Deloitte Hit With $5.4 Million Fine for Faulty Audit

By:
Chris Gaetano
Published Date:
Jul 8, 2019
Regulators in the UK have leveled a £4.225 million fine (about $5.4 million US) over its audit of a firm that was eventually charged with accounting fraud, according to the Wall Street Journal. The matter concerned the subsidiary of outsourcing firm Serco Group, specifically its 2011 and 2012 financial statements. The firm recently settled with the UK's Serious Fraud Office after being charged with misleading the government about profits it made on a contract between 2010 and 2013. It had been accused of overcharging for electronic tagging services to track criminals, some of whom were actually dead, according to Bloomberg

The UK's Financial Reporting Council (FRC), which regulates the accounting profession there, said that the Big Four firm failed to act with professional competence and due care with regard to the Serco audit. Beyond the fine, Deloitte shall also be responsible for the £300,000 cost of the investigation, and the audit engagement partner shall have to pay £97,000. Auditors shall also have to undergo additional training. 

The Big Four have come under increasing scrutiny and criticism in the United Kingdom, sparked by the collapse of a large government contractor with ties to each of the firms. This collapse, in turn, prompted additional scrutiny of other audits, leading to fines against KPMG for its audit of Quindell and against PwC for its audit of BHS. Amid the revelations, some in the government have even called for a breakup of Britain's Big Four. This criticism, though, also extended to the FRC for failing to properly supervise these firms: a House of Commons report described the regulator as "timid" and "feeble" in the face of the Big Four, saying that "we have little faith in the ability of the FRC to complete important investigations in a timely manner."  The Journal noted that the FRC has therefore come under increasing pressure to show it is capable of regulating the profession. 

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