- KPMG’s auditing engagement partner William Smith has also been censured and ordered to pay £84,000
- PwC is also braced for a fine for its role in auditing collapsed retailer BHS
‘Big four’ audit firm KPMG has been fined £3.15million by the accountancy regulator for its role in auditing insurance software firm Quindell.
William Smith, who worked as KPMG’s auditing engagement partner, has also been censured and ordered to pay £84,000. Both fines were discounted as part of a settlement.
The misconduct relates to the audit of the financial statements of Quindell for 2013 as well as transactions relating to the sale and purchase of software licenses, related services and investments.
Fined: The misconduct relates to the audit of the financial statements of Quindell for 2013
The Financial Reporting Council said KPMG had failed to ‘obtain reasonable assurance’ that Quindell’s financial statements were ‘free from material misstatement’ and to ‘obtain sufficient appropriate audit evidence’.
It also said the audit firm did not exercise ‘sufficient professional scepticism’.
KPMG’s fine follows Deloitte’s £10million fine for its auditing of Autonomy before it was sold to HP for £7.4billion, while PwC is also braced for a fine for its role in auditing collapsed retailer BHS.
It comes as the FRC has faced criticism for its oversight of big audit firms following the collapse of BHS and Carillion.
Quindell, now renamed Watchstone, had its shares suspended in 2015 after the Financial Conduct Authority launched a probe into its accounts and founder Rob Terry. It is also investigated by the Serious Fraud Office.
Quindell shares surged between 2012 and early 2014 – valuing the group at around £2.7 billion – but the stock then plunged amid short-selling and after a US hedge fund publicly questioned the firm’s business model.
The FRC said in a statement: ‘KPMG and Mr Smith, members of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a member and a member firm and that they failed to act in accordance with the ICAEW’s fundamental principle of professional competence and due care.
‘The misconduct related to two audit areas, and included failure to obtain reasonable assurance that the financial statements as a whole were free from material misstatement, failure to obtain sufficient appropriate audit evidence and failure to exercise sufficient professional scepticism.’