The Financial Reporting Council (FRC) has announced formal sanctions against KPMG LLP and Anthony Sykes, following admissions of serious audit breaches relating to the 2022 financial statements of N Brown Group plc.
According to the FRC’s Final Settlement Decision, KPMG and Sykes admitted to failing to comply with International Standards on Auditing (ISAs) concerning the impairment assessment of non-current assets, a critical area in determining whether a company’s assets are overstated. The deficiencies were found across multiple dimensions of the audit — including cash-generating unit valuations, forecast cash flows, discount rates, sensitivity analyses, and reconciliations to market capitalisation.
Although the FRC’s decision does not challenge the truthfulness of N Brown’s FY22 financial statements, it declares that the auditor’s report issued by KPMG failed to satisfy required standards.
Sanctions Imposed
- KPMG LLP is ordered to pay £710,937.50, after reductions for cooperation and early admissions, along with a Severe Reprimand and a formal declaration that its FY22 audit report was non-compliant.
- Anthony Sykes faces a penalty of £51,187.50, plus a Severe Reprimand and the same declaration of non-compliance with required standards.
- Additionally, KPMG is required to bear the costs of the FRC’s investigative process.
FRC Deputy Executive Counsel Jamie Symington commented that the case underscores the high level of judgment required in impairment audits, especially when significant risks are identified. He also acknowledged the “exceptional cooperation” by the respondents, including remedial action and internal review processes that aided the investigation.
