The Financial Reporting Council has issued a severe reprimand and imposed a £6,050,000 financial sanction on Deloitte LLP following audit breaches across five financial years for public transport operator Go-Ahead Group plc.
Regulatory Enforcement Action and Fines
Executive Counsel of the Financial Reporting Council issued a Final Settlement Decision Notice under its Audit Enforcement Procedure, sanctioning Deloitte LLP for statutory audits of Go-Ahead Group plc covering financial years 2016 through 2020.
The FRC set the financial penalty at £6,050,000, reduced from £11 million after granting a 10% discount for exceptional cooperation and a 35% discount for early admissions and settlement. In addition to covering investigation costs, Deloitte received a severe reprimand, a declaration that its audit reports did not meet statutory requirements, and a requirement to submit a root cause analysis report to its firm supervisor.
Audit Breaches Across Passenger Rail Operations
The enforcement action relates to accounting issues at three Go-Ahead Group rail subsidiaries: London & South Eastern Railway Ltd, London & Birmingham Railway Ltd, and German component Go-Ahead Bayern GmbH.
London & South Eastern Railway retained erroneous overpayments from the Department for Transport, building accruals of £27 million from FY16 to FY20 while releasing sums into profit without informing transport officials. Deloitte failed to exercise sufficient professional scepticism or evaluate fraud risk factors regarding the retention of over £30 million in public funds across the rail subsidiaries.
At Go-Ahead Bayern GmbH, Deloitte provided insufficient oversight of component audit work. The subsidiary initially adjusted its contract provision from a loss valuation to positive cashflow, but ultimately required an onerous contract provision restatement in FY21 that increased the obligation from €8.1 million to €49.5 million.
| Sanction Type | Details and Reductions |
|---|---|
| Financial Penalty | £6,050,000 (discounted from £11,000,000 for cooperation and early settlement) |
| Public Sanction | Published statement of severe reprimand |
| Audit Declaration | Formal declaration that FY16 to FY20 audit reports failed Relevant Requirements |
| Remedial Requirements | Preparation of root cause analysis report for FRC Firm Supervisor and payment of investigation costs |
