KPMG and PwC fined over Eddie Stobart audits
UK watchdog also imposes penalty on two partners following three-year investigation
The UK’s accounting regulator has fined KPMG and PwC over back-to-back audits of Eddie Stobart Logistics, a logistics and haulage company that came close to collapse in 2019.
KPMG was hit with an £877,000 penalty by the Financial Reporting Council on Thursday and given a severe reprimand after the regulator ruled that its 2017 audit “did not satisfy the relevant requirements.” Nicola Quayle, a former partner, was also reprimanded and fined £45,500.
£51,000 and gave both severe reprimands, saying that the 2018 audit “did not satisfy the relevant requirements”
The investigations were launched in May 2020 after Eddie Stobart, best known for its fleet of green and red lorries, discovered that its 2018 profits had been overstated by £2mn. Claudia Mortimore, the FRC’s deputy executive counsel, said on Thursday that there were “numerous, serious and pervasive failings” in the PwC audit and some “serious failings” in KPMG’s work. The fines were reduced after the firms and partners co-operated with the inquiry.
According to the FRC, KPMG resigned as auditor in 2018 because “of a breakdown in their relationship with Eddie Stobart’s management, following difficulties in obtaining sufficient appropriate audit evidence”. PwC was subsequently appointed for the 2018 audit. This is the third time Quayle has been fined and reprimanded by the watchdog. She was fined, reprimanded and ordered by the regulator to undergo training in 2020 and last year she was fined and reprimanded for her work on the audit of Conviviality, the Aim-listed owner of Bargain Booze. She retired from KPMG in November 2021. The FRC said the auditors failed to properly assess Eddie Stobart’s property transactions and the financial disclosures associated with them. “These transactions had a significant effect on ESL’s financial performance, and without the profit generated from them, ESL would have been in a lossmaking position,” the FRC said.
The errors in the accounts were identified following a review by chief financial officer, Anoop Kang, who joined the company in April 2019 and resigned in April 2020.
Eddie Stobart, which was listed on London’s Aim market, was rescued by private equity group Dbay in December 2019. It bailed the group out with a loan of £55mn in return for a 51 per cent stake in a subsidiary that runs the company’s haulage business.
