LONDON (Reuters) - Britain’s accounting watchdog on Wednesday fined BDO 160,000 pounds ($207,040) for unintentional rule breaches in its audit of international insurer AmTrust Europe Limited (AEL), saying the auditor would have to implement a training programme.
The Financial Reporting Council (FRC) said the fine was reduced from 200,000 pounds for early admissions regarding audits for 2014 and 2015. The truth and fairness of the financial statements for the two years were not in question, and the breaches were not intentional, the FRC said.
BDO said it was its first ever sanction from the FRC and that it was extremely disappointed its audit work for AEL did not meet the required standards.
BDO said the shortcomings had been addressed and its procedures were strengthened still further following BDO’s merger with Moore Stephens.
One of the breaches related to a failure in documentation. Other breaches related to provisions for claims and the use of independent actuaries as experts.
“The failings in this case related to an area of high audit risk, namely the consideration of an insurance company’s approach to its provision for claims,” said Jamie Symington, the FRC’s Deputy Executive Counsel.
“The auditors relied on the opinions of independent expert actuaries without taking sufficient steps to gain an understanding of or to evaluate their work.”
Some of the shortcomings came to light in the FRC’s annual checks on samples of 2015 audits of Britain’s leading accounting firms, the watchdog said.
The watchdog said the fine, which included a reprimand for BDO partner David Roberts, reflected that BDO and Roberts have a good compliance history and disciplinary record with no prior sanctions.
BDO, among the next tier down from the Big Four auditors of KPMG, Deloitte, EY and PwC, is required to implement a training programme to improve how it obtains and evaluates independent actuarial audit evidence.
Reporting by Huw Jones; Editing by Mark Potter
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