KPMG fined for audit of N Brown’s FY22 statements

The Financial Reporting Council (FRC) has issued fines against KPMG and a former partner of the advisory firm in relation to their audit of financial statements for fashion retailer N Brown Group.

Following an investigation, the FRC has imposed a fine of 1.25 million pounds on KPMG and a further 90,000 pound fine on Anthony Sykes, who resigned from KPMG in 2022, after finding “serious breaches” of international auditing standards.

The FRC’s concerns particularly pertained to N Brown’s statements for the financial year ended February 26, 2022, for which the organisation pointed to failures in impairment modelling, cash flow forecasts, discount rates and sensitivity analysis.

In a statement, Jamie Symington, FRC deputy executive counsel, said: “This case demonstrates that the audit of impairment requires a substantial level of diligence, forethought and careful exercise of judgement.”

The organisation noted that both KPMG and Sykes were cooperative in the investigation, as well as undertaking remedial action to prevent recurrence of the breaches. It is also not alleged that N Brown was required to recognise an impairment in FY22.

After being acquired by non-executive director Joshua Alliance earlier this year, N Brown Group, the parent company of JD Williams and Simply Be, delisted from AIM. The sale was valued at 191 million pounds.