KPMG fined £875,000 over Revolution Bars Group audits

Accountancy firm KPMG has been severely reprimanded and fined £875,000 by the Financial Reporting Council (FRC) over its audits of Revolution Bars Group for its 2015 and 2016 financial years.

The FRC said the company’s financial statements contained various misstatements that had to be corrected. KPMG and Michael Frankish, who now works for Grant Thornton, accepted failures relating to supplier rebates and listing fees, share-based payments and deferred taxation.

Consequently, the audits “failed to achieve their principal objective of providing reasonable assurance that the financial statements were free from material misstatement”.

The FRC said it had made auditors aware in 2014 and 2015 that such complex supplier arrangements were an area of particular risk and would be a focus of its inspection.

The watchdog said these were “serious breaches”, however “were not intentional, dishonest, deliberate or reckless”, and that the respondents provided a good level of co-operation during the investigation, including making early admissions in respect of the breaches.

Frankish performed the role of audit engagement partner in respect of the audits on behalf of KPMG, although he was not a partner in the firm, and was fined £35,000.

Jamie Symington, deputy executive counsel to the FRC, said: “KPMG’s failings in this case persisted for two years and across multiple areas. They included complex supplier arrangements which the FRC had previously identified as an area of regulatory focus, albeit that in this case their impact on the financial statements was minor.

"The audit client was a newly listed and relatively small company, but the breaches were nevertheless serious, including lack of professional scepticism. The FRC has required KPMG and Mr Frankish to take action to mitigate or prevent breaches recurring. The package of financial and non-financial sanctions should help to improve the quality of future audits.”

KPMG will also pay executive counsel’s costs of the investigation.