By Huw Jones
LONDON (Reuters) - Britain's accounting watchdog said on Monday it has fined KPMG 1.46 million pounds ($1.90 million) for "basic failings" in its audit of advertising company M&C Saatchi plc in 2018.
The Financial Reporting Council (FRC) said it launched an investigation after M&C Saatchi found accounting errors which led to the restatement of the company's accounts for 2018.
KPMG and Adrian Wilcox, the audit engagement partner at KPMG for M&C Saatchi, both admitted breaches regarding failures to audit with sufficient professional scepticism regarding a type of payment that inflated revenue by 1.2 million pounds.
There was also a failure to properly audit journal entries across a number of subsidiary companies, and to document their reasoning in relation to retention of rebates under a contract, the FRC said.
"The sanctions imposed have taken into account the fact that it was a challenging audit and the auditors demonstrated some robustness in pushing back the signing date until they obtained further evidence from management," the FRC said.
KPMG would have been fined 2.25 million pounds had it not admitted to the breaches, the FRC said.
Wilcox was fined 48,750 pounds and received a severe reprimand, but avoided a 75,000 pound fine after admitting to the breaches, the FRC said.
KPMG also paid the investigation's costs.
Cath Burnet, head of audit at KPMG UK, said the company was committed to learning from past cases and it regrets that aspects of the 2018 audit of M&C Saatchi fell short of required standards.
"We continue to invest significantly in audit quality, in our training, controls and technology, to drive further improvements and resilience in our audit practice," Burnet said.
The FRC said it imposed no other sanctions because KPMG was already undergoing "audit improvement programmes" following other enforcement actions, thereby reducing the risk of the identified failings recurring.
KPMG received a record 21 million pound FRC fine last October for a "textbook failure" in audits of builder Carillion.
($1 = 0.7893 pounds)