FRC imposes record penalties on audit firms during 2023

FRC imposes record penalties on audit firms during 2023

The Financial Reporting Council (FRC) issued a historic number of fines in 2023, totalling £33.2 million, surpassing the previous year’s record.

KPMG bore the brunt, facing penalties for various audit shortcomings, with the biggest fine reaching £21m due to failures in the Carillion audit, the UK’s largest corporate collapse in 2018.

Including investigation costs, audit firms paid a total of £40.4m in penalties to the regulator, around £1m less than during 2022, according to data analysed by Thomson Reuters. 

Last year saw KPMG involved in four out of five concluded FRC investigations, also facing fines for its work with Luceco, The Works, and Eddie Stobart. PwC received fines totalling £7.6 million for shortcomings in its audits of Stobart and Babcock, while EY and Deloitte, members of the Big Four, escaped fines but remain under ongoing investigations, The Times reports.

The largest fine in 2023 was linked to KPMG’s audit of Carillion, contributing to the FRC’s mission to enhance audit quality.

As the FRC awaits government approval for its transformation into the Audit, Reporting, and Governance Authority, its headcount has doubled over the past six years to nearly 500. The regulator’s intensified approach appears to be yielding results, with 77% of audited reports in its latest assessment deemed either good or requiring limited improvements, marking the third consecutive year of improvement.

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