The Financial Reporting Council’s 4th annual enforcement review reveals a record number of cases resolved in the last year and record financial sanctions of £46.5 million imposed.
KPMG was reprimanded four times and fined £10m before discounts for its co-operation. Grant Thornton was fined three times, PwC was penalised twice, with EY and Deloitte fined once each.
The increase in the total financial sanctions, up from £16.5m in 2020/21, reflects the seriousness and high number of cases concluded. It also reflects the FRC’s growing capability to take on the large and complex cases which are an increasingly prominent feature of its work, supported by a 23% growth in the Enforcement Division’s headcount.
The report also reveals that the increased focus on non-financial sanctions has continued. Non-financial sanctions, which are carefully tailored to the facts of each case, are becoming increasingly sophisticated with a focus on tackling the underlying causes of failure in order to reduce the risk of recurrence. The report emphasises the critical importance of detailed follow-up reporting so that the effectiveness of such sanctions can be closely monitored.
For the vast majority of concluded cases, a lack of audit evidence and a lack of professional scepticism featured – both of which go to the heart of robust audit.
The FRC continues to encourage and incentivise full and frank cooperation. While progress in this area has been slower than hoped, there have been some positive changes, including through self-reporting, comprehensive admissions and proactive steps to address the causes of matters self-reported.