Institute hits PKF with £100k fine and costs for audit 'failures'

The audits were conducted for an unnamed company and in 2000 and 2001 PKF gave the company unqualified audit opinions. But the investigation committee has now found that PKF had not met auditing standards and ordered the firm to pay a £75,000 fine and costs of £27,000.

The fine and costs order related to audit work done on subsidiaries of the company, the ICAEW’s latest list of disciplinary orders and regulatory decisions revealed.

The papers said that PKF had ‘failed to obtain sufficient knowledge’ of the workings of the subsidiaries and what impact transactions at these subsidiaries would have on the financial statements.

The papers also said PKF had ‘failed to plan and perform the audit of the group to obtain reasonable assurance that the group financial statements were free from material misstatement’.

Finally, the audit failed to obtain ‘sufficient competent evidential matter’ with respect to revenues, cost of revenues and intangible assets at the company’s subsidiaries.

Responding to the fine and costs, PKF said that since 2001, the ‘regulatory environment’ had changed significantly and that PKF, along with the rest of the audit industry, had ‘strengthened’ its audit processes. PKF said it had co-operated fully with the ICAEW.

It is not known whether the fine is the largest ever ordered by the ICAEW in a disciplinary, but experts said the fine and the costs were larger than the norm.

‘The ICAEW will only pass on a case to the Accountancy and Actuarial Discipline Board if it feels the case in the public interest. There is no limit on the size of a fine the ICAEW can impose, but this one does look big,’ said Chris Dickson, chief counsel of the Joint Disciplinary Scheme.