Big Four firms in the United Kingdom should be subject to fines of 10 million pounds ($13.2 million) or more for seriously poor audit work, according to an independent review by the U.K.’s Financial Reporting Council.

The audit regulator appointed a panel headed by a former judge to review the sanctions imposed on firms in the wake of recent high-profile accounting scandals involving British companies such as Tesco and BT.

In addition to higher monetary penalties, the report also recommended that greater attention should be paid to the use of nonfinancial penalties. Those would be imposed to maintain and improve the quality and reliability of future audit and accounting work.

The report also recommends removing any requirement for tribunals to consider themselves bound by previous cases when determining the appropriate sanction to impose, along with the adjustment of settlement discount provisions to encourage timely settlement.

While the report said it’s not appropriate to set a tariff or range for financial sanctions, it suggests that under certain circumstances a fine of £10 million or more could be appropriate for cases involving seriously poor audit work carried out by a Big Four firm.

The FRC welcomed the report and said it will carefully its recommendations to decide which ones to adopt and incorporate into revised sanctions guidance to ensure that sanctions imposed continue to be fair, effective and in the public interest.

The headquarters of Barclays and HSBC Holdings stand among the offices of Citigroup, State Street and other financial firms in the Canary Wharf business district of London.
The headquarters of Barclays and HSBC Holdings stand among the offices of Citigroup, State Street and other financial firms in the Canary Wharf business district of London. Chris Ratcliffe/Bloomberg

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.