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KPMG in dock over admitted audit code breaches

TWO KPMG audit partners will await their fate when the FRC concludes its disciplinary hearings into a brace of audits conducted by the firm.

The cases revolve around breaches of the FRC’s Ethical Standards for Auditors code.

The first, in relation to telecoms giant Cable & Wireless Worldwide, concerns the non-timely disposal of a share-holding in a client entity for the years 2011/12 by KPMG audit partner James Marsh and the Big Four firm’s audit outfit.

The second hearing relates to whether KPMG audit partner, Greg Watts, and KPMG were independent when they conducted the audits of car dealer Pendragon’s financial statements for 2010/11.

The FRC began its investigations in May 2013. Its decision to initiate the probes was taken after consulting with the ICAEW.

In both cases, the formal complaints have been admitted by the accused.
The sanction hearings will take place at London’s International Dispute Resolution Centre on 4 and 5 December 2014.

Among the sanctions available to the audit and accounting watchdog are an unlimited fine, unlimited costs, exclusion from the profession for a period of time and various reprimands.

Pendragon was forced to correct its 2011 accounts after it overstated its cashflows from operations and investment activities, following a review by the FRC’s Financial Reporting Review Panel in August 2012. As a result of the correction, made in the company’s interim results, cash inflow had been overstated by £31.1m. The FRRP said it was satisfied with correction and that the matter was closed.

Back in 2010, KPMG shared in a £22m pot given to corporate advisers working on Cable & Wireless’ demerger moves.

The telecoms behemoth split to form Cable & Wireless Worldwide and Cable & Wireless Communications, a move that required the corporate expertise of a number of advisers including its auditors KPMG.

 

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