KPMG
(Picture: PA Archive)The boss of KPMG UK was today forced to apologise after the accounting watchdog fined the auditor £3 million for “serious” failings with its work on collapsed drinks business Conviviality.
The Financial Reporting Council (FRC) today fined KPMG for poor quality audits of Conviviality in 2017 and 2018. Nicola Quayle, the former KPMG partner who led the work, was personally fined £80,850.
“Big Four” accountant KPMG is reeling from a string of recent fines and scandals linked to poor quality audits carried out in the past. In December, KPMG ruled itself out of bidding on new government contracts after the Cabinet Office threatened a ban due to historic misconduct.
The FRC said today’s fine reflected KPMG’s “poor regulatory track record”. Both Quayle and KPMG were given a severe reprimand.
KPMG was the auditor on Conviviality, the AIM-listed owner of Bargain Booze, before its collapse in 2018. The company — which supplied the likes of JD Wetherspoon, Slug & Lettuce, Hilton Hotels in the UK and even The Ivy — was worth half a billion pounds at its height. It expanded rapidly through a string of acquisitions but collapsed after an accounting error led to a fatal profit warning.
The FRC today slammed KPMG for work checking the accounts.
Claudia Mortimore, deputy executive counsel to the FRC, said: “The audit failings in this case were serious, spanned several significant areas of the financial statements and related to a number of fundamental auditing standards, including the requirement to obtain sufficient appropriate audit evidence, apply sufficient professional scepticism, and prepare proper audit documentation. The sanctions reflect the seriousness of the failings.
“The sanctions also reflect the poor regulatory track record of each of the respondents and are intended to enhance the quality and reliability of future audits.”
Jon Holt, chief executive of KPMG in the UK, said: “I’m sorry that our work wasn’t good enough in this instance. I am committed to resolving, and learning from, our past cases and this development marks another step forward in dealing with these matters. We have fully cooperated with the FRC throughout their investigation.”
The Conviviality fine is the latest in a series of setbacks. KPMG was fined a near record £13 million last year for its work on the sale of mattress maker Silent Night to private equity in 2011. It has faced fines for poor audit work at Ted Baker, BNY Mellon and Quindell among others in recent years.
Five former KPMG employees are currently involved in a tribunal case brought by the FRC regarding work with Carillion, the outsourcer that collapsed in 2018. On Monday, a sixth former employee reached a settlement with the FRC over its work with IT outsourcer Regenersis in 2014. KPMG faces likely sanctions pending the resolution of the Carillion case.
Holt said: “We continue to invest significantly in our business, taking action to address the FRC’s findings and implementing our Audit Quality Transformation Programme, which includes comprehensive new training, controls and technology.”
Holt was elevated to the top job last year in the wake of another crisis. Predecessor Bill Michael resigned last February after outcry among staff about comments he made during an online meeting. Michael told staff to “stop moaning” and “playing the victim” in relation to the pandemic. The remarks were subsequently leaked to the press.
