Mazars hit with £72k fine after audit failingsby
Mazars has been fined £72,000 for wide-ranging failures in its audit of a market traded company.
The Financial Reporting Council (FRC) revealed today that challenger firm Mazars was sanctioned over the audit of an unnamed company, although it was confirmed that the audit was carried out in the Crown dependencies, which covers Guernsey, Jersey and the Isle of Man.
Mazars was fined £90,000, but this penalty was reduced to £72,000 due to the firm’s cooperation and certain admissions.
The FRC’s enforcement committee flagged “wide-ranging” audit failings, with the most significant being the incorrect classification of convertible loan notes.
The accountancy watchdog highlighted that this failing resulted in a material misstatement and was not identified by Mazars until after the audit was completed. The committee said this failing demonstrated a lack of quality control. It also raised concern over the way in which bonus payments were addressed.
Mazars ‘disappointed’ by failings
In a statement, a spokesperson from Mazars confirmed to AccountingWEB that it has accepted a regulatory penalty and committed to specific undertakings following the findings of the FRC’s enforcement committee.
“We are disappointed that we did not meet the high standards required in this instance and we retain our steadfast commitment to, and investment in, delivering quality audits. We are grateful that the regulator has acknowledged Mazars’ cooperation and, respecting client confidentiality and due process, will provide no further comment,” they said.
The FRC imposed a sanction to ensure the firm’s audit work is “undertaken, supervised and managed effectively” and noted that its Audit Quality Review (AQR) team will monitor Mazars’ compliance.
Mazars’ poor audit quality singled out
The sanction comes after Mazars was singled out, alongside BDO, by the FRC in its annual enforcement audit quality review in July for “unacceptable” audits. This is the second year in a row that Mazars has faced criticism from the watchdog in the review. However, Mazars audit quality had improved compared to the previous year, with 56% audits requiring only limited improvements while 37% needed significant improvements in 2021/22.
Last year, the FRC said Mazars and BDO had grown “too fast, picking up higher risk audits being dropped by their peers, without adequate controls to ensure high-quality audits”.
However, the watchdog has since acknowledged that Mazars had invested heavily in its audit quality but encouraged urgent action from the firm as a lot of the improvements from the initiatives it launched following the poor review won’t be seen until 2024.
In the FRC’s key trends and facts in the accountancy profession report, which was released this week, it revealed that Mazars commands an audit fee income of £109.8m for audit and a total fee income of £287.8m.
As of the end of last year, Mazars has two FTSE 250 audit clients, 17 clients listed on regulated markets and 17 AIM audit clients.