KMPG Fined Due to Shortfall in Audit of Rolls-Royce Holdings

KPMG LLP has agreed to pay a fine after the Financial Reporting Council found a flaw in the audit of the UK engine maker Rolls-Royce Holdings PLC, which settled the bribe allegations in 2017.

The UK Audit Office said on Tuesday that it imposed sanctions on service companies of £3.4 million (equivalent to $ 4.2 million) and audit partner Anthony Sykes of £112,500. 

The investigation focused on KPMG’s audits of Rolls-Royce for the year ended December 31, 2010, through December 31, 2013. The FRC did not find any breaches of conduct in the audits spanning 2011 to 2013.

The FRC and the UK accounting industry have been scrutinized in recent years due to a series of corporate scandals, including the end of the closed construction company Carillion PLC and the department store chain BHS Ltd. These have led to various changes aimed at reforming the sector and its oversight.

KPMG has not adequately addressed the risk of Rolls-Royce violating legislation by making two payments to third-party agents in India, the FRC said Tuesday. The payment later became part of a UK criminal investigation into bribery and corruption allegations at Rolls Royce, and as a result, the company agreed to pay the UK government £497 million in 2017 to resolve the investigation.