FRC fines BDO £2m for 'serious' breaches related to NMCM audit

(Sharecast News) - The Financial Reporting Council said on Thursday that it has fined BDO and one of its senior partners £2m for "significant and serious" breaches related to the accountancy firm's audit of construction company NMCM.

NMCM collapsed into administration in 2021, owing its creditors £60.5m.

The fine relates to the audit of financial statements for the year ended 31 December 2019 and the FRC said there had been numerous and "pervasive" breaches that were fundamental to BDO's audit work, commonly involving shortcomings in obtaining sufficient appropriate audit evidence.

BDO and senior partner Geraint Jones have admitted breaches of relevant requirements in multiple areas of the 2019 audit of NMCN.

The regulator said breaches occurred mainly within the audit work on NMCN's long‑term contracts. There were further breaches in the audit of going concern, including a failure to meet the requirement to plan and perform the audit with "professional scepticism", it said.

Deputy executive counsel Jamie Symington said: "The breaches in this case are fundamental to audits of companies delivering major infrastructure contracts, where particular care needs to be taken in the audit of revenue and profits from the performance of long‑term contracts. The statutory auditors failed to critically assess evidence, challenge management's assertions and exercise professional scepticism in important areas including going concern.

"The respondents demonstrated an exceptional level of cooperation with the investigation. This, together with their early admissions, enabling the matter to be resolved by settlement, has entitled them to a substantial reduction of the financial penalty imposed."

BDO was fined £1.33m, while senior partner Geraint Jones was fined £49,875.