The Financial Reporting Council (FRC) has imposed sanctions against BDO LLP and two former audit engagement partners, John Everingham and Kevin Cook, following admissions of misconduct.
The case follows the action of a senior manager who created false audit evidence and forged signatures on reports over a period of four years, all undetected.
BDO was fined £5.85m and issued with a severe reprimand. The firm is also required to take steps to repay audit fees to entities in respect of audits where unauthorised auditors reports were issued by the firm. BDO must also pay £716,000 in respect of FRC’s costs.
Due to non-cooperation with the investigation John Everingham’s financial sanction was increased from £200,000 to £210,000, but then discounted to £189,000. Everington is not allowed to perform any audit work for six years
Kevin Cook was fined ÂŁ90,000 and banned from any audit work for three years.
Both men received a severe reprimand too.
Jamie Symington, Deputy Executive Counsel, said: “This case has established that BDO did not have sufficiently robust systems and controls in place from 2012 to 2019 to ensure that audit engagement partners diligently conducted and supervised their audits. These failures gave rise to circumstances in which misconduct could occur and remain undetected. Mr Everingham and Mr Cook were responsible as audit engagement partners for the overall quality of the audits they supervised, and they both adopted a fundamentally flawed approach to this role which involved a serious abrogation of their responsibilities.
“The failings admitted by BDO and the two partners enabled the Senior Manager’s dishonest course of conduct to go undetected over several years, thereby undermining the integrity and quality of numerous audits in the relevant period. Even when evidence of the Senior Manager’s misconduct did emerge, the firm failed to take the steps necessary to investigate it, and to protect their clients. The substantial sanctions imposed reflect the extent to which the serious failings established in this case will undermine confidence in audit and the accountancy profession.
We recognise that following the Senior Manager’s departure from BDO in December 2019, BDO conducted an extensive forensic investigation into the Senior Manager’s conduct over the course of the next 15 months and provided a detailed report on its findings to the FRC. BDO has since worked to remediate and strengthen relevant systems and controls. As part of this set of sanctions, BDO will report to the FRC for a period of two years on the efficacy of this work, including the control enhancements introduced specifically to prevent any repetition of the misconduct in this case”.
