KPMG was fined £3.4m by its regulator
KPMG and its lead partner Anthony Sykes failed to address potential bribery and corruption by Rolls-Royce in their 2010 audit despite being aware of two sets of suspicious payments to agents in India, according to the Financial Reporting Council.
Those two payments later formed two of 12 cases in Rolls-Royce’s nearly £500million deferred prosecution agreement with the Serious Fraud Office in 2017 to settle bribery and corruption allegations.
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KPMG and Sykes were aware of two payments, one of £3.32m and one of £1.85m, to an agent in India in 2010, at a time when the use of intermediaries in relation to defense contracts was being investigated Indian government has been restricted by the Indian government authorities.
KPMG and Sykes accepted that they should have included a summary of the Indian payments and the outcome of their discussions with Rolls-Royce management in their audit papers, but did not, the FRC said in its May 24 decision notice.
KPMG was contacted for comment.
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KPMG’s fine has been reduced to almost £3.4m from £4.5m for approvals and early disposal, while Sykes’s has been adjusted to £112,500.
KPMG is also required to commission an external review of its policies on legal and regulatory compliance activities by audited entities.
“It is vital that auditors are aware of the risks of corporate non-compliance with laws and regulations and conduct their work in this area with care and sufficient professional skepticism. This is particularly true where the audited entity operates in a sector where such risks are known to be widespread,” said Claudia Mortimore, FRC Assistant Legal Counsel.
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