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FRC sanctions KPMG over Ted Baker audits
21 August 2018
The FRC has fined and reprimanded KPMG Audit plc and partner Michael Barradell following their admission of misconduct over their audits of Ted Baker plc and No Ordinary Designer Label Limited for 2013 and 2014.
KPMG received a severe reprimand and a fine of £3m, discounted to £2.1m. In addition the Big 4 firm was asked to pay £112,000 for the executive counsel’s costs. Barradell received a reprimand and a fine of £46,500, after adjustments for mitigating factors and a discount for settlement.
The misconduct arose from KPMG providing expert witness services to Ted Baker in a commercial court claim. This was in breach of the ethical standards and led to the loss of KPMG’s independence in respect of the audits. The independent tribunal panel said that there was a risk, which then occurred, that the audit team would review the work of the expert when auditing Ted Baker’s treatment of the claim in its accounts and this posed an unacceptable self-review threat.
In addition there was a self-interest threat arising from the fact that the fees for the expert engagement significantly exceeded the audit fees in the relevant years. Both KPMG of Barradell failed to consider these problems properly.
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