Big Four firm KPMG and a former partner have received heavy fines and formal reprimands from the accountancy regulator for serious failures in their audit of N Brown Group plc’s 2022 accounts.
The Financial Reporting Council (FRC) found that KPMG and Anthony Sykes failed to meet international auditing standards, with the firm admitting to serious breaches in testing whether the former London-listed group’s assets were properly valued.
The FRC highlighted failures in impairment modelling, cash flow forecasts, discount rates and reconciliation to market value.
Retailer N Brown, which owns the brands JD Williams and Simply Be, was acquired by a company owned by its non-executive director, Joshua Alliance. As a result of the acquisition, it was removed from AIM.
The acquisition was finalised on 12 February 2025, and Alliance led the £191m cash acquisition through Falcon 24 Bidco.
As a result of the regulator’s investigation, KPMG was fined £1.25m, reduced to £710,937.50 due to early admissions and cooperation. While Sykes was fined £51,187.50, down from £90,000.
Both were severely reprimanded, and their 2022 audit report was ruled inadequate. KPMG must also pay the investigation costs.
This is the third fine for Sykes for audit breaches, following his previous orders to pay over £156,000 in penalties for audits he oversaw at The Works and Rolls-Royce in the past four years.
According to Companies House, Sykes resigned as a member of KPMG on 30 September 2022.
Jamie Symington, FRC deputy executive counsel, said: “In this case, there were numerous failings in relation to the audit work on impairment, despite it having been identified as a significant risk.”
“This case demonstrates that the audit of impairment requires a substantial level of diligence, forethought, and careful exercise of judgement.”
He added that KPMG and Sykes “provided an exceptional level of cooperation” and “as a result, both time and costs were saved in this investigation.”
Commenting on the decision, Cath Burnet, head of audit at KPMG UK, said: “We accept that an element of our audit work did not meet the professional standard required. We cooperated fully with the FRC’s investigation and remain committed to driving continuous improvements in our audit practice.”
Back in June, KPMG and an audit partner were hit with sanctions over their audits of a London-listed farm supplies company, Carr’s, following findings of “serious” breaches.
Back in April, City AM reported that despite being the smallest of the Big Four, KPMG led in total financial sanctions over a five-year period, with 11 fines (now 13) by the regulator.