Mazars fined over local government audit failings - Financial Times

Mazars has been fined £250,000 by the UK accounting regulator for failings in the mid-tier firm’s audit of a local government authority.

The findings against Mazars are the latest indication of a growing crisis in the audits of local government accounts, which has been blamed partly on a decade of austerity and deep cuts in audit fees.

Only 9 per cent of local government bodies in England had published audited accounts for the 2020-21 financial year by the statutory deadline at the end of September, creating questions about transparency and governance in the public sector.

Almost one in three audits in the sector were found to require improvement in the Financial Reporting Council’s latest annual inspections, half of which were based on historic accounts because the most recent ones had not been completed on time.

The FRC fined Mazars for breaching regulations in its audit of the 2019 financial statements of an unnamed local government authority.

The regulator, which oversees audit quality for larger local authorities in England, said its enforcement committee had “found failures in the reviewed audit, which it considered fell far short of the applicable standards and regulations and had the potential to undermine confidence in the standards in general of registered auditors”.

The penalty was discounted by 20 per cent from £314,000 to reflect Mazars’ co-operation and admissions, the FRC said. The firm had also offered undertakings to address its concerns, the watchdog added.

The fine will fuel concerns about the quality of audits by Mazars and other mid-tier accountants hoping to gain market share from the Big Four firms — Deloitte, EY, KPMG and PwC — which have themselves been criticised for failing to raise red flags before the collapse of companies such as outsourcer Carillion and retailer BHS.

Mazars is under investigation by the FRC over its audit of retailer French Connection while Grant Thornton has been fined £3m in the past four months over its audits of café chain Patisserie Valerie and outsourcer Interserve.

Mazars is the third biggest auditor of large local government authorities and health bodies in England, holding 15 per cent of the market, according to the FRC.

“Having worked closely with the FRC throughout its investigation, we accept and regret that the quality of our work did not meet the standards expected,” said Mazars.

The firm added that it had made significant investments in its teams and processes and that all four of its audits included in last year’s FRC local government audit inspections had received the highest ranking.

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Mazars fined over local government audit failings - Financial Times
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