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The former KPMG partner has been fined by the UK Accounting Regulator for the third time in four years after pleading a “serious violation” in a company’s audit of clothing retailer n Brown.
Anthony Sykes was fined £51,187 by the Financial Reporting Council after an audit that oversaw the retailer’s 2022 accounts found that it included numerous failures related to failures in non-current assets. Sykes retired from KPMG in 2022 after 38 years.
This is the third time regulators have fined Sykes for accounting violations in recent years. He has paid just £156,000 for two penalties over the past four years in connection with an audit by stationery seller Theworks.co.uk and engine maker Rolls-Royce.
KPMG was fined almost £711,000 for an audit of N Brown and was primed by the FRC. This is the 14th time the company has been approved by regulators since 2020. That is, since then, the FRC has received almost half of the 30 sanctions imposed by the FRC.
KPMG’s UK equity partner, which won the biggest payday in history last year, earning an average of £816,000 through September 2024, despite repeated sanctions, including a record fine for failed audits by collapsed contractor Carilion.
FRC Deputy Enforcement Advisor Jamie Symington said on Tuesday that in a study of KPMG’s N Brown accounts he found “many failures related to audit work on failures despite being identified as a significant risk.”
“This case shows that auditing impairment requires a considerable level of diligence, foresight and careful exercise of judgment,” he said.
Cath Burnet, auditor at KPMG UK, said: “We accept that the elements of the audit work do not meet the required professional standards. We are fully dependent on promoting continuous improvements in our audit practices.”
Sykes declined to comment.
The FRC reflected “exceptional level of cooperation” by taking corrective actions to reduce Sykes and KPMG fines by 43% to prevent recurrence of violations and conduct reviews identifying some obstacles.
N Brown’s market capitalization fell “significantly below its net worth” in 2022. This said FRC is a “indicator of impairment,” which was identified by the audit team as “significant risks and key audit issues.”
However, Sykes and KPMG said they have admitted many “significant violations” regarding impairment, as well as cash flow forecasts, discount rates, sensitivity analysis, adjustments to market capitalization and mistakes to the overall conclusions of the audit team.
Regulators said they “do not question the truth or fairness” of N Brown’s 2022 account, which specializes in plus size and other “inadequate” client clothing despite the failures. The retailer was delisted this year from the AIM stock market in London.
“While inadequate audit work on disability has exaggerated headroom, N Brown has not been told they need to recognize the disability in 2022,” the FRC said.
