KPMG fined £1.25m over audits of Revolution Bars Group
Business adviser KPMG and one of its former auditors, have been fined over their handling of Manchester-based Revolution Bars Group’s accounts.
The Financial Reporting Council (FRC) today (March 8) said it had fined KPMG £1.25m, reduced to £875,000, and imposed a fine of £50,000, reduced to £35,000 on Michael Neil Frankish, connected to their audits of Revolution Bars for the financial years ended June 30, 2015, and the 53 weeks ended July 2, 2016.
Mr Frankish was audit engagement partner in respect of the audits on behalf of KPMG, although he was not a partner in the firm.
The FRC, which issued a severe reprimand to KPMG, said its reports did not satisfy the requirement to conduct the audit in accordance with relevant standards.
It ordered the adviser to analyse the underlying causes of the breaches, identify and implement any remedial measures, and report to the FRC at each stage of the process.
It also severely reprimanded Mr Frankish, who left KPMG in 2017, and ordered him to analyse the underlying causes of his role in the breaches of relevant standards, identify and implement any necessary remedial measures as part of his appraisal and personal development arrangements, and report to the FRC at each stage of the process.
KPMG also had to pay the costs of the investigation.
The FRC said KPMG and Mr Frankish have accepted failures in their work on the audits of Revolution Bars.
They relate to three specific areas of the audits: Supplier rebates and listing fees; share-based payments; and, for FY2016 only, deferred taxation.
The company’s financial statements for fiscal years 2015 and 2016 contained various misstatements which had to be corrected.
The failings in respect of supplier rebates and listing fees were aggravated by the fact that the FRC had made auditors aware that such complex supplier arrangements were an area of particular audit risk and would be a focus of its inspection activity.
Jamie Symington, deputy executive counsel to the FRC, said: “KPMG’s failings in this case persisted for two years and across multiple areas.
“They included complex supplier arrangements which the FRC had previously identified as an area of regulatory focus, albeit that in this case their impact on the financial statements was minor.
“The audit client was a newly listed and relatively small company, but the breaches were nevertheless serious, including lack of professional scepticism. The FRC has required KPMG and Mr Frankish to take action to mitigate or prevent breaches recurring.”
A KPMG spokesperson said: “We regret that aspects of our 2015 and 2016 audits of Revolution Bars Group Plc fell short of required standards. Our firm is committed to dealing with, and learning from, our historic cases. We have fully cooperated with the FRC throughout their investigation.
“We continue to invest significantly in our business, taking action to address the FRC’s findings and have made significant improvements to our audit procedures through our Audit Quality Transformation Programme, including in respect of supplier rebates, share based payments and deferred tax.”
KPMG has been hit with a series of fines recently, including £3m two months ago over failings in its audits of failed drinks business Conviviality, a near record £13m last year for its work on the sale of mattress maker Silent Night, as well as fines for poor audit work at Ted Baker, BNY Mellon and Quindell.
