The accountancy regulator has fined KPMG and a partner over its audit of advertising agency M&C Saatchi.
Back in 2019, the Big Four firm resigned as the ad giant’s auditor amid an accounting scandal which saw the company set aside £6.4m after it had spotted an error in its accounts.
The business had also overstated its profits by £14m over a number of years.
KPMG’s chief risk officer John Bennett led the audit of M&C Saatchi from 2013 to 2017, then partner Adrian Wilcox took over in 2018.
KPMG faced scrutiny from the Financial Reporting Council (FRC) as the regulator launched an investigation.
On Monday, it was revealed that the FRC has issued a final settlement decision notice (FSDN) under the Audit Enforcement Procedure and imposed sanctions against KPMG and Adrian Wilcox .
KPMG have been hit with financial sanction of £2.2m, which has been discounted for admissions and early disposal to £1.4m.
The firm also have been issued with non-financial sanctions comprising of a published statement in the form of a severe reprimand and declaration that the audit report signed on behalf of KPMG did not satisfy the relevant requirements.
Wilcox himself was issued a financial sanction of £75,000, discounted for admissions and early disposal to £48,750.
He also was slapped with non-financial sanctions comprising a published statement in the form of a severe reprimand and a declaration that the audit report signed by him did not satisfy the relevant requirements.
KPMG has also paid the costs of the investigation.
KPMG and Wilcox have admitted breaches of relevant requirements, such as failure to audit with sufficient professional scepticism and failures to properly audit journal entries across a number of subsidiary companies.
Claudia Mortimore, deputy executive counsel of FRC said: “KPMG’s audit did not meet the required quality standards in a number of respects amounting to serious audit failings and breaches of audit standards. This included a lack of professional scepticism in certain high-risk areas of the audit and basic failings in journal testing.”
KPMG was contacted for comment.