(Adds EY comment)
LONDON, Aug 25 (Reuters) - Britain's accounting watchdog
said on Wednesday it had fined EY 3.5 million pounds ($4.8
million) for failing to challenge financial statements in its
audit of transport group Stagecoach Group's in 2017.
The Financial Reporting Council (FRC) said Mark Harvey, the
auditing engagement partner, had also been sanctioned and fined
100,000 pounds.
EY's fine was cut to 2.2 million pounds for admitting to the
failings, with Harvey's fine reduced to 70,000 pounds for the
same reason.
There were admissions to failings in specific areas of the
Stagecoach audit, including provisions for insurance claims
relating to accidents, defined benefit pension scheme
obligations, and an onerous contract provision relating to the
East Coast Mainline railway franchise, according to the FRC.
"Whilst it is not alleged that the Financial Statements were
in fact misstated, in several material instances the Respondents
failed to obtain sufficient appropriate audit evidence," the
regulator said.
The FRC said EY will be required to report to the watchdog
for a year in respect of audit work in relation to onerous
contract provisions.
EY said it regrettably fell short of the standards it set
for itself, adding that no findings were raised in the FRC's
review of auditor's most recent audit of Stagecoach for the
year-end 2020. It said it had continued to make significant
investments in audit quality.
"These will support our focus on delivering the highest
levels of audit quality by building a culture of challenge and
providing independent oversight of our UK audit practice."
Harvey could not be immediately reached for comment.
Britain has said it wants to reform the audit market and
replace the FRC with a more powerful watchdog after a series of
company collapses, but the government has yet to put legislation
to parliament to implement any change.
($1 = 0.7290 pounds)
(Reporting by Yadarisa Shabong in Bengaluru and Huw Jones in
London; Editing by Shounak Dasgupta and David Holmes)
