BDO has been fined £2 million by the accounting watchdog due to “significant and serious” breaches linked to collapsed construction firm NMCN.
The Financial Reporting Council (FRC) also handed one of the accounting firm’s most senior partners, Geraint Jones, a £75,000 fine.
Nevertheless, both fines have been discounted to £1.33 million and £49,875 respectively due to cooperation and admissions in the process.
Following a five-year investigation, the regulator said it found “numerous and pervasive breaches that were fundamental to BDO’s audit work” for the company.
This regularly included shortcomings in “obtaining sufficient appropriate audit evidence”, the FRC said.
NMCN, which was previously called North Midland Construction, collapsed into administration in October 2021, owing creditors around £115 million.
A BDO spokeswoman said: “The 2019 audit of NMCN plc fell below the standards that we expect.
“We have made significant structural changes within our audit practice in the six years since this audit, and we remain committed to delivering consistency in the high quality of our audits.
“The FRC has noted the exceptional level of our cooperation with its investigation.”
Jamie Symington, FRC deputy executive counsel, said: “The breaches in this case are fundamental to audits of companies delivering major infrastructure contracts, where particular care needs to be taken in the audit of revenue and profits from the performance of long‑term contracts.
“The statutory auditors failed to critically assess evidence, challenge management’s assertions and exercise professional scepticism in important areas including going concern.
“The respondents demonstrated an exceptional level of cooperation with the investigation.
“This, together with their early admissions, enabling the matter to be resolved by settlement, has entitled them to a substantial reduction of the financial penalty imposed.”
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