Britain’s accounting watchdog, the Financial Reporting Council, has imposed a record £48.2m in fines over the past year, after completing several high-profile investigations, including audits of Carillion and London Capital & Finance.
The Financial Reporting Commission, which oversees the country’s audit and accountancy firms, has surpassed its previous record of £46.5m in the 2021-22 financial year. The sharp rise in fines shows the watchdog’s growing assertiveness ahead of its move to a more robust audit, reporting and governance body, which Labour has pledged to prioritise.
After applying discounts for early acceptance and cooperation, audit firms paid fines of £33.1m, up from £28.5m the previous year, but still below the record £34.6m in 2021-22. Although only eight fines were handed out last year – the lowest since 2020-21 – the cases were notably high, with Carillion the most significant.
Carlyon, a construction and services contractor, collapsed in 2018, prompting the Financial Reporting Commission to investigate its audit firm, KPMG. The investigation uncovered “typical” failings in KPMG’s audits, leading to a record £30m fine, later reduced to £21m due to the firm’s admission and cooperation.
Other major penalties included fines for EY, PwC and smaller audit firm Oliver Clive & Co, in relation to their work with London Capital & Finance, the now-defunct investment group embroiled in a major savings scandal. PwC and EY received fines of £7m each, reduced to £4.9m and £4.4m respectively, while Oliver Clive was fined £60,000, reduced to £42,000.
Elizabeth Barrett, Executive Director of Enforcement at the FRA, commented: “Last year was a remarkable year for the completion of many high-profile and complex cases at the FRA. The FRA will continue to prioritise fair, robust and proportionate enforcement outcomes to support confidence in financial reporting and auditing, which supports investment confidence in UK businesses and therefore the UK’s economic growth and international competitiveness.”
Audit firms have often criticised the Financial Reporting Commission for the length of its investigations. However, the regulator has reported improvements, with eight of the nine investigations it concluded last year completed within three years, a marked improvement on previous years.
The Financial Reporting Commission opened six new investigations last year, leaving it with 35 open, down from 38 the previous summer.