EY slapped with fine over audit of Scottish water company
Big Four giant EY has been sanctioned £500,000 over its audit of a Scottish water company, less than a week after it received another fine for its audit of the collapsed airline Thomas Cook.
The Financial Reporting Council (FRC) slapped EY and partner Christopher Voogd with fines over the audit of Stirling Water Seafield Finance accounts for the year ended 31 December 2019.
French utilities company Veolia owns Stirling Water Seafield Finance.
The accountancy regulator launched its investigation in January 2023 and revealed on Monday morning that EY breached the term limit of auditing a company.
The FRC said that by undertaking this audit, the firm “exceeded the maximum ten-year engagement period for audits of a public interest entity without renewal via a qualifying public tender.”
The ruling stated that both EY and Voogd “failed to ensure that appropriate procedures regarding the continuance of the audit engagement had been followed”.
It was added that EY failed to comply with its quality control obligations regarding independence requirements.
EY identified and reported the ethical breach to the FRC in November 2021.
As a result, the regulator slapped the firm with a £500,000 fine, discounted to £325,000 for admissions, while Voogd was hit with a £50,000 fine, discounted to £32,500.
The firm also had to pay for the investigation.
Regarding the ruling, Jamie Symington, FRC deputy executive counsel, said: “Mandatory firm rotation is a clear requirement for auditors underpinned by company law and the FRC’s revised ethical standard.”
“It is an integral legal safeguard to provide assurance that auditors are demonstrably independent which supports trust and confidence in UK corporate reporting and audit.”
“In this case, there were significant failings in relation to mandatory firm rotation requirements at both the engagement and firm level during the continuance stage, which led to EY carrying out audit work despite being ineligible,” he added.
This comes less than a week after the watchdog fined EY £6.5m (discounted to over £4.8m) and Richard Wilson for auditing the collapsed airline Thomas Cook.
Commenting on today’s decision, a spokesperson for EY said: “We identified a breach of the mandatory firm rotation requirements in relation to our 2019 audit of Stirling Water Seafield Finance plc which we reported to the FRC.”
“We have fully co-operated with the FRC throughout the investigation and have implemented new monitoring processes and procedures,” they added.