KPMG, one of the world’s largest consultancy firms, has been fined £6m ($7.7m) and “severely reprimanded” over the way it audited an insurance company.
The Financial Reporting Council (FRC) said in a statement that it also told KPMG that it would have undertake an internal review of how it handled the the 2008 and 2009 audits of Syndicate 218 — a firm based at the Lloyds of London market.
The regulator also slapped two individuals with a £100,000 fine for misconduct — Mark Taylor, a partner at KPMG, and former partner Anthony Hulse.
Douglas Morgan, a former director at Equity Syndicate Management Limited (ESM), was also reprimanded for misconduct over the way his company calculated Syndicate 218’s potential liabilities and the reserves needed to meet them.
A tribunal found reserves held by the Syndicate had been “reduced to meet a pre-determined target” in a “wholly improper” manner.
Morgan has been excluded from membership of the Chartered Institute of Management Accountants (CIMA) for two years.
The FRC began investigating the audits in 2012. It said that KPMG made “insufficient inquiries” in 2008 and 2009 into the process that Syndicate 218 used to review insurance claims.
It also found there was a lack of inquiries into the way Syndicate 218 qualified its financial reserves.
“Consequently, there was insufficient evidence to provide an unqualified audit opinion,” the watchdog said.