EY handed fine for botched Stagecoach audit
The Financial Reporting Council (FRC) has landed EY and its Audit Engagement Partner, Mark Harvey with £2.3m in fines.
The FRC said that an EY audit of StageCoach, an international travel company, “did not satisfy the audit reporting requirements” for the 2016-2017 financial year.
Claudia Mortimore, the Deputy Executive Counsel to the FRC said: “the audit failings in this case were extensive and related to a number of fundamental auditing standards.”
Mortimore claims that EY failed to obtain appropriate evidence for the audit, adequately evaluate expert evidence, apply sufficient professional scepticism and prepare proper audit documentation.
The most serious “deficiencies” in the audit work concerned a lack of evaluation and challenge concerning financial assumptions relating to pension scheme obligations, insurance payouts and contracts.
Today, a final decision notice slapped EY with a £2.2m fine, reduced from £3.5m for early payment, while Mark Harvey was given a personal financial sanction for £100,000. Both EY and Harvey also received a severe reprimand.
A spokesperson for EY responded to the news, saying “regrettably, on this occasion, we fell short of the standards we set for ourselves, and the standards expected of us by the FRC and society.
“We have cooperated with the FRC throughout their investigation, take their findings very seriously and have worked hard to rectify the issues identified. No findings were raised in the FRC’s review of our most recent audit of the company, for the 2020 year-end,” they added.
Mortimore said: “The sanctions imposed reflect the seriousness of the breaches and are intended to improve the quality of future audits.”
In 2019, the FCA issued a £4m fine to KPMG as well as a £100,000 to an audit partner at the firm over misconduct related to Co-op Bank’s merger with the Britannia Building Society.
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