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.
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.