Deloitte has been fined a record £4m by the accountancy watchdog for misconduct in its audit of AIM listed Aero Inventory in the run up to its administration in 2009.
In particular, the Financial Reporting Council (FRC) claims the accountancy giant, along with partner John Clennett, fell short of the standard expected when auditing the company in the years ending June 2006, 2007 and 2008.
As well as fining Deloitte, the watchdog slapped Clennett with a £150,000 penalty and ordered the professional services giant to pay for the costs of the proceedings against it, including an interim payment of £2.3m.
"This fine of £4m 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," said Gareth Rees QC, executive counsel to the FRC. "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."
A Deloitte spokesperson said: "We accept the findings of the tribunal and regret that in this instance our audit did not meet professional standards. Our audit quality processes have evolved significantly since these audits were performed between 2006 and 2008, and we are relentless in our focus to ensure all our audits are of the highest quality."
Hugh Bevan, former finance director of Aero Inventory, has previously reached a settlement with the watchdog, as part of which he was excluded from being a member of the Institute of Chartered Accountants in England and Wales for three years and told to pay £170,000 towards costs incurred by the FRC.