Mazars hit with £250k audit failings fineby
Mazars has been fined £250,000 by the Financial Reporting Council after falling short in its audit of a local government authority.
The mid-tier firm’s audit of an unnamed local government authority’s 2019 financial statements “fell far short” and had “the potential to undermine confidence in the standards in general of registered auditors”.
Mazars was originally hit with a regulatory penalty of £314,000, but the sanction was discounted by 20% to £250,000 due to the firm’s cooperation at an early stage and admissions.
The challenger firm’s most significant audit failing was in the PPE valuation. The Financial Reporting Council (FRC) said there was insufficient and undocumented challenge of the accounting treatment for refurbishment costs in the valuation of the authority’s dwellings which could indicate a material overvaluation.
The FRC also flagged other concerns such as first-year independence, group oversight and quality control.
“Having worked closely with the FRC throughout its investigation, we accept and regret that the quality of our work did not meet the standards expected,” said a Mazars spokesperson.
Local government audits need improvement
The sanction against Mazars arrives just two months after the FRC found that a third of local government audits need improvement.
The FRC probed 20 major audits from six of the largest accountancy firms as part of the review published in October 2021 and concluded that out of the 20 audits, six fell below par.
While this was an improvement on the previous year, the accounting watchdog was unable to inspect half of its original target as there were delays in getting the paperwork signed off.
Four of Mazars' audits were inspected as part of the most recent local government audit inspection report by the FRC. The Mazars spokesperson told AccountingWEB that “all four financial statement audits reviewed were graded in the top category of “good or limited improvements required” and identified good practice in our audit work”.
They added, “Mazars has made significant investments in our teams and processes which are recognised in the FRC’s October 2021 report, including in relation to our work on the valuation of property assets.
“We are entirely focused upon delivering high-quality for our clients, and will continue to instil a culture of no compromise when it comes to applying the highest professional standards”