The UK audit watchdog has fined Deloitte £362,500 ($477,000) and reprimanded a former partner over failing to relate to the audit of a former client’s defined benefit pension.
The Financial Reporting Council (FRC) said the accounting firm did not ensure that the work carried out by the Engagement Quality Control Review (EQCR) was properly documented.
It also added that the Big Four firm did not obtain sufficient audit evidence to substantiate the cash holding of the client’s pension scheme. The fine was discounted from £500,000 for admissions and/or early disposal.
The former client in case has not been named by the FRC or the identity of the former partner.
The issues relate to an audit carried out by Deloitte in 2015. A reprimand has been imposed against the former audit engagement partner who will have to pay the executive counsel’s costs of the investigation.
The FRC clarified that the decision notice does not question the truth or fairness of the financial statements, and that the breaches were "not intentional, dishonest, deliberate, or reckless."
Claudia Mortimore, the FRC’s deputy executive counsel, said: “The proportionate sanctions reflect the failures by the respondents to obtain sufficient appropriate audit evidence and to properly document work in significant areas of audit risk, but also recognise the limited nature of the breaches, which did not call into question the truth or fairness of the financial statements.
Deloitte will now be required to prepare a progress report for the FRC’s audit quality review team, outlining its current EQCR work programmes and how such work is documented during the course of the audit of Public Interest Entities.
A spokesperson from Deloitte said: “We acknowledge and regret that aspects of our audit work for this entity did not comply with the relevant standards. However as the FRC has recognised, these did not call into question the truth or fairness of the financial statements in question,”
“Audit quality remains our priority and we continue to enhance our audit quality processes and to seek improvement across all of our work.”
The audit industry has faced intense scrutiny over the past few years after several high profile audit failures.
Earlier this year, Deloitte was stung with a record £15m fine and severely reprimanded by the FRC for “serious and serial failures” in its auditing of software company Autonomy. Former Deloitte partners Richard Knights and Nigel Mercer were also sanctioned.
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