KPMG fined in UK for failing to audit BNY Mellon properly
In the year to March, the UK accounting watchdog had fined accounting firms nearly £43m, with KPMG making up nearly half of that total
London — Accounting firm KPMG has been fined £3.5m ($4.24m) by Britain’s accounting watchdog for failing to audit client accounts of BNY Mellon properly, the latest in a string of penalties on KPMG for poor performance.
The fine will keep the pressure on Britain’s government to come forward with legislation that implements a proposed shake-up of auditing, including a more powerful watchdog.
The UK Financial Reporting Council (FRC) said on Thursday that in 2011, BNY Mellon held more than £1-trillion pounds in assets on behalf of its customers, which, under client asset audit standard (CASS) safekeeping rules, must be audited to ensure the assets are being kept safe.
KPMG and Richard Hinton, who signed the client assets report on behalf of KPMG, admitted misconduct, the FRC said.
KPMG said it regretted that aspects of its work did not meet the standards expected by the regulator. “We are happy to undertake the additional review process outlined by the FRC as part of our drive to improve audit quality,” it said in a statement.
The fine was discounted from £5m pounds for admission of misconduct. Hinton’s £75,000 fine was discounted to £52,500, the watchdog said. Britain’s finance industry watchdog, the Financial Conduct Authority, had fined BNY Mellon £126m in April 2015 for failing to keep customer money safe.
In the year to March, the accounting watchdog had fined accounting firms nearly £43m, with KPMG making up nearly half the total after admitting misconduct in audits of The Co-operative Bank, retailer Ted Baker, and professional services firm Quindell.
The watchdog had already put KPMG into close supervision measures, and on Thursday added a requirement for a quality performance review of everyone who signs a client assets report on behalf of KPMG.
Hinton was not a partner at KPMG and is not currently working as a CASS auditor, the FRC said.
The FRC has substantially increased fines on accounting firms, partly to meet criticisms from parliament that it was too timid with KPMG, EY, Deloitte and PwC, known as the “Big Four”.
Accounting industry officials have expressed concerns that rocketing fines will put off people working in audit. Said the FRC, “We also take into account that a fine should not be such as to deter accountants from accepting audit or CASS audit engagements.”
Reuters