With a second partner at Deloitte now having been fined over its auditing of Serco Geografix, Syedur Rahman of business crime solicitors Rahman Ravelli expects to see improvements.
An audit engagement partner at Deloitte has been fined for misconduct as a result of the company's audit of Serco Geografix.
The Financial Reporting Council (FRC) said Ross Howard had been severely reprimanded and will have to pay a discounted settlement of £78,000, ending the regulator's investigation into Deloitte's Serco Geografix audit. The fine for misconduct relates to the audit of Serco Geografix's 2012 financial statements.
The FRC opened its investigation in 2016 after receiving information from the Serious Fraud Office (SFO) relating to an investigation it was conducting into Serco's contracts for electronic tagging. Four months ago, Serco agreed to pay £19.2M plus costs to the SFO under a deferred prosecution agreement relating to three offences of fraud and two of false accounting. The offences related to how the UK government was billed for the electronic tagging of offenders.
In July Deloitte was fined £6.5m by the FRC after admitting to misconduct in its Serco audit. The firm was severely reprimanded for its audit work on the 2011 and 2012 Serco financial statements. Deloitte audit engagement partner Helen George was fined £150,000 for misconduct and was severely reprimanded in relation to the 2012 audit.
This latest penalty has been imposed when the UK government considers how to introduce major reforms to auditing; particularly regarding the "Big Four'' firms: Ernst and Young, KPMG, Deloitte and PricewaterhouseCoopers.
Deloitte has recognised that its work for Serco was below the standard which is expected from a Big Four accounting practice and the FRC must have accepted some of the mitigation from Ross Howard, as his fine was discounted from £120,000 to £78,000. This whole episode will have been a lesson learned for Deloitte, which will be making efforts to improve its audit process in order to avoid any repeat problems.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.