Deloitte hit with 6.05 million pound fine over Go-Ahead audits
The Financial Reporting Council found a 'highly concerning pattern of failure' in Deloitte's audits of Go-Ahead Group between 2016 and 2020, when the transport operator wrongly retained tens of millions of pounds of public money.
The Financial Reporting Council has fined Deloitte 6.05 million pounds over its audits of transport operator Go-Ahead Group for the financial years between 2016 and 2020, the regulator announced on Thursday. The penalty had been reduced from 11 million pounds in recognition of Deloitte's "exceptional cooperation" and its admissions.
The sanctions also include a published statement in the form of a severe reprimand, a declaration that the audit reports for FY16 to FY20 signed on behalf of Deloitte did not satisfy the relevant requirements, and an order that Deloitte prepare a report for its FRC firm supervisor setting out its root-cause analysis and the actions taken to prevent recurrence. Deloitte also paid the costs of the investigation.
Penrose Foss, the FRC's executive director of investigations and enforcement, said the breaches "show a highly concerning pattern of failure by Deloitte to apply sufficient scrutiny to decisions and actions by Go-Ahead which were clearly questionable". He said the fact that some of those decisions and actions put very large amounts of British taxpayers' money at risk was particularly troubling, and that this was reflected in the level of the fine.
These breaches show a highly concerning pattern of failure by Deloitte to apply sufficient scrutiny to decisions and actions by Go-Ahead which were clearly questionable.Penrose Foss, Financial Reporting Council
The breaches centre on three of Go-Ahead's rail subsidiaries. London and South Eastern Railway had received overpayments from the Department for Transport under the Integrated Kent Franchise before Deloitte became auditor. Although obliged to repay them under the franchise terms, the company retained the money and made accruals for it without informing the department, then released accruals to profit after the franchise ended.
Overpayments also accrued under a separate Direct Award Contract from FY16 to FY20, reaching a cumulative total of 27 million pounds, with evidence obtained during the later audit years suggesting what the FRC described as an intention to keep the overpayments if they were not discovered. The FRC found Deloitte failed to evaluate evidence of fraud risk factors and to challenge management sufficiently. London and Birmingham Railway released 5.6 million pounds of accruals to profit in FY20 and concealed the move by rewording a financial statement note, while Go-Ahead Bayern GmbH's onerous contract provision was later restated from 8.1 million euros to 49.5 million euros.
"We regret that aspects of our audit work did not meet the standards expected and have learned from this matter," a Deloitte spokesperson said. "We are committed to continuous improvement and the delivery of high-quality audits."
The Times reported it was Deloitte's biggest fine since the 15 million pound penalty imposed in 2020 over its work signing off the accounts of Autonomy. The Department for Transport discovered the full extent of the overpayments in 2021 and imposed a 23.5 million pound penalty on Go-Ahead for breaching the franchise agreements.
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