Deloitte hit with £1.25m FRC fine over SIG audit

Deloitte hit with £1.25m FRC fine over SIG audit

The Big Four firm was found guilty of breaches in relation to cash and the audit of supplier rebates

Deloitte hit with £1.25m FRC fine over SIG audit

Deloitte has been handed a heavy fine by the Financial Reporting Council (FRC) over failings in relation to its 2015 and 2016 audits of building materials supplier SIG plc.

Following a four-year investigation, the Big Four firm admitted two major breaches of FRC standards. The watchdog responded with a series of sanctions, including a £1.25m fine, a severe reprimand, and an order for Deloitte to take action to prevent future breaches.

The breaches “involved contraventions of requirements which are fundamental to the role of the independent auditor”, said Jamie Symington, deputy executive counsel at the FRC.

According to the audit regulator, the misdemeanours concerned the audit of supplier rebates (incentives paid to SIG by its suppliers) and cash.

Deloitte failed to “obtain and document sufficient appropriate audit evidence” and “exercise sufficient professional scepticism” in both cases, the FRC said.

Symington added that the supplier rebate breaches were made “all the more serious” by the fact that the FRC had highlighted the arrangements as requiring particular attention from auditors.

The audit watchdog also levelled sanctions at Simon Manning, the statutory auditor for the 2015 and 2016 SIG audits, and signatory of the audit reports on behalf of Deloitte.

Alongside Deloitte, Manning co-operated with the FRC’s investigation and admitted both the audit supplier rebates and cash breaches. He has received a £50,000 fine and a severe reprimand.

“We are disappointed that our work on the FY15 and FY16 SIG plc audits – relating to the audit of supplier rebates and cash – fell short of the high standards expected of us,” a Deloitte UK spokesperson said.

“We have learnt from the matters identified by the FRC and remain committed to audit quality and its continuous improvement.”

Due to the “extent and timing” of their admissions, both Deloitte and Manning received 27.5% discounts to their financial penalties. The final totals are £906,250 and £36,250 respectively.

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

Professional Services Why Professional Services Firms Should Ditch Folders and Embrace Metadata

2y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

2y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine

Accounting Firms Turn Accounts Payable into a value-engine

2y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021

Making Tax Digital Digital Links: A guide to MTD in 2021

2y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource