UK watchdog hands KPMG fines totalling £390,000 

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The UK accountancy watchdog said on Tuesday it had fined KPMG a total of £390,000 for putting commercial considerations above ethical standards for auditors in two separate cases of misconduct that stretch back to 2010 and 2011.

In the first case, the Financial Reporting Council found four findings of misconduct against KPMG and one of its partners, James Marsh, chief operating officer of KPMG.

KPMG failed to require Mr Marsh to sell his shares in Cable and Wireless Worldwide — one of the firm’s auditing clients — when he was appointed partner in 2011. The FRC said that KPMG lacked “sufficient or appropriate procedures to prevent or identify the failure on the part of Mr Marsh to sell the shares”.

The FRC also found misconduct around Mr Marsh’s appointment to the role of chief operating officer when less than two years earlier he had been in a position to exert significant influence over the financial statements of Cable and Wireless.

KPMG was fined £350,000, which was reduced 35 per cent to £227,500 to reflect the auditor’s admissions. Mr Marsh was fined £60,000, which was reduced to £39,000 to reflect his admissions.

The second case related to KPMG’s position as auditor to car retailer Pendragon when a former partner, Mel Egglenton, was appointed a non-executive director of Pendragon. The FRC found that KPMG failed to have sufficient or appropriate procedures in place to identify whether Mr Egglenton might have been in the chain of command so that his appointment as NED of Pendragon would require KPMG’s audit resignation.

KPMG was fined £250,000, which was reduced 35 per cent to £162,500 to reflect KPMG’s admissions.

In both cases, the FRC said that KPMG failed to establish an appropriate control environment that put sticking to ethical principles and compliance with ethical standards above commercial considerations.

KPMG said that none of the breaches had a substantive impact on the firm’s clients. It said: “We are pleased that the tribunal agrees that these breaches were unintentional on our part and that they acknowledge the significant efforts we have made (and continue to make) improving our internal processes and controls.”

Last month an appeals tribunal quashed the FRC’s finding that there had been deliberate misconduct at Deloitte in respect of its advice on two transactions connected to UK carmaker MG Rover, which went out of business in 2005. The tribunal also threw out eight of 13 charges against Deloitte, one of the FRC’s most high profile cases in recent years.

Source: FT – UK watchdog hands KPMG fines totalling £390,000

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