The Financial Reporting Council (FRC) has issued KPMG with a financial sanction of £690,625 over its audit of Carr’s Group plc for the FY21.
The Big 4 firm has also received a severe reprimand.
Nick Plumb, who signed off the audit report has been fined £38,675 and also received a severe reprimand.
KPMG has also paid the costs of Executive Counsel’s investigation.
The FRC said Plumb and KPMG breached the FRC’s 2019 Ethical Standard (the Ethical Standard) and International Standards on Auditing (ISAs) by failing to ensure compliance with applicable independence requirements. The independence issue arose because the Statutory Audit of Carr’s relied on the work of another firm (a component auditor outside the KPMG network, Firm X) who undertook the Statutory Audit of an associate of Carr’s, in circumstances where the audit engagement partner at Firm X had held the role for longer than five years, and Firm X had provided certain non-audit services to the associate entity.
The settlement does not call into question the quality of the substantive audit work conducted either by KPMG or Firm X. The breaches were not dishonest, intentional, or reckless. KPMG and Mr Plumb provided an exceptional level of cooperation during the investigation, including by self-reporting breaches of Relevant Requirements and volunteering relevant additional information. This conduct attracted a 15% discount in addition to the discount for admissions and early disposal.
