On Thursday, Britain’s accounting authority penalized KPMG 875,000 pounds ($1.09 million) for its audit of lighting maker Luceco (LUCEL.L) for its financial year to Dec. 31, 2016.
Luceco owned lighting and wire accessory firms in China and other countries in 2016.
“The breaches included failures in the design and performance of audit procedures, failures to adequately review and critically assess the audit evidence obtained, failure to document the audit work and failures by the respondents to apply professional scepticism,” the Financial Reporting Council said.
The FRC claimed the breaches were worse since KPMG and its Luceco auditor, Stuart Smith, were aware of inventory cost problems from the prior year.
KPMG and Mr. Smith cooperated with the FRC and admitted the violations. “The 30% discount on financial sanctions reflects their admissions and timing,” the FRC said.
Smith, who left KPMG, was fined 50,000 pounds.
KPMG UK head of the audit Cath Burnet said the auditing firm is dedicated to learning from past cases and regrets that parts of the 2016 Luceco audit fell short of standards.
The FRC said KPMG must investigate the breaches’ causes and take any additional steps to prevent a repeat.
“We continue to invest significantly in training, controls, and technology to improve quality and resilience in our audit practice,” Burnet added.
Smith confessed wrongdoing in 2015’s Regenesis audit spot check by the FRC. As a result, he was fined £150,000 and prohibited from accounting for three years.
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