Sanctions against KPMG LLP and Anthony Sykes
News types: Investigations
Published: 7 October 2025
This Final Settlement Decision Notice is a document prepared by Executive Counsel following an investigation relating to, and admissions made by, the Respondents. It does not make findings against any persons other than the Respondents and it would not be fair to treat any part of this document as constituting or evidencing findings against any other persons or entities since they are not parties to the proceedings.
Executive Counsel to the Financial Reporting Council (FRC) has issued a Final Settlement Decision Notice (FSDN) under the Audit Enforcement Procedure and imposed sanctions against KPMG LLP (KPMG) and Anthony Sykes (Mr Sykes), Audit Engagement Partner, in relation to the statutory audit of the financial statements of N Brown Group plc (N Brown) for the financial year ended 26 February 2022 (FY22).
Mr Sykes and KPMG have admitted serious breaches of the International Standards on Auditing (ISAs) in their audit work on impairment of non-current assets. Impairment testing contributes to an accurate representation of the company's financial position, helping to ensure that the company’s assets are not overstated. International Accounting Standard 36 (IAS 36) requires companies to assess non-current assets for impairment where there are indications that they may be overstated and auditors are required to determine if these assessments are performed in accordance with the standard.
The sanctions are:
KPMG:
- A financial sanction of £1.25 million adjusted for the mitigating factor of exceptional co-operation by a reduction of 12.5%, and further discounted for admissions and early disposal by 35% so that the amount payable is £710,937.50.
- A published statement in the form of a Severe Reprimand; and
- A declaration that the FY22 auditor’s report signed on behalf of KPMG did not satisfy the Relevant Requirements.
Mr Sykes:
- A financial sanction of £90,000 adjusted for the mitigating factor of exceptional co-operation by a reduction of 12.5%, and further discounted for admissions and early disposal by 35% so that the amount payable is £51,187.50.
- A published statement in the form of a Severe Reprimand; and
- A declaration that the FY22 auditor’s report signed on behalf of KPMG did not satisfy the Relevant Requirements.
KPMG has also paid the costs of Executive Counsel’s investigation.
N Brown is one of the UK’s largest online clothing and footwear retailers and at the relevant time was listed on the Alternative Investment Market of the London Stock Exchange. In FY22 there was an indicator of impairment, as the group’s market capitalisation was substantially lower than its net assets. The impairment of non-current assets was identified by the audit team as a significant risk and a key audit matter.
The admitted breaches of Relevant Requirements relate to a number of aspects of the audit work on impairment as follows:
- Carrying value of the cash generating unit (CGU)
- Impairment model methodology;
- Cash flow forecasts;
- Discount rate;
- Sensitivity analysis;
- Reconciliation to market capitalisation; and
- The audit’s team’s overall conclusions.
Despite the failings in the Respondents’ audit work, this FSDN does not question the truth or fairness of the FY22 financial statements. While the inadequate audit work on impairment resulted in headroom being overstated, it is not alleged that N Brown was required to recognise an impairment in FY22.
Jamie Symington, FRC Deputy Executive Counsel, said:
“In this case, there were numerous failings in relation to the audit work on impairment, despite it having been identified as a significant risk. This case demonstrates that the audit of impairment requires a substantial level of diligence, forethought, and careful exercise of judgement.
Notably, the Respondents provided an exceptional level of cooperation not only by undertaking remedial action to prevent recurrence of the breaches but in conducting self reviews in which a number of the breaches of Relevant Requirements were identified. As a result both time and costs were saved in this investigation.”