The value of fines issued by the UK’s Financial Reporting Council (FRC) to auditors rose by 180% to just under £25m ($35.4m) for the year-end 31 March 2021, up from £8.9m in the previous 12 months, according to a study by audit confirmation solution, Confirmation, a part of Thomson Reuters.
Confirmation said the increase in value of fines shows that the FRC is continuing to use fines as part of its campaign to improve the quality of audit in the UK and that the regulator is determined to take decisive action against poor quality audit work ahead of its transition into Audit, Reporting and Governance Authority (ARGA).
Earlier this year, the Department for Business, Energy & Industrial Strategy (BEIS) launched a white paper outlining its planned reforms of the audit industry, including the legal transition of the FRC into ARGA.
Confirmation managing director Europe Kyle Gibbons said: “The rise in the value of fines issued shows the FRC is willing to use financial sanctions to drive investment and improvements in audit.”
“Fines are now of the scale where they can make a substantial impact on the profits of a firm, even those of the Big Four.”
“A series of multi-million-pound fines have made the audit profession sit up and take notice and they are now investing in reform and technology as never before.”
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“Prominent fraud investigations, for instance at Wirecard and Patisserie Valarie, capture media attention, of course. But actually, many frauds can be and are caught or prevented by the implementation of relatively straightforward technology and the following of existing audit standards. So there is a lot of scope for improvement.”