regret that some aspects of our audit for the year ended 31 December 2013 did not meet the required standards. As we stated in our audit opinion for the following year, certain information given to KPMG contradicted representations previously made by former members of management. Nonetheless, we accept the FRC’s findings that in two specific areas of the audit, our challenge for the year ended 31 December 2013 should have gone further,” the spokesperson added.
The FRC is also investigating KPMG’s auditing of the collapsed firm Carillion.