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Deloitte handed penalty for SIG audit failings

Audit
The FRC imposed sanctions (pic: Scott Graham)

Big Four accountant Deloitte has been handed a near-£1m penalty and a severe reprimand over its audit of building materials company SIG’s financial statements.

The Financial Reporting Council (FRC) imposed sanctions against Deloitte and audit engagement partner Simon Manning.

The penalties relate to the audit of SIG for the financial years ended 31 December 2015 and 31 December 2016.

Deloitte and Mr Manning admitted two breaches of relevant requirements in relation to the audit of supplier rebates and cash.

They failed to obtain and document sufficient appropriate audit evidence in respect of the testing of rebate terms as set out in SIG plc’s rebate workbooks, and the testing of rebate debtor balances.

The FRC said they also failed to exercise sufficient professional scepticism by not investigating indications that rebate debtor balances may have been overstated.

In respect of cash, Deloitte and Mr Manning failed to obtain sufficient appropriate audit evidence in respect of cheque payments made around the year-end, and failed to exercise sufficient professional scepticism by failing to investigate indications that cheque payments claimed to have been made post-year-end should properly have been regarded as pre-year-end payments.

Deloitte must pay £906,250, discounted from £1.25m for admissions and early disposal. Mr Manning was given a financial sanction of £50,000, discounted to £36,250.

Jamie Symington, deputy executive counsel at the FRC, said: “These breaches concerned two discrete areas of the audit of a particular subsidiary of SIG plc.

“They involved contraventions of requirements which are fundamental to the role of the independent auditor, and were associated with material misstatements in SIG plc’s accounts which had to be corrected.

“The breaches in respect of supplier rebates were made all the more serious by the fact that the FRC had highlighted these complex supplier arrangements as requiring particular attention from auditors.”

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