[UK] EY fined £500,000 for breaching audit rules in second penalty within a week
April 14, 2025
The Financial Reporting Council has handed EY a £500,000 fine over its audit of a Scottish water company, less than a week after it was sanctioned over Thomas Cook
EY, one of the Big Four accounting firms, has been hit with a £500,000 penalty over its audit of Scottish water company Stirling Water Seafield Finance. This comes less than a week after it was fined for its audit of the failed airline Thomas Cook.
The Financial Reporting Council (FRC) imposed fines on EY and partner Christopher Voogd for their audit of Stirling Water Seafield Finance's accounts for the year ending 31 December 2019. The water company is owned by French utilities firm Veolia, as reported by City AM.
The accountancy watchdog initiated its investigation in January 2023 and disclosed on Monday morning that EY had violated the term limit for auditing a company. According to the FRC, by conducting this audit, the firm "exceeded the maximum ten-year engagement period for audits of a public interest entity without renewal via a qualifying public tender."
The ruling stated that both EY and Voogd "failed to ensure that appropriate procedures regarding the continuance of the audit engagement had been followed".
It was further noted that EY did not comply with its quality control obligations concerning independence requirements. EY identified and reported the ethical breach to the FRC in November 2021.
Consequently, the regulator imposed a £500,000 fine on the firm, reduced to £325,000 due to admissions, while Voogd received a £50,000 fine, discounted to £32,500. The firm was also required to cover the cost of the investigation.
Jamie Symington, FRC deputy executive counsel, commented on the judgement, saying: "Mandatory firm rotation is a clear requirement for auditors underpinned by company law and the FRC's revised ethical standard.
"It is an integral legal safeguard to provide assurance that auditors are demonstrably independent which supports trust and confidence in UK corporate reporting and audit."
Symington pointed out significant shortcomings regarding mandatory firm rotation requirements, emphasising that these lapses occurred both at the engagement and firm levels during the continuance stage, ultimately resulting in EY performing audit work for which they were ineligible. This development comes on the heels of a recent penalty where the watchdog fined EY £6.5 million (reduced to over £4.8 million) and Richard Wilson for the audit of the now-defunct airline Thomas Cook.
In response to the latest ruling, an EY spokesperson stated: "We identified a breach of the mandatory firm rotation requirements in relation to our 2019 audit of Stirling Water Seafield Finance plc which we reported to the FRC."
They confirmed EY's full cooperation with the FRC during the investigation and noted the implementation of new monitoring processes and procedures.
[Business Live]
