Big Four firms Face Potential £10m Fines for Shoddy Audit Work
Financial Reporting Council (FRC) has decided to implement a number of restrictions and sanctions on the Big Four firms after the body faced immense pressure to take a strong stand against these firms in light of the recent accounting scandals involving the said firms.
It is expected that the Big Four firms may be required by the FRC to pay fines of £10m for cases where the Big Four firms have carried out “seriously poor audit work”. If it is found that the auditors failed to keep their integrity intact or conscious wrong-doing was involved then in such a case even more hefty financial penalties should be imposed on the Big Four firms.
The FRC representatives said on Monday that the FRC has accepted the findings of the independent review carried out in November of last year under the stewardship of a former judge Sir Christopher Clarke. The former judge recommended the independent regulator to slap much heftier fines on the firms in question for the serious misdeeds committed by the world’s biggest and well reputed accountants & auditors.
The independent review report also stated that fines which the Big Four firms could be required to pay are in single figure millions and it is a pretty small portion of the revenues which the Big Four firm’s make during the course of their financial year revenues and therefore does not carry enough of a deterrent effect.
The record amount for a fine imposed by the FRC was of £5.1m given to PwC over the audit it carried out of RSM Tenon in the year 2011.
The UK based regulatory also accepted other suggestions of the former Judge Christopher Clarke which included exclusion of dishonest accountants and auditors from the accounting profession for at least 10 years.
The new sanctions come into effect from June 1, 2018.These changes are made at a time when the FRC was facing a lot of pressure with regards to taking a stronger stand against the Big Four firms in relation to shoddy or neglectful audit work, with high profile cases like Carillion spurring the conversation.