Grant Thornton has been fined £650,000 by the Financial Reporting Council (FRC), reduced for cooperation, over failures in the 2016 audit of an unnamed publicly listed company, which included inadequate sampling, a lack of professional scepticism and insufficient documentation
The firm’s fine has been discounted to £422,500 for admissions and early disposal. A Grant Thornton audit engagement partner has been fined £20,000, reduced to £13,000.
Grant Thornton and the audit engagement partner will pay all of executive counsel’s costs of the investigation, which was opened two years ago.
The FRC has also made a declaration that the 2016 audit report signed on behalf of Grant Thornton did not satisfy certain relevant requirements, because of breaches relating to the audit work carried out on the company’s principal assets, and an area identified as a significant risk.
The regulator said the work done on the sampling of those assets was inadequate and failed to select an audit sample that was sufficient to reduce the sampling risk to an acceptably low level.
The audit team also placed undue reliance on the company’s externally appointed experts in the valuation of the assets and did not appropriately consider the use of an auditor’s expert.
The breaches by the audit team led to a failure to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions about the valuation of the assets. There were also failures to exercise sufficient professional scepticism and to prepare adequate audit documentation.
However, the FRC noted that none of the breaches of relevant requirements were either intentional, dishonest, deliberate or reckless.
The regulator stated that despite these breaches, its decision on the investigation does not question the truth or fairness of the company’s 2016 financial statements, which have not been subject to any restatement.
Grant Thornton has also taken remedial action including the provision of appropriate training on the use of experts and the challenge of management estimates to all audit staff to prevent reoccurrence of breaches.
A spokesperson for Grant Thornton UK said: 'We acknowledge the FRC’s announcement and regret that we fell short of expectations in this instance.
'We note that the FRC’s decision does not question the truth or fairness of the company’s financial statements for the relevant year end.
'The regulator also recognises that we have since taken a number of proactive steps to improve quality, including improvements in our training programmes, which build on the measures we announced earlier this year to strengthen audit quality within our firm.'
