• Register
Return to: Home > News > Last hurrah for the FRC as UK watchdog hands out near-trebled fines on poor quality audits

Last hurrah for the FRC as UK watchdog hands out near-trebled fines on poor quality audits

The Financial Reporting Council (FRC) handed out fines totalling £42.9m before settlement discounts in 2018/19, a near trebling in annual fines from £15.5m in 2017/18. After settlement discounts are taking into account, fines issued in 2019/19 totalled £32m, up from £13.1m in 2017/18.

The FRC also reported far greater use and range of non-financial sanctions, rising from 11 in 2017/18 to 38 in 2018/2019. The FRC has issued its first Annual Enforcement Review which reveals a significant increase in sanctions and settlements overall. The watchdog also said there had been a significant reduction in “legacy” cases, increased use of horizon scanning techniques to identify issues requiring investigation and a 25% in year growth in the Enforcement Division.

The FRC published financial sanctions in relation to nine audit investigations during the year. The total amount of financial sanctions on audit firms (pre-discount for settlement) was £40.6 million. The increase in total financial sanctions is partly due to an increased number of cases being concluded (either following Tribunal proceedings or firms agreeing to settle cases prior to a Tribunal hearing).

KPMG faced the biggest bill over the year with fines before discounts totalling £18.5m (discounted to £15.25m) relating to four audits: Quindell, Ted Baker, Equity Syndicate and Co-operative Bank. The largest single fine of £10m (£6.5m after discount) was imposed on PwC for the BHS audit.

The Review provides a baseline for measuring future enforcement performance as the FRC transitions into the Audit, Reporting and Governance Authority (ARGA) and highlights issues identified in enforcement cases and actions taken to address them.

The FRC’s Executive Counsel Elizabeth Barrett the said: “The clarity and accuracy of financial reporting is of critical importance to us all. The significant increase in the number, range and severity of sanctions sends a clear message that where behaviour falls short of what is required, we will hold those responsible to account.

“Improved behaviour by those we regulate requires recognition that where failures occur their root causes must be identified, effectively addressed and reported to us. Where such co-operation occurs due credit will be given; where it does not, consequences will be severe.”

Top Content

    South Africa: sensing new opportunities

    It has been an interesting couple of years for the profession in South Africa. A number of high-profile scandals have brought the profession and the role of auditors into sharp public focus, brewing a distrust towards accountants and a large expectations gap. Joe Pickard reports.

    read more

    Ghana: a quest for consistency

    Ghana’s current economic profile would suggest a fertile landscape for purveyors of accounting services. But inconsistent approaches to compliance and application of standards – coupled with problems in the banking sector and consequent liquidity constraints – have created a challenging environment. Paul Golden writes.

    read more

    Drone technology: audit takes to the skies

    The movement towards a digitised era has already impacted the auditing profession in a number of ways, from blockchain to artificial intelligence. Now firms are taking to sky and using drone technology in their audits. Mishelle Thurai speaks to Big Four firms to find out more.

    read more

    SBC: a new alliance joins the market

    Jonathan Minter speaks to Paul Tutin, chair of founding firm Streets Chartered Accountants, about why the business and its European partners took the decision to launch their own association.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.