The Financial Reporting Council (FRC) is to investigate KPMG’s audit work for alcohol wholesaler and retailer Conviviality, which went into administration in April having identified a ‘material error’ in its financial forecasts and an unexpected £30m tax bill earlier in the year
The investigation, conducted under the FRC’s audit enforcement procedure, will look at the audit by KPMG of the financial statements of Conviviality plc for the 52 weeks ended 30 April 2017.
The FRC has also commenced an investigation under the accountancy scheme into the preparation and approval of Conviviality’s financial statements and other financial information by a member of the ICAEW.
The regulator is already investigating KPMG’s auditing of collapsed outsourcer Carillion, and recently fined the firm £4.5m over failures in its auditing of Quindell, the insurance technology and claims management group.
In this year’s annual audit quality inspection (AQI) report the FRC reported ‘an unacceptable deterioration’ in KPMG’s audit quality, with 50% of the firm’s FTSE 350 audits requiring more than just limited improvements, compared to 35% in the previous year, and said it would be increasing its scrutiny of the firm.
The regulator said it had decided to increase by 25% the number of KPMG audits it plans to inspect in 2018/19 and will also be monitoring closely the implementation of the firm’s audit quality plan.
KPMG has been asked to comment.
Report by Pat Sweet
