The UK accounting regulator has fined Deloitte £6mn for "a highly concerning pattern of failure" in its audits of rail and transport operator Go-Ahead across five years. The Financial Reporting Council said it would fine the Big Four firm for breaching audit requirements at three Go-Ahead subsidiaries between 2016 and 2020. The fine was reduced from £11mn because of Deloitte's "exceptional co-operation", the regulator said.
The watchdog launched its investigation four years ago following a crisis at Go-Ahead, which the UK government stripped of the Southeastern rail franchise in 2021. The FRC found that Go-Ahead had kept tens of millions of pounds of taxpayer funding that should have been returned, releasing it as profit without telling the government. The practice stopped only when the government discovered the overpayments and fined the company £23.5mn. In total, Go-Ahead recorded £29.4mn in overpayments as profits between its 2016 and 2020 financial years.
"These breaches show a highly concerning pattern of failure by Deloitte to apply sufficient scrutiny to decisions and actions," said FRC executive director of investigations Penrose Foss. The regulator also found that at the London and Birmingham Railway, the company "attempted to conceal" £5.6mn owed to the Department for Transport, and that Deloitte applied "insufficient scrutiny" to onerous contract provisions at German subsidiary Gaby.
Deloitte did not properly scrutinise some contract valuations, failed to show enough "professional scepticism", and did not fully evaluate evidence of fraud risk, the regulator added. Deloitte UK said it regretted that aspects of its audit work did not meet expected standards. Go-Ahead, which has since been taken private and delisted, said the investigation related to "a historic issue" and that it had transformed significantly since then.
Source: Financial Times Companies · Summarized by HeadlinesBriefing