fbpx

Credible World News, 24/7 – 365

KPMG fined £3.4m over ‘serious failures’ in Rolls-Royce audit

Regulator says accountants’ audit of jet engine maker failed to report payments to Indian intermediaries

KPMG will pay a fine of £3.4m to the accounting regulator after accepting failures in its audit of Rolls-Royce, the British jet engine manufacturer that paid a £500m settlement after bribery allegations.

The accountancy firm received a severe reprimand from the regulator, the Financial Reporting Council (FRC), and the firm will have to commission an independent review into the effectiveness of its policies.

It is the fourth significant fine the firm has paid this year.

Anthony Sykes, the KPMG partner who led the audit, will also pay a £112,500 fine and received a severe reprimand ahead of his retirement from the firm in September. The fines for the firm and Sykes were reduced from £4.5m and £150,000 respectively because they cooperated with the regulator. KPMG will also pay the regulator’s costs for the investigation.

It is the latest in a series of scandals suffered by the big four accounting firms, all of which have been fined millions of pounds for audits that later turned out to have significant failings.

Poor quality audits have been blamed in cases ranging from the collapsed construction firm Carillion – for which KPMG was this month fined £14m – to the retailer BHS, for which PwC was fined £6.5m. KPMG has also been fined this year in relation to work on the alcohol distributor Conviviality and Revolution Bars.

Rolls-Royce, Britain’s most prominent aerospace and defence manufacturer, agreed to pay £671m in penalties in 2017 after long-running investigations into claims it paid bribes to land export contracts, including £500m in the UK and other payments in the US and Brazil. The charges in the deferred prosecution agreement included false accounting and conspiracy to corrupt.

“Allegations of bribery and malpractice through the use of intermediaries and ‘advisers’ in the defence field were prominent at the time of the audit”, and should have been well known to KPMG because it was auditing another defence company that had just paid a large fine to settle a criminal investigation, the regulator said.

The “serious failures” highlighted by the FRC related to two payments – one of £3.3m and one of £1.9m – made to Indian intermediaries.

The auditors became aware of the payments in July 2010, but failed to include reference to them in the audit. Sykes also instructed a manager to remove a paragraph referring to them from minutes.

Claudia Mortimore, the deputy executive counsel to the FRC, highlighted the need for accountants to question their clients’ assertions.

“It is essential that auditors are alive to the risks of companies’ non-compliance with laws and regulations, and conduct work in this area with care and sufficient professional scepticism,” she said. “This is particularly so when the audited entity is in a sector where such risks are known to be prevalent.”

Jon Holt, the KPMG UK chief executive, said the fine was related to a “legacy case” that happened before he took over last year.

“I am pleased we have now concluded this historic matter and I’m sorry that elements of our work in the FY2010 audit of Rolls-Royce Group did not meet the professional standards required,” he said.

Related articles

“Very unfair: Rafael Nadal critical of Wimbledon ban on Russian players

‘It’s not their fault what’s happening in the war’ Nadal still looking for peak fitness after stress fracture of rib Rafael Nadal has branded Wimbledon’s ban on Russian and Belarusian players “very unfair” as the ATP considers its response. Wimbledon officials reiterated their position last week, saying that a directive from the government regarding the […]

A new era is over when New York removes last public payphone

City once had more than 6,000 public telephones but march of technology has led to replacement with wifi kiosks New York City removed its last public payphone this week, discontinuing a relic from a more analog time. On Monday municipal officials removed the last remaining city-owned payphone, located in the Midtown area. New York City […]

Pope Francis’ latest plans fuel speculation about his resignation

Francis to host consistory in August then visit Perdonanza Celestiniana festival, initiated by pope who resigned Rumours swirling since early May that Pope Francis might retire have been fuelled by an announcement that he will be attending a feast initiated by a 13th-century pope who himself resigned. Speculation that the 85-year-old might follow in the […]

World Bank and IMF gathering highlights a grim world outlook Larry Elliot

Larry Elliott If Russia’s invasion of Ukraine is hurting developed countries, it’s proving a hammer blow for the poor Russia-Ukraine war: latest updates In Washington it was the week of the four Ws – war, walkouts, weakness and warnings. Some half yearly get-togethers of the International Monetary Fund and the World Bank are dull, easily […]

Russian gymnast Ivan Kuliak banned for one year for wearing the pro-war the ‘Z’ symbol

Competitor displayed letter on podium next to Ukrainian ‘I just showed my position,’ says unrepentant Kuliak 00:42 Russian gymnast Ivan Kuliak has been handed a one-year ban for wearing the letter “Z” supporting Russia’s invasion of Ukraine during an event in Qatar in March, the International Gymnastics Federation (FIG) has said. The 20-year-old, who won […]

Shanghai residents evicted from their homes fight with police over Covid policy

Scuffles follow complaints of food shortages and over-zealous officials forcing people into quarantine 01:04 Videos posted on social media have showed residents of Shanghai scuffling with hazmat-suited police who were ordering them to surrender their homes to Covid-19 patients, providing a rare glimpse into rising discontent in the megacity over China’s inflexible virus response. Shanghai, […]

Spanish parliament approves “only Yes means yes’ bill for consent

Sexual assault survivors will no longer have to prove violence was used against them if passed by Senate Spain’s parliament has approved a bill that makes consent a key determinant in sexual assault cases, freeing survivors of having to prove that violence or intimidation was used against them. The bill, popularly known as “Only yes […]

Hong Kong bans some media outlets from swearing-in of new chief executive

Press crackdown continues as Japanese, US and Taiwanese reporters blocked from 1 July event, which is also 25th anniversary of British handover Hong Kong authorities have barred some local and international media from the inauguration of the new chief executive, citing pandemic restrictions and security reasons. International and wire outlets were among those reportedly not […]

Joe Root resigns as England Test cricket captain following a gruelling run

Five-year stay in the role as skipper comes to a close ‘Recently it’s hit home how much of a toll it has taken’ Joe Root has resigned as the England men’s Test captain after a five-year tenure in the role. Pressure had built on the 31-year-old after a torrid run of Test results, culminating in […]

West Ham identify fans in an alleged attack on German radio journalists

Club have passed details on to Metropolitan police Fans face ban if guilty of attack during Frankfurt game West Ham have said two supporters face indefinite bans if they are found to have attacked two German radio reporters during their side’s 2-1 home defeat by Eintracht Frankfurt in the semi-final, first leg of the Europa […]

Secondhand bikes and city traffic: the joy and grit of an African cycle race

Sierra Leone’s Tour de Lunsar is a showcase for the country’s talent, aiming to open doors for aspiring young athletes by Tom Owen. Photographs by Matt Grayson The half-finished, two-storey roundabout at the centre of Lunsar is not much to look at – a circular concrete shell that one day, maybe, will be finished and […]

“Final resting place””Final resting spot”: sacred Indigenous objects are returned to Australia from a US university

Warlpiri delegation from Yuendumu, north-west of Alice Springs, has collected the seven objects from University of Virginia Seven sacred Indigenous objects have been returned to central Australia from an American university. A delegation of Warlpiri men from Yuendumu, north-west of Alice Springs, collected the objects after they were repatriated from the University of Virginia last […]