Deloitte hit with £11m fine after missing £30m taxpayer fraud at UK transport giant
Big Four giant Deloitte has been fined £11m for failing to raise concerns about fraud in its statutory audits of the transport business, the Go-Ahead Group (GAG), which operates multiple train services across the UK.
The Financial Reporting Council (FRC) said on Thursday the fine, which was discounted to £6.05m for early admission and co-operation, related to the Big Four giant’s audit of the transport firm between the 2016 and 2020 financial years.
GAG, a major transport group, provides rail and bus services across the country, and from 2016 to 2020, the group was listed on the London Stock Exchange. The group is London’s largest bus operator, running roughly a quarter of the capital’s buses across 17 depots on behalf of Transport for London (TfL), including the Elizabeth Line.
The breaches relate to three of GAG’s subsidiaries that operated passenger rail services: London and South Eastern Railway Ltd (LSER), London and Birmingham Railway Ltd (LM), and Go-Ahead Bayern GmbH (GABY). The findings on Deloitte’s failure to apply “professional scepticism” regarding three subsidiaries. The regulator found that, in each case, Deloitte accepted management’s explanations without sufficient challenge.
The FRC said Deloitte, across all three subsidiaries, failed to recognise that it had wrongfully retained over £30m in taxpayer funds by keeping overpayments to the Department for Transport (DfT), and it failed to address the transport group’s concerns.
The Big Four firm also received a severe reprimand alongside the fine and an order to prepare a report for Deloitte’s FRC firm supervisor explaining why these failures happened. The regulator said Deloitte must pay the full costs of the FRC’s investigation.
“These breaches show a highly concerning pattern of failure by Deloitte to apply sufficient scrutiny to decisions and actions by GAG which were clearly questionable. The fact that some of those decisions and actions put very large amounts of UK taxpayers’ money at risk is particularly troubling, and this is reflected in the high level of financial sanction imposed,” said Penrose Foss, executive counsel and executive director of investigations and enforcement.
Commenting on the fine, a spokesperson from Deloitte UK said: “We regret that aspects of our audit work did not meet the standards expected and have learned from this matter. We are committed to continuous improvement and the delivery of high quality audits.”
Regulator drops Joules probe
Separately, the regulator also announced on Thursday that it closed its probe into Deloitte over its audit of former listed lifestyle brand Joules Group.
The FRC launched the investigation in May 2023 after Joules collapsed into administration in late 2022, reviewing the audit for the year ended 30 May 2021.
The British fashion retailer, founded by Tom Joule, collapsed into administration on 16 November 2022. A month later, retail giant Next partnered with founder Tom Joule to acquire the business out of administration in a £34m to £41m deal.
After a “review of the evidence and all relevant factors” from Deloitte’s audit of the business, the FRC closed its investigation into the Big Four giant without taking any enforcement action.