FRC investigates KPMG over Ted Baker audit ethics
The Financial Reporting Council (FRC) has announced it is to investigate KPMG over the firm’s consideration of and compliance with ethical standards in connection with the provision of non-audit services during the audit of the financial statements of Ted Baker, the designer retail brand.
The regulator said the investigation, carried out under its accountancy scheme, will look at KPMG’s actions during the audit of the financial statements of Ted Baker and what it calls ‘one of its significant affiliates’ for the periods ended 26 January 2013 and 25 January 2014.
KPMG has been the retailer’s external auditors since 2001, with a competitive audit tender process carried out in 2012.
In the 2016 annual report the Ted Baker audit committee states it has formally reviewed the independence of the auditors during the review year.
It goes on to state: ‘KPMG LLP has provided a letter to the audit committee confirming that it remains independent within the meaning of the regulations on this matter and in accordance with professional and ethical standards.’
The report also notes that the FRC’s Audit Quality Review team reviewed the KPMG audit files for the prior period and shared with the audit committee the two observations in connection with audit process. The audit committee says it discussed the review team’s feedback with KPMG and is satisfied that the auditors have addressed the two observations noted in relation to the audit process for the current year audit.
According to the 2016 annual report, Ted Baker paid KPMG £216,000 in audit fees for the year ended 31 January 2016, up from £189,000 the year before. KPMG was also paid £114, 000 for tax compliance and other advisory services, the same amount as in 2015. However, there was no payment under the category for all other services (forensic services). In contrast, Ted Baker paid £569,000 to KPMG for these activities in 2015 and £218,000 in 2014.
No accountancy professional members employed by Ted Baker are the subject of the FRC’s investigation. Investigations are conducted by executive counsel and the professional discipline team within the conduct division, who will decide whether to bring disciplinary proceedings against KPMG as a member firm and, if so, make a referral to a disciplinary tribunal hearing.
A KPMG spokesperson said: ‘We have always sought to ensure that the non-audit services we provide to audit clients are consistent with both the letter and the spirit of prevailing requirements However, we recognise that the application of principles requires the exercise of professional judgement and, in this instance, the FRC’s view may differ from our own. We will of course co-operate fully with the FRC’s investigation.’
Source: CCH Daily – FRC investigates KPMG over Ted Baker audit ethics
