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The UK's accounting watchdog has fined KPMG £1.5m for “serious failings” in its audit of M&C Saatchi, one of Britain's best-known advertising agencies.
The Financial Reporting Council said on Monday it had fined the Big Four company for failing to meet audit requirements during its audit of M&C Saatchi's accounts for the year ending December 2018.
“KPMG’s audit did not meet the required quality standards in a number of respects amounting to serious audit failures and breaches of auditing standards,” said Claudia Mortimore, Deputy Executive Counsel at the FRC.
Adrian Wilcox, the partner at KPMG who was responsible for the 2018 audit, was also fined nearly £50,000.
The revelation of accounting errors forced M&C Saatchi to revise its declared profits for 2018 and previous years.
Trading in the company's shares was suspended for 10 weeks in 2020 as PricewaterhouseCoopers, its new auditor, struggled to determine the group's true financial position in the wake of the accounting scandal, which first came to light in 2019.
M&C Saatchi has for years been one of the UK's most respected advertising networks – best known for its work for the Conservative Party – but has recently suffered from tougher trading conditions and boardroom battles over its future.
The £1.5m fine represents the 16th fine KPMG has received since 2018. Last October, it was hit with a record £21m fine for failing in its audit of collapsed state contractor Carillion.
Among the failings in the M&C Saatchi audit, the FRC said KPMG did not apply sufficient professional skepticism to client payments that resulted in a £1.2 million increase in revenue. KPMG also failed to properly audit journal entries across a number of subsidiaries, the FRC said.
Cath Burnett, head of audit at KPMG UK, said: “We are committed to engaging with and learning from our past issues, and regret that aspects of our 2018 audit of M&C Saatchi plc fell short of required standards.
“We continue to invest significantly in audit quality, and in our training, controls and technology, to drive further improvements and flexibility in our audit practices.”
