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May 9, 2013

FRC to investigate KPMG UK

The UK Financial Reporting Council (FRC) has launched two investigations into the conduct of KPMG UK.

In a brief announcement the FRC said the first investigation will be looking into the conduct of KPMG and one of its partners in connection to potential breaches of the Ethical Standards for Auditors, "in relation to the non-timely disposal of a share-holding in a client entity".

The second investigation, carried out under the Accountancy Scheme, is to look into whether KPMG was independent when it conducted the audits of automotive retailer Pendragon’s financial statements for the years ended 31 December 2010 and 2011.

In response to the FRC’s announcement KPMG UK said: "We take our professional responsibilities very seriously, have stringent policies and procedures in place to ensure that our independence is not compromised and regularly review those procedures to ensure that they remain appropriate.

"We are therefore very disappointed, in relation to the first matter, that one of our partners mistakenly failed to dispose of the relevant shares on a timely basis and that our firm’s procedures, in this instance, did not deal appropriately with that failure. We fully accept that the holding of shares in a client by a partner is in clear contravention of UK Ethical Standards. However, on becoming aware of the matter, we took action in relation to the partner concerned and initiated a review of procedures to ensure that lessons are learnt and applied," KPMG UK said in a statement.

"On the second matter, in relation to the 2010 and 2011 Pendragon audits, we remain of the view that our independence as auditor for these years was maintained.

"We are committed to the highest standards of professionalism, quality and integrity and will of course co-operate fully with both investigations," the Big Four firm added.

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