The Financial Reporting Council (FRC) has fined Deloitte UK £4m, the highest fine ever issued by the regulator.
The regulator also fined Deloitte partner, John Clennett, with a severe reprimand and a £150,000.
The sanctions have been issued in relation to the audit official statements of the AIM listed company Aero Inventory Plc and its subsidiary Aero Inventory (UK) Limited.
Clenett’s conduct “fell significantly short of the standards reasonably to be expected of them,” stated the FRC in its official release.
The Tribunal also ordered that Deloitte pay all the costs of the proceedings brought against it and Clennett and ordered an interim payment on account of costs of £2,275,000.
Gareth Rees QC, executive counsel to the FRC, said: “This fine of £4 million is the highest recorded by the FRC for misconduct on a firm and was imposed on Deloitte by the Tribunal following a five week hearing.”
Reese added: “It is a clear indication of the importance of the highest standards being maintained in all audits and the seriousness of the failure to perform an adequate audit of these financial statements which led to misleading information about the profits and turnover of the company being made to the market.”
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The three allegations brought by the Executive Counsel to the FRC concerned:
– The appropriateness of the accounting and disclosure in Aero's 2006 financial statements of the Garuda Transaction.
– The costs of sales and stock valuations in the 2006, 2007 and 2008 audits.
– Stock existence in the 2007 and 2008 audits.
