Accounting giant KPMG and a senior audit partner have been fined over £3m for failings related to an audit of collapsed firm Conviviality.
AIM-listed Conviviality collapsed in 2018 shortly after receiving a clean bill of health from auditors at KPMG who signed off company accounts showing a significant increase in company revenue, profit and net assets. The Financial Reporting Council (FRC) issued the company with a “severe reprimand” and today announced that KPGM would be fined £3m while audit engagement partner Nicola Quayle personally faces a penalty of £80,850.
“The sanctions reflect the seriousness of the failings,” said Claudia Mortimore, deputy chief counsel of the FRC. “The sanctions also reflect the poor regulatory track record of each of the Respondents and are intended to enhance the quality and reliability of future audits.”
In March 2018 Conviviality issued a series of outlandish trading updates which resulted in the Company’s shares being suspended from trading on AIM. The firm entered administration a month later after an unsuccessful equity raise.
“The audit failings in this case were serious, spanned several significant areas of the financial statements and related to a number of fundamental auditing standards including the requirement to obtain sufficient appropriate audit evidence, apply sufficient professional scepticism, and prepare proper audit documentation,” said Mortimore, in a scathing assessment.
The accusations come as the embattled auditor KPMG faces an ongoing FRC hearing over its failings in relation to collapsed outsourcer Carillion.
The FRC claims a KPMG audit team forged documents relating to a 2016 audit of Carillion, which buckled under $7bn of liabilities in 2018, in order to pass an inspection by the accounting regulator.
Appearing at the hearing yesterday Peter Meehan, the KPMG partner who led the audits, said he knew nothing about the alleged forgery of documents provided to the FRC before his suspension from the firm, leaving him “shocked and devastated, and angry”.