KPMG and PwC fined over botched Eddie Stobart audits

Eddie Stobart lorries queue at a security barrier

Two of the world’s largest accounting firms have been slapped with fines over their audits of Eddie Stobart Logistics.

The Financial Reporting Council (FRC) issued KPMG a fine of £877,500 for its 2017 audit of the lorry company, and also fined one of its former partners.

PwC was fined £2m over the 2018 audit, along with a partner. The FRC said the penalties were because both PwC and KPMG had not satisfied relevant requirements in their audit work.

Regulators pointed to “numerous, serious and pervasive failings” in PwC’s work and some “serious failings” in KPMG’s case. However, the fines were reduced after “exceptional cooperation” and admissions made to the regulator.

It comes years after the FRC first kicked off its investigation into the two companies. Both had signed off separate sets of Eddie Stobart’s results in the run-up to a bookkeeping scandal which brought the company to its knees. The issues resulted in shares being suspended between late 2019 and 2020. The FRC had been investigating a £2m misstatement of profits and whether the auditors should have spotted the black hole.

Since then, Eddie Stobart has gone through multiple changes of ownership. It almost collapsed in 2019, owing more than £200m to its banks. However, it was rescued by offshore private equity firm Dbay Advisors in a £55m deal.

The son of Eddie Stobart’s founder William was appointed executive chairman under the terms of the deal. Eddie Stobart was later sold to Culina Group, with William Stobart moving into a role as deputy chief executive of Culina.

PwC said it was focused on ensuring consistent delivery of high quality audits and that it had made significant and continuous investment in improving the quality since 2018.  A PwC spokesman said: “Our work was not of the required standard on this occasion and for this we apologise.”

KPMG said it regretted that elements of its work fell short of required standards, adding: “This development marks another step forward in dealing with these matters, and we continue to invest significantly in audit quality, in our technology and training, to drive further improvements.”