LONDON (Reuters) - Accounting firm KPMG has been fined 3.5 million pounds ($4.24 million) by Britain’s accounting watchdog for failing to audit client accounts of BNY Mellon (BK.N) bank properly, the latest in a string of penalties on KPMG for poor performance.
The fine will keep the pressure on Britain’s government to come forward with legislation that implements a proposed shake-up of auditing, including a more powerful watchdog.
The Financial Reporting Council (FRC) said on Thursday that in 2011, BNY Mellon held more than a trillion pounds in assets on behalf of its customers, which under “CASS” safekeeping rules must be audited to ensure the assets are being kept safe.
KPMG and Richard Hinton, who signed the client assets report on behalf of KPMG, admitted misconduct, the FRC said.
KPMG said it regretted that aspects of its work did not meet the standards expected by the regulator. “We are happy to undertake the additional review process outlined by the FRC as part of our drive to improve audit quality,” it said in a statement.
The fine was discounted from 5 million pounds for admission of misconduct. Hinton’s 75,000 pound fine was discounted to 52,500 pounds, the watchdog said.
Britain’s finance industry watchdog, the Financial Conduct Authority, had fined BNY Mellon 126 million pounds in April 2015 for failing to keep customer money safe.
In the year to March, the accounting watchdog has fined accounting firms nearly 43 million pounds, with KPMG making up nearly half of the total after admitting misconduct in audits of The Co-operative Bank, retailer Ted Baker, and professional services firm Quindell.
The watchdog had already put KPMG into close supervision measures, and on Thursday added a requirement for a quality performance review of everyone who signs a client assets report on behalf of KPMG.
Hinton was not a partner at KPMG and is not currently working as a CASS auditor, the FRC said.
The FRC has substantially increased fines on accounting firms, partly to meet criticisms from parliament that it was too timid with KPMG, EY, Deloitte and PwC, known as the “Big Four”.
Accounting industry officials have expressed concerns that rocketing fines will put off people working in audit.
“We also take into account that a fine should not be such as to deter accountants from accepting audit or CASS audit engagements,” the FRC said.
Reporting by Huw Jones. Editing by Jane Merriman