Deloitte fined for pension scheme audit failures
Big Four firm Deloitte has been fined £362,500 for failures relating to the audit of a former client’s defined benefit (DB) pension scheme and the carrying value of the company’s intangible assets.
The Financial Reporting Council (FRC) described the former client as one of the largest local and regional multimedia organisations in the UK responsible for operating 236 publications and 203 websites. The company entered administration in November 2018.
The regulator did not name the company involved nor the audit partner at Deloitte.
The FRC said Deloitte failed to ensure the work carried out by the Engagement Quality Control Review (EQCR) was adequately documented, and that it failed to obtain sufficient appropriate audit evidence to substantiate the cash holding of the client’s DB scheme.
The FRC also said Deloitte failed to obtain sufficient appropriate audit evidence in respect of its stress testing of the company’s impairment model.
The problems relate to an audit carried out by Deloitte in 2015. The audit engagement partner who dealt with the case in question has been reprimanded by the FRC and will have to pay the executive counsel’s costs of the investigation.
The decision notice detailing the failings, published this morning, does not question the truth or fairness of the company’s 2015 financial statements.
A Deloitte spokesperson said: “We acknowledge and regret that aspects of our audit work for this entity did not comply with the relevant standards. However as the FRC has recognised, these did not call into question the truth or fairness of the financial statements in question.
“Audit quality remains our priority and we continue to enhance our audit quality processes and to seek improvement across all of our work.”
Deputy executive counsel to the FRC Claudia Mortimore said: “The proportionate sanctions reflect the failures by the respondents to obtain sufficient appropriate audit evidence and to properly document work in significant areas of audit risk, but also recognise the limited nature of the breaches, which did not call into question the truth or fairness of the financial statements.”
Deloitte and two audit partners received a record £15million fine following an investigation into its audit of software firm Autonomy in September.
The audit sector has faced criticism in recent years following several high profile audit failures.
Earlier this year the FRC found 29 of 88 audits carried out by Deloitte, PWC, EY, KPMG, BDO, Grant Thornton and Mazars this year needed improvements, with seven of these requiring significant improvements.