EY fined more than £2m over Stagecoach audit failings - Financial Times

Accounting firm EY has been fined £2.2m and issued with a severe reprimand for failings in its audit of Stagecoach, the London-listed transport company.

The UK’s Financial Reporting Council also imposed a £70,000 fine and a severe reprimand against Mark Harvey, the EY partner responsible for the review of Stagecoach’s financial statements.

The sanction by the watchdog relates to the financial year ended April 2017, the first year in which EY audited Stagecoach, which was then included in the London Stock Exchange’s mid-cap FTSE 250 index.

The watchdog did not allege that Stagecoach’s accounts had been misstated but found that EY had “failed to obtain sufficient appropriate audit evidence and to apply sufficient professional scepticism” in several material aspects of the audit.

It said EY had admitted to failings in three areas of the audit: obligations to the company’s defined benefit pension scheme, provisions for insurance claims relating to accidents and an onerous contract provision on one of Stagecoach’s rail franchises.

The accounting regulator imposed a fine of £3.5m, discounted to just over £2.2m because of mitigating factors and EY’s co-operation leading to an early resolution of the case.

EY was also issued with a severe reprimand and will be required to report to the FRC for the period of one year in relation to audit work performed on large contract provisions.

Harvey, who has been contacted for comment, left the firm last year, EY said.

“Audit underpins trust and confidence in the economy and delivering high quality audits is an absolute priority for us,” EY said.

“Regrettably, on this occasion, we fell short of the standards we set for ourselves, and the standards expected of us by the FRC and society,” it added.

“We have co-operated with the FRC throughout their investigation, take their findings very seriously and have worked hard to rectify the issues identified. No findings were raised in the FRC’s review of our most recent audit of the company, for the 2020 year-end.”

EY is also facing separate investigations by the UK accounting regulator into its audits of collapsed UK companies NMC Health, Thomas Cook and London Capital and Finance.

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2021-08-25 07:20:34Z
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