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U.K. probes KPMG for Rolls-Royce audits

Jaclyn Jaeger | May 8, 2017

The United Kingdom’s independent accounting regulator said it has commenced an investigation into the conduct of KPMG for audits it performed on Rolls-Royce.

The U.K. Financial Reporting Council said it has commenced an investigation under the Audit Enforcement Procedure relating to the audit of the financial statements of Rolls-Royce Group for the year ended 31 December 2010 and of Rolls-Royce Holdings for the years ended 31 December 2011 to 31 December 2013.

To meet its responsibility as the U.K. competent authority in respect of audit enforcement, the FRC operates the Audit Enforcement Procedure. This procedure applies to the investigation and sanctioning of breaches of the various requirements of the statutory auditors of Public Interest Entities (PIEs) and any other cases retained by the FRC.

The stages of the Audit Enforcement Procedure are initial case examination and decision to investigate; decision by executive counsel as to whether to issue a Decision Notice; referral to enforcement committee; and referral to a tribunal.

For a matter to be referred for investigation by the FRC’s executive counsel under the Audit Enforcement Procedure, the FRC’s conduct committee must decide whether there is good reason to investigate an allegation in relation to a statutory auditor and/or a statutory audit firm.

The FRC said the decision to investigate follows the Serious Fraud Office’s announcement on 17 January 2017 of a deferred prosecution agreement between the SFO and Rolls-Royce, which relates to offences including conspiracy to corrupt and a failure to prevent bribery.