Fines totalling £500,000 ($1 million) have been imposed on KPMG
UK and former audit engagement partner Andrew Sayers in relation to
the 2000 audit of Independent Insurance Group.

The UK’s Joint Disciplinary Scheme tribunal has also ordered the
Big Four firm to pay £1.15 million in costs.

The tribunal reprimanded KPMG UK and Sayers for accepting a loss
could be turned into profit by using stop loss insurance which was
“too good to be true”.

Independent Insurance Group ended up in liquidation and in the
following years several senior directors were found guilty of fraud
by the UK Serious Fraud Office.

The harshest penalty was delivered to former Independent
Insurance Group chief executive Michael John Bright, who was
sentenced to prison for seven years and disqualified from being a
company director for 12 years.

Lessons learned

The Big Four firm said in a statement that it regretted there
were shortcomings in certain aspects of its audit of Independent
Insurance Group and accepted it could have done better.

“But it must be noted that there were frauds which led to the
collapse of Independent, which were perpetrated by a number of
their senior directors, who have been sentenced to substantial
terms of imprisonment, so there is clear evidence that information
was withheld from us,” the firm said.

“The complaints on which the settlement was based relate to an
audit that took place more than seven years ago. Any lessons to be
learned were learned very soon after the collapse and we have
enhanced our audit processes since then.”

Andrew Sayers is still with KPMG UK but is no longer involved
with audits – he is now in an internal role.

The Joint Disciplinary Scheme conducts independent
investigations into the work and conduct of chartered accountants
where this has given rise to public concern. It is sponsored by the
Institute of Chartered Accountants in England and Wales and the
Institute of Chartered Accountants of Scotland.

Carolyn Canham