Deloitte, Partner Get Record U.K. Fine for Audit Misconduct

  • Audits of Aero Inventory were unacceptable, regulator says
  • Fine is the largest imposed by the accounting watchdog

Deloitte LLP and firm partner John Clennett got a record fine for misconduct after the accounting regulator said the audit and financial statements of Aero Inventory Plc fell short of acceptable standards.

The Financial Reporting Council fined Deloitte 4 million pounds ($5 million) and Clennett 150,000 pounds for their work on the aircraft parts supplier’s 2006, 2007 and 2008 fiscal year accounts, the regulator said Thursday. The fine is the highest imposed by the FRC for misconduct.

“We accept the findings of the tribunal and regret that in this instance our audit did not meet professional standards," a Deloitte spokeswoman said.

The allegations related to "the appropriateness of the accounting and disclosure in Aero’s 2006 financial statements" of an acquisition, the costs of sales and stock valuations in the 2006, 2007 and 2008 audits and stock existence in the 2007 and 2008 audits, the FRC said in the statement.

"It is a clear indication of the importance of the highest standards being maintained in all audits and the seriousness of the failure to perform an adequate audit of these financial statements which led to misleading information about the profits and turnover of the company being made to the market," said Gareth Rees, executive counsel to the FRC.

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