Corporate accounts regulator the Financial Reporting Council (FRC) has fined Ernst & Young LLP (EY) and senior auditor Julian Gray more than £3m for misconduct over Tech Data’ (formerly Computer 2000 Distribution) 2012 accounts.
Gray, senior statutory auditor and audit engagement partner, and EY admitted misconduct in relation to the audit of the financial statements of Tech Data for the financial year ended 31 January 2012.
The FRC’s Executive Counsel has agreed the following terms of settlement with EY and Gray, which have been approved by a legal member of the independent Tribunal Panel:
- EY to receive a Reprimand and a fine of £2,750,000 (adjusted for mitigating factors and discounted for settlement to £1,800,000)
- Mr Gray to receive a Reprimand and a fine of £90,000 (adjusted for mitigating factors and discounted for settlement to £59,000)
- EY to pay a sum of £225,000 towards Executive Counsel’s costs
The fines reprimand follows the conclusion of the investigation by the Executive Counsel to the Financial Reporting Council (FRC), which was announced in August 2014.
The FRC said: “EY and Mr Gray, a member of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a Member and a Member Firm and that they failed to act in accordance with the ICAEW’s Fundamental Principle of Professional Competence and Due Care.
“The admitted acts of Misconduct related to three audit areas, and included failures to obtain reasonable assurance about whether the financial statements as a whole were free from material misstatement, failures to obtain sufficient appropriate audit evidence and failures to exercise sufficient professional scepticism.”
EY statement (updated 8.55):
"Audit quality is an ongoing focus and priority to EY, however we recognise that we fell short of our professional standards on three matters in relation to the audit of Tech Data (formerly Computer 2000 Distribution) for the financial year ending 31 January 2012.
"EY is committed to performing high quality audits and has established a long-term audit quality programme in the UK and a dedicated Audit Quality Board, which are aligned to the steps we have taken globally. We also continue to invest in new technology, data analytics software and training for our people.
"The results of the latest inspection report from the Financial Reporting Council (FRC) recognises the significant level of investment EY has made in audit quality, particularly over the last three years, and demonstrate our continued progress.
"EY continues to listen and act upon feedback from the FRC, as well as conducting its own reviews of EY’s audit practice."