The Financial Reporting Council (FRC) has issued a final decision notice under the audit enforcement procedure and imposed sanctions against KPMG Audit plc and Anthony Sykes, audit engagement partner, in relation to the statutory audit of Rolls-Royce Group plc.

The FRC’s investigation has taken five years since it was first announced on 4 May 2017. It focused on KPMG’s conduct of the audits of the financial statements of Rolls-Royce Group plc for the year ended 31 December 2010 and of Rolls-Royce Holdings plc for the years ended 31 December 2011 to 31 December 2013. No findings of breaches have been made in respect of the audits for the years ended 31 December 2011 to 31 December 2013.

The Big Four audit firm has been given a financial sanction of £4.5m adjusted for admissions and early disposal to £3,375,000; and non-financial sanctions, including a requirement that KPMG shall commission a review by an appropriate external independent expert of the effectiveness of the firm’s policies, guidance and procedures for audit work in the area of an audited entity’s compliance with laws and regulations; a severe reprimand; and a declaration that the statutory audit report for the audit did not satisfy the relevant requirements.

Syk