Grant Thornton fined £3m for conflicts of interest on audits

A CITY watchdog has fined accountancy firm Grant Thornton £3m over serious conflicts of interest on two audit clients.

Grant Thornton and four senior staff members were sanctioned for mishandled audits for Vimto drinks maker Nichols and the University of Salford.

The Financial Reporting Council (FRC) initially fined the company £4m, but this was reduced to £3m due to an early settlement.

It is the largest penalty issued by the FRC on an accountant outside of the big four. It comes amid intense scrutiny of the sector and growing calls for the largest firms to be broken up.

The FRC has been flexing its muscles after committing earlier this year to ramping up its monitoring of auditors. Last week it fined KPMG £3m for deficiencies on its audits of retailer Ted Baker. The four former Grant Thornton staff sanctioned for the audits were Eric Healey, Kevin Engel, David Barnes and Joanne Kearns.

Ex-partner Mr Healey joined the audit committees of Nichols and Salford University – which were both Grant Thornton clients at the time – and was also engaged to provide services under a consultancy agreement.

The FRC said Mr Healey’s action created “serious familiarity and self-interest threats” and “the loss of independence” on eight audits over four years.

Mr Healey was fined £200,000, discounted for settlement to £150,000. He will be excluded from the Institute of Chartered Accountants for a recommended period of five years.

The watchdog said its investigation also uncovered “widespread and serious inadequacies” in controls at Grant Thornton’s Manchester office between 2010 and 2013, as well as “firm-wide deficiencies in policies and procedures relating to retiring partners”.