KPMG fined over scandal at top Tory advertising agency

THE audit watchdog has fined KPMG £1.5m for “serious failings” after it didn’t spot an accounting scandal at advertising agency M&C Saatchi.

The Financial Reporting Council (FRC) yesterday reprimanded the big four firm and supervising partner Adrian Wilcox for lacking “professional scepticism” when auditing the agency’s 2018 accounts.

It follows a five-year investigation into serious accounting blunders at M&C Saatchi, which is renowned for its work with the Conservative Party.

The FRC launched its inquiry in 2019 after M&C Saatchi discovered £25.8m worth of accounting errors and misjudgments, including £14m of overstated profits. The London-listed group was ultimately forced to restate its 2018 profits in its 2019 annual accounts. The crisis sent shares plunging and prompted the resignation of Lord Saatchi, its founder, and three directors.

The Financial Conduct Authority launched an investigation into the firm in 2020, but closed the case a year later without taking any enforcement action. KPMG resigned as M&C Saatchi’s accountant in 2019. The auditor has since admitted to numerous serious failings and breaches of audit standards, according to the FRC.

This included a lack of professional scepticism in certain high-risk areas of the audit and basic failings in record checking.

KPMG was ordered to pay £1.46m, a figure that was reduced from £2.25m for co-operation with the investigation. Mr Wilcox was also given a discounted fine of £48,750, down from £75,000. KPMG covered the costs of the investigation.

The FRC noted that the M&C Saatchi was “a challenging audit” and that KPMG demonstrated some robustness in delaying signing off the accounts until they obtained further evidence from the company’s management.

However, the watchdog concluded that KPMG’S “serious failings” affected potentially a significant number of people in Britain, including the public, investors and other market users.

Cath Burnet, head of audit at KPMG UK, said: “We are committed to dealing with, and learning from, our past cases and regret that aspects of our 2018 audit of M&C Saatchi PLC fell short of required standards.”