Britain’s accounting watchdog, the Financial Reporting Council (FRC), has imposed a record £48.2 million in fines over the past year, concluding several high-profile investigations, including audits of Carillion and London Capital & Finance.
The FRC, responsible for overseeing the nation’s audit and accounting firms, surpassed its previous record of £46.5 million set in the 2021-22 financial year. This sharp increase in fines demonstrates the watchdog’s growing assertiveness ahead of its transition into the more robust Audit, Reporting and Governance Authority, which the Labour Party has pledged to prioritise.
After applying discounts for early admissions and cooperation, audit firms paid £33.1 million in fines, an increase from the £28.5 million paid the previous year, though still less than the record £34.6 million in 2021-22. Despite handing out only eight fines last year—the fewest since 2020-21—the cases were notably high-profile, with Carillion being the most significant.
Carillion, a construction and services contractor, collapsed in 2018, triggering an FRC investigation into its auditor, KPMG. The investigation uncovered “textbook” failures in KPMG’s audit processes, resulting in a record £30 million fine, later reduced to £21 million due to the firm’s admissions and cooperation.
Other significant penalties included fines for EY, PwC, and the smaller audit firm Oliver Clive & Co, related to their work with London Capital & Finance, the defunct investment group involved in a major retail savings scandal. PwC and EY each received £7 million fines, reduced to £4.9 million and £4.4 million, respectively, while Oliver Clive was fined £60,000, reduced to £42,000.
Elizabeth Barrett, the FRC’s Executive Director of Enforcement, commented, “The past year was notable for the completion of several high-profile and complex cases at the FRC. The FRC will continue to prioritise fair, robust, and proportionate enforcement outcomes to uphold trust in financial reporting and audit, which supports confidence to invest in UK companies and in turn, the UK’s economic growth and international competitiveness.”
Audit firms have often criticised the FRC for the lengthy duration of its investigations. However, the regulator reported improvements, with eight of the nine concluded investigations last year completed within three years, a marked improvement from previous years.
The FRC initiated six new investigations last year, leaving it with 35 open investigations, down from 38 the previous summer.