U.K. auditing giant KPMG was hit with yet another fine from the nation’s Financial Reporting Council (FRC).
Reports in Bloomberg said KPMG was hit with $2.7 million in fines for its audits of Ted Baker in 2013 and 2014 after the company admitted misconduct to the FRC. The regulator determined that KPMG’s decision to provide expert witness services to Ted Baker in a lawsuit breached ethical standards and compromised KPMG’s ability to audit Ted Baker’s finances without bias.
“Ethical standards are critical in supporting the confidence that third-party users can reasonably have in financial statements in circumstances where, of necessity, they only have incomplete information to judge whether the auditor is, in fact, objective,” said FRC Interim Executive Council Claudia Mortimore in a statement. “Where those standards are breached, such that the auditor’s independence is lost, user confidence is likely to be undermined.”
The FRC slapped KPMG with a nearly $4 million fine earlier this year for 2013 audits of Quindell, and soon followed up with a warning for the accounting and auditing firm. KPMG has also been criticized for its audit of Carillion and failing to predict the government contractor’s eventual collapse.
Press relations for KPMG noted that the firm’s auditing on Ted Baker financial statements was not questioned by the FRC. However, the fine is the latest in a string of sanctions against KPMG and other auditors, leading to calls for a breakup of the Big Four — which include PricewaterhouseCoopers (PwC), Ernst & Young and Deloitte. At the same time, there have been some calls to break up the FRC, too.
Earlier this month, the Institute of Directors (IoD) called for a review of the FRC’s effectiveness, and suggested that a separation of its corporate governance and audit reviews operations.
“This would help the process of making changes to the U.K. corporate governance code become more transparent, with clearer lines of accountability, rather than being subsumed by a large regulator where corporate governance is just one concern amongst many,” the IoD said in its recommendations to the U.K. government.