London-based professional services firm EY (formerly Ernst & Young) has been fined £1.8 million for misconduct around its audit of Tech Data’s British unit.
According to the Financial Times, the Financial Reporting Council (FRC) – the UK’s accounting watchdog – fined the accountancy firm, along with former partner Julian Gray, for failings in the company’s dealings with the distie. It’s not specified just what these failings were, but the Council uncovered financial improprieties at its British arm in 2013.
EY was initially fined £2.75 million, but that has been reduced to £1.8 million after being adjusted and discounted for settlement. The FT reports that EY will pay £225,000 in legal costs and that Gray’s fine was reduced from £90,000 to £59,000.
On Monday the FRC said that the guilty parties had shown “failures to obtain reasonable assurance about whether the financial statements” of Tech Data “were free from material misstatement”. In addition, it was found that “failures to obtain sufficient appropriate audit evidence and failures to exercise sufficient professional scepticism” were also present.
In response to the fine, EY issued a statement saying: “We recognise that we fell short of our professional standards on three matters in relation to the audit of Tech Data Limited for the financial year ending 31 January 2012. The results of the latest inspection report from the Financial Reporting Council (FRC) recognises the significant level of investment EY has made in audit quality, particularly over the past three years, and demonstrate our continued progress.”
Tech Data, which is valued at $3.6 billion, had in 2013 uncovered what it called ‘improper’ accounting and an “inadequate control environment” within its financing.
Neither Gray or Tech Data responded to requests from the newspaper for comment.