The Financial Reporting Council fined Grant Thornton UK LLP and sanctioned two of the auditor’s former executives for failing to maintain ethical standards, in the latest critique by regulators of accounting firms’ shortcomings.
The accounting firm will pay 1.95 million pounds ($2.45 million) and another 207,000 pounds in costs, the FRC said Wednesday in an email. Natasha Toy, a former senior manager at the firm, and an ex-audit engagement partner, Kevin Engel, were sanctioned, the FRC said.
The sanctions come from Grant Thorton’s handling of an audit of Conviviality Retail Plc for the year ending April 2014. Engel arranged for Toy, who was part of a team conducting the audit, to move to Conviviality to help prepare the statements.
“The threats to independence created by this situation were so great that the Audit Engagement Partner should not have provided an audit opinion, and in signing an unqualified audit opinion confirming compliance with all relevant standards as he in fact did, he breached a number of standards designed to preserve the independence and objectivity of audit,” the FRC said.
While “we accept there were previously shortcomings in our processes and procedures at the time, we are confident that such a situation should not arise again,” given the investments Grant Thornton has made to improve the quality of its auditing, a spokesman for the firm said in a statement.
Grant Thornton said it didn’t have contact details for Engel or Toy. A message sent on LinkedIn to Engel wasn’t immediately returned, and attempts to find Toy on LinkedIn were unsuccessful.
The fine was cut after Grant Thornton cooperated with the probe, the FRC said. The regulator said it isn’t alleging that its work for Conviviality “lacked objectivity or that the accounts did not give a true and fair view of the company’s affairs.”
The sanctions come as the FRC tries to break up the U.K.’s dominant accounting firms. It has asked the so-called Big Four — KPMG, Deloitte, PricewaterhouseCoopers LLC and Ernst & Young — to separate their audit units from other operations by June 2024 to tackle the deficiencies that led to the collapse of several companies.
