The FRC’s Enforcement Committee found failures in the reviewed audit, which it considered fell far short of the applicable standards and regulations and had the potential to undermine confidence in the standards in general of registered auditors.

The FRC revealed that Mazars’ most significant failing was in respect of the PPE valuation, where there was insufficient and undocumented challenge of the accounting treatment for refurbishment costs in the valuation of the authority’s dwellings which could indicate a material overvaluation.

Other areas of concern included the first-year independence, group oversight and quality control. The Enforcement Committee considered that it is necessary to impose a Sanction to ensure that Mazar’s Local Audit Functions are undertaken, supervised and managed effectively.

The Sanction proposed by the Committee, and accepted by Mazars LLP, was a Regulatory Penalty of £314,000 adjusted by a discount of 20% for co-operation and admissions to £250,000.

In addition, the Committee accepted written Undertakings given by Mazars. The FRC’s AQR will monitor compliance with the Undertakings and report to the FRC’s Supervision Committee and the relevant RSB as appropriate.

Mazars said: “Having worked closely with the FRC throughout its investigation, we accept and regret that the quality of our work did not meet the standards expected.”

The firm, which is the third biggest auditor of large local government authorities and health bodies in England, added that it had made substantial investments in its teams and processes. It said that all four of its audits included in last year’s FRC local government audit inspections had received the highest ranking.