Sanctions against Deloitte LLP
News types: Investigations
Published: 8 October 2026
This press notice concerns the outcome of an investigation into the relevant Statutory Audit Firm (as defined in the FRC’s Audit Enforcement Procedure). It would not be fair to treat any part of this announcement as constituting or evidencing an investigation into, or findings in respect of the conduct of, any other persons or entities.
Executive Counsel of the Financial Reporting Council (FRC) has issued a Final Settlement Decision Notice under the Audit Enforcement Procedure and imposed sanctions against Deloitte LLP (Deloitte) in relation to the statutory audits of the consolidated financial statements of Go-Ahead Group plc (GAG) for the financial years ended 2 July 2016, 1 July 2017, 30 June 2018, 29 June 2019 and 27 June 2020 (FY16 to FY20).
The following sanctions were imposed on Deloitte:
- A financial penalty of £6,050,000 (discounted from £11 million, by 10% for exceptional co-operation and by 35% for admissions and early disposal);
- A published statement in the form of a severe reprimand;
- A declaration that the FY16 to FY20 audit reports signed on behalf of Deloitte did not satisfy the Relevant Requirements; and
- An order requiring Deloitte to prepare a report for Deloitte’s FRC Firm Supervisor setting out the root cause analysis completed, the actions taken and their assessment (based on empirical evidence) of how these mitigate recurrence of the identified breaches.
Deloitte has also paid the costs of Executive Counsel’s investigation.
The scope of the investigation when opened also included the audit of the financial statements of GAG for the year ended 3 July 2021 (FY21). Having reviewed the evidence obtained in the investigation and considered all relevant factors, Executive Counsel decided in December 2024 to close the investigation into FY21 and not to bring Enforcement Action.
GAG is a major international transport business, providing bus and rail services in the UK and other markets. Throughout FY16 to FY20 its shares were listed on the London Stock Exchange, and it was therefore a Public Interest Entity for statutory audit purposes.
The breaches relate to three of GAG’s subsidiaries which operated passenger rail services: London & South Eastern Railway Ltd (LSER), London & Birmingham Railway Ltd (LM) and Go-Ahead Bayern GmbH (GABY).
The first subsidiary, LSER, had received erroneous over-payments from the Department for Transport (DfT) under a rail franchise agreement before Deloitte became GAG’s auditor. Although obliged to repay the overpayments to the DfT, LSER retained the money, made accruals1 for it and began releasing the accruals to profit, all without informing the DfT. LSER continued with this practice after Deloitte was appointed as auditor, releasing £2.4 million in overpayments to profit in FY16, and accruing for a further £27 million from FY16 to FY20 under a subsequent franchise agreement. Evidence obtained from LSER’s management during the later audit years suggested an intention to release to profit the overpayments relating to this second franchise agreement, if they were not discovered by the DfT.
In addition to failing to tell the DfT about the overpayments, in FY19 and FY20 LSER classified the accruals in its financial statements in a way that disguised their true nature. LSER’s conduct breached terms in the franchise agreements requiring it to act in good faith. When the DfT became aware of LSER’s conduct in 2021, it decided not to renew LSER’s franchise on its expiry, took action to recover the overpayments and imposed a financial penalty of £23.5 million on LSER.
The second subsidiary, LM, also held accruals for sums that the DfT was unaware LM owed to it under a different rail franchise agreement. In FY20, once the franchise had ended, LM released £5.6 million of these accruals to profit, and attempted to conceal this by the way it worded the relevant note in its financial statements.
Deloitte, as auditor, failed to enquire sufficiently into the actions of LSER and LM, failed to apply sufficient professional scepticism, and failed to evaluate the evidence indicating the existence of fraud risk factors. Deloitte failed to appreciate that the company was under a contractual obligation to act in good faith and therefore in relation to LSER to bring the overpayments to the DfT’s attention.
In relation to the third subsidiary, GABY, during the FY20 Audit GAG initially provided information showing that GABY’s franchise contracts would be loss making, and the component audit team in Germany concluded that GAG would need to recognise an onerous contract provision in its financial statements2. However, GAG then provided different information which changed the valuation of the future cashflows from the contracts from a loss of €8 million to a positive value of €3 million.
Deloitte applied insufficient scrutiny to the evidence and explanations purporting to show why an onerous contract provision was not needed. Although a provision of €8.1 million was eventually recognised in the FY20 financial statements, Deloitte applied insufficient oversight of the component audit team and failed to evaluate whether sufficient appropriate audit evidence had been obtained to support it. In the FY21 financial statements, the FY20 provision was restated from €8.1 million to €49.5 million.
Overall, there were numerous breaches of different Relevant Requirements, some of which persisted across five audit years and all of which were in relation to matters that Deloitte had identified as significant audit risks. The sums involved in all the breaches were material, either at the subsidiary or the group level. In the case of LSER and LM, Deloitte failed to challenge the wrongful retention by GAG of over £30 million of public money for an extended period, and in the case of GABY, a restatement was required in FY21 to increase the size of the onerous contract provision by more than €40 million.
Penrose Foss, Executive Counsel and Executive Director of Investigations and Enforcement.“These breaches show a highly concerning pattern of failure by Deloitte to apply sufficient scrutiny to decisions and actions by GAG which were clearly questionable. The fact that some of those decisions and actions put very large amounts of UK taxpayers’ money at risk is particularly troubling, and this is reflected in the high level of financial sanction imposed.”