FRC launch investigation into KPMG in relation to the audit of the financial statements of Rolls-Royce Group
04 May 2017
The Financial Reporting Council (FRC) has commenced an investigation under the Audit Enforcement Procedure into the conduct of KPMG Audit Plc, in relation to the audit of the financial statements of Rolls-Royce Group plc for the year ended 31 December 2010 and of Rolls-Royce Holdings plc for the years ended 31 December 2011 to 31 December 2013.
The decision to investigate follows the SFO announcement on 17 January 2017 of a Deferred Prosecution Agreement* (DPA) between the SFO and Rolls-Royce PLC which relates to offences including conspiracy to corrupt and a failure to prevent bribery.
Notes to editors:
The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
*A DPA is a statutory means by which a company can account to a court for conduct without suffering the full consequences of a criminal conviction, which might include international disbarment from competition for public contracts.
To meet its responsibility as the UK competent authority in respect of audit enforcement, the FRC operates the Audit Enforcement Procedure. This procedure applies to the investigation and sanctioning of breaches of the various requirements of the statutory auditors of Public Interest Entities (PIEs) and any other cases retained by the FRC including AIM companies with a market capitalisation in excess of €200m.
In brief, the stages of the Audit Enforcement Procedure are:
- Initial case examination and decision to investigate
- Decision by Executive Counsel as to whether to issue a Decision Notice;
- Referral to Enforcement Committee; and
- Referral to a Tribunal.
In order for a matter to be referred for investigation by the FRC’s Executive Counsel under the Audit Enforcement Procedure, the FRC’s Conduct Committee is required to decide whether there is good reason to investigate an Allegation in relation to a Statutory Auditor and/or a Statutory Audit Firm.