Regulator fines Deloitte £500,000 over audit of pension scheme

Regulator fines Deloitte £500,000 over audit of pension scheme

The Financial Reporting Council (FRC) has imposed sanctions including a £500,000 fine against Deloitte and one of its former Audit Engagement Partners over its audit of an undisclosed company’s defined benefit pension scheme.

The sanctions concern the statutory audit of the company’s financial statements for the 52 weeks ended 2 January 2016.

The financial penalty has been discounted to £362,500 for admissions and early disposal.

Deloitte and its partner must also pay the executive counsel’s costs of the investigation.

The FRC found that Deloitte had breached the relevant requirements related to the audit of the company’s defined benefit pension scheme (DB Scheme) and the carrying value of the company’s intangible assets.

The regulator found that Deloitte failed to ensure that the review work carried out by the EQCR was adequately documented, failed to obtain sufficient appropriate audit evidence to substantiate the cash holding of the DB Scheme and failed to obtain sufficient appropriate audit evidence in respect of its stress testing of the company’s impairment model.

Deloitte and its partner have received a reprimand and a non-financial sanction requiring Deloitte to prepare a progress report for the consideration of the FRC’s Audit Quality Review team (setting out its current Engagement Quality Control Reviewer (EQCR) work programmes and how such work is documented during the course of the audit of Public Interest Entities.

Claudia Mortimore, deputy executive counsel to the FRC, 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.”

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