KPMG fined for failures in audit

Britain’s accounting watchdog fined KPMG £3.2m on Monday for failings in its audit of Quindell after the legal services firm twice restated its accounts, leading to heavy losses.

KPMG and its employee William Smith, who was fined £84,000, both failed to ensure that Quindell’s financial statements for 2013 and 2014 were free from material misstatement, the Financial Reporting Council (FRC) said.

In a statement released on Monday, KPMG issued an apology for failing to press Quindell’s management harder over the company’s accounts.

“We accept the FRC’s findings that in two specific areas of the audit our challenge for the year ended 31 December 2013 should have gone further,” a spokesman for KPMG said.

The fine in Britain comes as the global network of accounting firms that make up KPMG is under pressure. It is facing an inquiry in Britain over its audit of failed outsourcer Carillion and scrutiny of its South African arm’s work for a company owned by the Gupta family.

The big four accounting firms, including KPMG, are facing calls to break up into smaller parts. MPs in Britain allege that their dominance of the market means they do not sufficiently challenge clients’ claims about their accounts.

The FRC is also investigating KPMG’s auditing of the collapsed construction and outsourcing firm Carillion.

REBRANDED

Once close to being one of Britain’s blue-chip financial firms, the AIM-listed Quindell saw its market value collapse in 2015 after regulators launched some probes into its financial accounts. Quindell, which has since been rebranded as Watchstone, is still being probed by Britain’s Serious Fraud Office and the FRC over its business and accounting practices.

KPMG’s fine was discounted by the FRC from an original sum of £4.5m and Smith’s from £120,000 because they chose to settle the case.