Deloitte hit with £6.1m FRC penalty over missed fraud - what it means for professional advisers
The regulator’s decision shows that auditors and other advisers are expected to challenge red flags, even where management is concealing the truth.
Gena Ritchie, Solicitor in our Commercial Litigation team, has been quoted in the media on the news that the Financial Reporting Council (FRC) has fined Deloitte £6.1 million over audit failures linked to the Go-Ahead Group (GAG) scandal.
In a final settlement decision notice published on 8 October, the FRC found that Deloitte had failed to adequately scrutinise “clearly questionable” conduct at three GAG subsidiaries over a five-year period. The conduct included the wrongful retention of more than £30 million of taxpayer funds. The FRC concluded that Deloitte had not properly evaluated evidence of fraud risk factors, made sufficient enquiries, applied enough professional scepticism or challenged management. It also found that Deloitte should have maintained better oversight of the German component audit team. The original £11 million penalty was reduced by £5 million for exceptional co-operation, early disposal and admissions.
Gena commented that while professional advisers “are of course not responsible for an unrelated and underlying fraud”, their access to critical information places them in a unique position “to spot warning signs, raise concerns and scrutinise explanations”.
She added: “The FRC’s response sends a strong message in this regard and is consistent with the UK’s growing anti-fraud culture (as reinforced by the introduction of recent fraud-related legislation such as the Economic Crime and Corporate Transparency Act 2023).”
Read Gena’s comments in the media:
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