Britain’s accountancy watchdog today fined KPMG £1.25m over its audit of bar chain company Revolution.
The UK’s Financial Reporting Council (FRC) fined Big Four accountancy giant KPMG £1.25m and former-KPMG director Michael Neil Frankish £50,000, over failures in the audit of Revolution Bars Group’s accounts for the financial year 2015/16.
The fines come after FRC found that KPMG had failed to flag a series of problems with Revolution’s financial accounts, relating to supplier rebates, share-based payments, and deferred taxation.
The FRC said KPMG’s failures resulted in Revolution’s FY2016 accounts understated rebates by £188,000, overstated listing fees by £34,000, and understated their tax liabilities by £1.7m.
Founded by two friends from Ashton-underLyne in greater Manchester, Revolution Bars Group now runs 66 venues across the UK, having set up vodka bar chain Revolution in 1996 and rum bar chain Revolución de Cuba in 2011.
The hospitality company later floated on the AIM in 2000, before going private again in 2006. The firm later listed on the London Stock Exchange in 2015 and now employs more than 3,000 people.
Jamie Symington, Deputy Executive Counsel to the FRC, said: “KPMG’s failings in this case persisted for two years and across multiple areas.”
“They included complex supplier arrangements which the FRC had previously identified as an area of regulatory focus, albeit that in this case their impact on the financial statements was minor.”
“The audit client was a newly listed and relatively small company, but the breaches were nevertheless serious, including lack of professional scepticism.”
“The FRC has required KPMG and Mr Frankish to take action to mitigate or prevent breaches recurring. The package of financial and non-financial sanctions should help to improve the quality of future audits.”
A spokesperson for KPMG said: “We regret that aspects of our 2015 and 2016 audits of Revolution Bars Group Plc fell short of required standards.”
“Our firm is committed to dealing with, and learning from, our historic cases. We have fully cooperated with the FRC throughout their investigation.”
Both Frankish, who left KPMG in 2017, and KPMG admitted their failings in auditing Revolution’s accounts, according to the FRC.