The UK Accounting Authority said on Thursday it had fined PwC and KPMG, two of the world’s top four accountants, for “serious” failings to audit company Eddie Stobart Logistics (ESL) in 2017 and 2018 respectively had.
PwC has been fined £1.9 million ($2.4 million), reduced from £3.5 million, over exceptional cooperation and admissions, the Financial Reporting Council (FRC) said in a statement.
PwC has admitted to failings related to real estate transactions conducted by ESL, audit procedures and provisions for real estate leases, the regulator said.
The FRC also fined PwC audit partner Philip Storer £51,187. He avoided a fine of £90,000 through exceptional cooperation and confessions.
“Our work did not meet the required standard on this occasion and we apologize for that,” PwC said in a statement, adding that the focus was on ensuring consistent high-quality audit execution.
KPMG conducted the audit of the logistics company in 2017 and resigned as auditor in 2018 because the relationship with ESL’s management collapsed after difficulties in obtaining sufficient appropriate audit evidence, the FRC said.
PwC was then commissioned with the 2018 audit.
The FRC said it had fined KPMG £877,500, which was reduced on the basis of £1.35million admissions.
“KPMG’s poor disciplinary performance was cited as an aggravating factor,” the FRC said, adding that KPMG had been instructed to take specific actions to prevent the breach from reoccurring.
Cath Burnet, Head of Audits at KPMG UK, said the firm is committed to solving and learning from previous cases and regrets that parts of its work on this audit did not meet the required standards.
“This development represents further progress in addressing these issues and we continue to invest heavily in exam quality, technology and training to drive further improvements,” said Burnet.
The FRC also fined KPMG’s former audit partner Nicola Quayle £45,500, reduced on £70,000 admissions.
“Notable aggravating factors were Ms. Quayle’s seniority at the time the audit report was signed and her past disciplinary sanctions,” the FRC said, adding that it has committed not to conduct a statutory audit or sign audit reports in the future.