Pursuant to the Crown Dependencies recognised auditor sanctions procedure, the FRC’s enforcement committee has determined that Mazars failed to comply with the regulatory framework for auditing in its audit of a market traded company’s financial statements.

The committee found that there were wide-ranging failings in respect of the audit. The most significant failing was in respect of the incorrect classification of convertible loan notes, resulting in a material misstatement which was not identified by Mazars until after the audit was completed and demonstrated a lack of quality control. Other areas of concern included the way in which bonus payments were addressed.

The committee considered that it was necessary to impose a sanction to ensure that Mazars’ audit work is undertaken, supervised and managed effectively. The sanction proposed by the committee, and accepted by Mazars, was a regulatory penalty of £90,000 ($114,640), adjusted by a discount of 20% for co-operation and certain admissions to £72,000.

In addition, the committee has accepted written undertakings proposed by Mazars. The FRC’s AQR team will monitor compliance with the undertakings and report to the FRC’s supervision committee and the relevant recognised supervisory body, as appropriate. A copy of the Crown Dependencies recognised auditor sanctions procedure is available on the FRC’s website.

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