May 21, 2019 / 5:06 PM / a month ago

UK audit watchdog proposes record $16 million fine for KPMG

LONDON (Reuters) - Britain’s accounting watchdog has proposed fining KPMG 12.5 million pounds ($16 million) for errors in checking whether BNY Mellon bank was complying with rules for safeguarding client assets.

FILE PHOTO: The KPMG logo is seen at the company's head offices in Parktown, Johannesburg, South Africa, September 15, 2017. REUTERS/Siphiwe Sibeko

The Financial Reporting Council (FRC) said it has asked an independent disciplinary tribunal on Tuesday to levy the fine, a record for the watchdog if confirmed.

KPMG and one of its partners admitted to serious failings last September, and tribunal hearing was limited to sanctions.

KPMG said it accepts and regrets that some of its work for BNY Mellon’s London branch in the year ended December 2011 did not fully reflect all aspects of official guidance from the FRC.

“We are committed to cooperating with our regulator to bring these historic cases to conclusion as swiftly as possible,” KPMG said on Tuesday.

“However, in this instance we could not agree with the FRC on the level of appropriate sanctions, which will now be determined by an independent tribunal,” KPMG added.

The FRC has been asking for higher fines after accusations from lawmakers of being too cosy with big accounting firms like KPMG.

An independent report from former judge Christopher Clark in 2017 said KPMG, EY, Deloitte and PwC, known collectively as the Big Four, should be hit with fines of 10 million pounds or more for serious incompetence.

PwC was later fined a record 10 million pounds by the FRC over its audit of collapsed retailer BHS, a sum cut to 6.5 million pounds after the accounting firm agreed to settle early.

KPMG is still being investigated by the FRC over its audit of collapsed construction company Carillion that, along with the collapse of BHS, led to radical reforms being proposed for the audit sector.

Reporting by Huw Jones; editing by David Evans

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