The UK Financial Reporting Council (FRC) has imposed sanctions on BDO LLP and an audit engagement partner at the firm in connection with the 2019 statutory audit of NMCN PLC, a UK-listed construction and infrastructure group that entered administration in October 2021.
The FRC found numerous and pervasive breaches fundamental to BDO’s audit work, predominantly in the audit of NMCN’s long-term contracts. Having identified significant risks of material misstatement in revenue and profit recognition and the recoverability of contract assets, BDO and the engagement partner failed to obtain reasonable assurance that the financial statements were free from material misstatement, according to the regulator.
“The statutory auditors failed to critically assess evidence, challenge management’s assertions and exercise professional skepticism in important areas including going concern," said Jamie Symington, Deputy Executive Counsel at the FRC.
BDO was fined £1,330,000 and the engagement partner £49,875, both after reductions for exceptional cooperation and early admissions. Both received severe reprimands, and declarations were issued that the 2019 audit reports did not satisfy the relevant requirements.
The FRC noted that the breaches were not intentional, dishonest, deliberate, or reckless, and that the financial statements were not asserted to be misstated. The regulator also acknowledged that the audit took place under challenging circumstances, including the first COVID-19 lockdown and the unexpected withdrawal of the original engagement partner.
Join The Discussion
Sign in and be the first to comment.