The United Kingdom’s Financial Reporting Council said Thursday that it has opened an investigation into whether KPMG’s audit firm in the U.K. was independent when it conducted audits of automobile dealer Pendragon PLC, and a separate investigation of a partner's holdings in a client's company.
In a brief statement, the U.K. standard-setter said the FRC has “launched an investigation under the Accountancy Scheme into whether KPMG Audit Plc was independent when it conducted the audits of Pendragon PLC’s financial statements for the years ended 31 December 2010 and 2011.” The FRC’s decision to initiate an investigation was taken following a consultation with the Institute of Chartered Accountants in England and Wales.
Separately, the FRC also announced Thursday that it had launched an investigation into the conduct of KPMG Audit Plc and a member regarding breaches of the Ethical Standards for Auditors in relation to the non-timely disposal of a share-holding in a client entity.
KPMG’s U.K. member firm acknowledged in a statement forwarded by spokesman Mark Hamilton that the Financial Reporting Council is the two separate matters.
“We take our professional responsibilities very seriously, have stringent policies and procedures in place to ensure that our independence is not compromised and regularly review those procedures to ensure that they remain appropriate,” said the KPMG statement. “We are therefore very disappointed, in relation to the first matter, that one of our partners mistakenly failed to dispose of the relevant shares on a timely basis and that our firm’s procedures, in this instance, did not deal appropriately with that failure. We fully accept that the holding of shares in a client by a partner is in clear contravention of UK Ethical Standards. However, on becoming aware of the matter, we took action in relation to the partner concerned and initiated a review of procedures to ensure that lessons are learnt and applied.
“On the second matter, in relation to the 2010 and 2011 Pendragon audits, we remain of the view that our independence as auditor for these years was maintained,” the firm added. “We are committed to the highest standards of professionalism, quality and integrity and will of course co-operate fully with both investigations.”