The UK’s Financial Reporting Council (FRC) fined auditors a record £33.3m in the year running up to 30 September 2022, new figures from Thomson Reuters Confirmation shows.
The record high sum marks a 77 per cent increase on the £18.7m fines – after discounts and adjustments – handed out in the previous year.
The uptick was in part driven by the FRC’s decision to fine KPMG an unprecedented £14.4m over its audit of collapsed construction giant Carillion in July.
However, the increase also comes as the UK accounting watchdog has toughened its approach to regulating the UK’s audit sector, in the wake of a series of high-profile accounting scandals involving some of Britain’s largest firms.
Kyle Gibbons, managing director of Thomson Reuters Confirmation’s European business, said: “The sharp increase in the value of fines issued proves the FRC is more than willing to use serious financial sanctions to drive improvements in audit processes.”
He explained the string of multi-million-pound fines handed out to the UK’s major auditors over the past 12 months are designed to “send a clear message” to the accountancy sector.
Gibbons noted that “fines of these size can make a significant dent in the profitability” of even the UK’s largest accounting firms.
FRC investigations “can also be very expensive for audit firms,” due to the cost of bringing in an external law firm and the cost of higher insurance premiums, Gibbons said.
The research comes after FRC head Sir Jan du Plessis last week expressed “frustration” over the pace at which the government is progressing plans to overhaul the audit sector.
He also warned that half measures risk “exacerbating the significant long-term flow of capital away from public markets.”
The FRC chief’s comments come almost four years after the UK government first set out plans to overhaul the audit sector, with a view to setting a new, more powerful regulator – called ARGA – and forcing the Big Four to share audit work with smaller firms.