FRC launches new KPMG probe

The Financial Reporting Council said it will “investigate the firm’s consideration of and compliance with ethical standards in connection with the provision of non-audit services during its audit of the financial statements of Ted Baker and one of its significant affiliates.”

The dates concerned are the years ended, 26th Janurary 2013 and 25th January 2014.

The FRC said it will examine how the ‘big four’ company complied with ethical standards when providing non-audit services while auditing the retailer.

In the course of the last year KPMG were fined £390,000 for misconduct by the audit firm as its chief operating officer owned shares in Cable and Wireless Worldwide, which was being audited by KPMG, while in a separate instance a former partner of KPMG was appointed to the board of Pendragon, which was audited by KPMG.

A spokesperson from KMPG said: “We note today’s announcement by the FRC of its investigation in relation tour consideration of and compliance with ethical standards in connection with the provision of non-audit services during our audit of the financial statements of Ted Baker plc (and one of its significant affiliates),” said KPMG.

“We have always sought to ensure that the non-audit services we provide to audit clients are consistent with both the letter and the spirit of prevailing requirements. However, we recognise that the application of principles requires the exercise of professional judgement and, in this instance, the FRC’s view may differ from our won. We will of course co-operate fully with the FRC’s investigation.”

The FRC’s ethical standards require firms to take certain safeguards to ensure that their objectivity and independence of audit clients is not affected when profiding non-audit services.

The FRC’s recently released Audit Qualifty Inspection report showed that audit quality at KPMG had inched down slightly during 2015-16.

The number of audits reviewed at the firm which were identified as requiring the significant improvements came in at two, up from just one the year before, while the number where improvements were required had increased from four to six.