Grant Thornton sanctioned by FRC
The Financial Reporting Council (FRC) has announced sanctions against Grant Thornton UK and one of its audit engagement partners in relation to the audit of a listed company in 2016.
The professional services giant has been fined £650,000 (discounted for admissions and early disposal to £422,500) for failing to satisfy certain Relevant Requirements of the auditing process – although the FRC says none of the breaches were “intentional, dishonest, deliberate or reckless.”
The firm’s audit engagement partner has been fined £20,000 (discounted to £13,000) and both parties will pay the entirety of the Executive Counsel’s investigation costs.
The breaches relate to audit work carried out on the unnamed company’s principal assets and an area of the business that was identified as a significant risk.
The FRC says the work done on the sampling of those assets was “inadequate” and “failed to select an audit sample that was sufficient to reduce the sampling risk to an acceptably low level.”
In a statement, the FRC said that the audit team also “placed undue reliance on the company’s externally appointed experts in the valuation of the assets and did not appropriately consider the use of an auditor’s expert.”
This in turn led to “a failure to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions about the valuation of the assets.”
The statement goes on to say that despite the breaches, the FRC “does not question the truth or fairness of the Company’s 2016 financial statements, which have not been subject to any restatement,” and the Executive Counsel notes that Grant Thornton’s audit engagement partner had “a hitherto unblemished disciplinary record.”
The FRC also says Grant Thornton UK and its partner have co-operated fully with the investigation, and that the firm has also taken remedial action “including the provision of appropriate training on the use of experts and the challenge of management estimates to all audit staff to prevent reoccurrence of breaches.”
