KPMG hit with £4.5m fine over Rolls-Royce bribery scandal

KPMG hit with £4.5m fine over Rolls-Royce bribery scandal

The big four auditor is being penalised for “conspiracy to corrupt and a failure to prevent bribery”

KPMG hit with £4.5m fine over Rolls-Royce bribery scandal

KPMG UK has received a multimillion-pound penalty in relation to its audits of Rolls-Royce more than a year ago to mark the latest in a string of hefty fines.

A fine of £4.5m was levelled at the firm by the Financial Reporting Council (FRC) this morning, in addition to a “severe reprimand” and a requirement that big four auditor shall commission an independent review of its audit work.

The penalty concerns Rolls-Royce’s £670m deferred prosecution agreement with the Serious Fraud Office (SFO) over bribery charges in the US and UK, which took place in January 2017.

Shortly after the settlement was made public, the FRC launched an investigation into KPMG.

In a statement made at the time, the regulator confirmed that its investigation related to “offences including conspiracy to corrupt and a failure to prevent bribery”.

KPMG will also pay the Executive Counsel’s costs of the investigation, while former audit engagement parter Anthony Sykes was handed a £150,000 fine.

“It is essential that auditors are alive to the risks of companies’ non-compliance with laws and regulations, and conduct work in this area with care and sufficient professional scepticism,” said Claudia Mortimore, deputy executive counsel to the FRC.

“The package of financial and non-financial sanctions imposed in this case should help to improve the quality of future audits.”

KPMG UK declined Accountancy Age’s request for comment.

“This latest fine once again raises serious questions about the quality and effectiveness of audit for our major companies,” said Gavin Hayes, head of public policy and external relations at the Chartered Institute for Internal Auditors.

This is another in a long line of cases underlining the “urgent” need for the UK government to accelerate the implementation of its impending audit reforms, Hayes argued.

“We believe there is a clear case for bringing forwards legislation sooner rather than later, as demonstrated by these latest fines.”

A string of misconduct

This is the latest in a spate of heavy penalties to hit KPMG, the most significant of which came earlier this month as the auditor was found guilty of fresh misconduct in relation to the collapse of construction firm Carillion.

At a tribunal hearing in London on May 12, the FRC confirmed that KPMG will pay a £14.4m settlement (the second largest in UK audit history) in addition to £4.3m in costs and a “severe reprimand”.

The latest findings and penalties follow on from a five-week hearing earlier this year examining the conduct of KPMG staff during the FRC’s audit quality reviews, in which the firm’s audits of Carillion (2016) and outsourcer Regenersis (2014) were inspected.

The watchdog’s allegations were upheld as a result of the tribunal – namely that KPMG and some of its former auditors had falsified meeting minutes, spreadsheets and assessments before signing them off.

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