Britain’s accounting watchdog has fined Deloitte and one of its partners a total of £4.62m (€5.15m) for misconduct related to the audit of financial statements of Serco Geografix for 2011 and 2012.
The penalty for Deloitte, one of the world’s ‘Big Four’ accounting firms — the others are EY, KPMG, and PwC — comes at a sensitive time for the audit sector, as Britain’s government considers how to implement sweeping reform of auditing.
MPs have called for a major shake-up of accounting, after the failures of UK retailer, BHS, and construction company, Carillion.
Deloitte’s initial, £6.5m fine from the Financial Reporting Council (FRC) was discounted for settlement to £4.23m, while audit engagement partner, Helen George, paid a fine of £97,500, discounted from £150,000.
Both parties were sanctioned for failure to act in accordance with the fundamental principle of professional competence and due care.
Deloitte will also pay £300,000 towards the costs of the investigation, the regulator said.
In addition, Deloitte has committed to providing all its audit staff with FRC- approved training to rectify the shortcomings that led to the misconduct.
Deloitte said it regretted that its audit work on Serco Geografix, in 2011 and 2012, was below the expected standards.
“We have a programme of continuous improvement for our audit quality processes… We have also specifically agreed with the FRC certain actions focussed on learning lessons from the shortcomings in this audit work,” Deloitte said.
Earlier this week, Serco, one of Britain’s largest government contractors, said its Serco Geografix unit and Britain’s Serious Fraud Office had reached a deferred prosecution agreement (DPA), by which the company is expected to pay £19.2m to draw a line under a scandal over how it billed for electronic tagging contracts.
Deloitte’s fine comes just weeks after PwC was fined £4.55m over its failings in its handling of technology firm, Redcentric.
The UK’s Competition and Markets Authority has called for a split of the big accounting firms’ operations, amid allegations of conflicts of interest.
The FRC said it had to wait for the DPA to be announced before it could publish its own fine, which was agreed with Deloitte earlier in the year. The FRC said it would publish full details of the case at a later date.