The Financial Reporting Council (FRC) has launched an investigation into KPMG’s audit of the fiscal 2016/17 results of Conviviality, the company behind Bargain Booze.
READ: Accountants KPMG fined £4.5mln by the Financial Reporting Council for failings in its audit of Quindell
The investigation will be conducted under the Audit Enforcement Procedure, which might need to be as fierce as it sounds if the FRC is to escape the scorn of MPs who have been critical of the council’s stewardship of auditing firms in the wake of the collapse of high-profile companies such as BHS and Carillion.
MPs accused the FRC of being “useless and toothless” in its monitoring of the “big four” accountancy firms: Deloitte, EY, KPMG and PwC.
The industry watchdog has already put KPMG on the naughty step for an inadequate job on the accounts of insurance firm Quindell – now known as Watchstone. KPMG got a slap on the wrist from the FRC in the form of a £4.5mln fine.
KPMG also failed to cover itself in glory with its work on the accounts of Carillion PLC, the infrastructure firm that collapsed spectacularly earlier this year.
READ: Carillion's troubles continue as accounting watchdog says to probe KPMG audits after profit warning
Conviviality went into administration at the beginning of April, just five months after listing on AIM, but KPMG is maintaining that it was not asleep at the wheel when looking over the 2016/17 accounts.
"We believe we conducted our audit appropriately and will co-operate fully with the investigation,” a spokesperson for KPMG said.
"Our audit of the company's financial statements for the year ended 30 April 2018 had not yet commenced at the point which administrators were appointed,” the spokesperson added.
The FRC has also commenced an investigation under the Accountancy Scheme into the preparation and approval of Conviviality's financial statements and other financial information by an unnamed member of the Institute of Chartered Accountants in England and Wales.
The FRC will conduct an initial examination and investigation of KPMG’s work on Conviviality’s accounts to determine whether the case should be referred to a tribunal.