Sanctions against KPMG LLP and Nick Plumb

A Final Settlement Decision Notice (FSDN) was issued by the FRC and published on 12 June 2025 against KPMG and its audit engagement partner Mr Nick Plumb.

A number of sanctions have been imposed on both parties as a result of an investigation into the statutory audit of the financial statements on behalf of the Carr’s Group plc prepared for the year ended August 2021.

It was held that both KPMG and Mr Plumb breached the FRC’s 2019 Ethical Standard and International Standards on Auditing (ISA’s).

Number of breaches

The financial statements of Carr’s were prepared as group financial statements and incorporated into the financial results of subsidiaries, joint ventures and associates of Carr’s. One of the associates of Carr’s namely, Carr’s Billington Agriculture (Operations) Limited (CBAO) were audited by a component auditor outside the KPMG network. This resulted in a number of breaches being determined by the FRC as follows:

1. The RI engaged in the network firm had held the role in excess of five years which exceeds the permitted period of duration allowable for an acting RI.
2. The network firm provided CBAO with non-audit services including the provision of tax and accountancy services.

The FRC found the Ethical Standard had been breached in this case, as Mr Plumb and KPMG had failed to ensure compliance with the independence requirements. This notice resulted in the imposition of a penalty on KPMG in the sum of £1.25 million for significant breaches in the audit independence rules applicable under the Ethical Standards.

The FSDN has not disputed the quality of the audit work conducted by either KPMG or the network firm. The breaches were not corrupt, intentional or impetuous. However, both KPMG and Mr Plumb failed a number of times to determine the breaches applicable in accordance with the Ethical Standards.

Lessons for the profession

Such is the importance of ethics and their impact on the audit, it is imperative to consider the above when conducting individual and/or group financial statements in order to avoid the potential for breaches of independence and objectivity.

A complicated area for auditors to consider concerns replies to a group auditor’s reporting instructions. The group auditor is required to consider whether responses indicate that the component audit is independent within the meaning of the Ethical Standard for the audit of a UK group.

There are some differences between the IESBA Code followed by many jurisdictions around the world and the Ethical Standard and group auditors must consider whether this poses threats to independence which require safeguards, or which cannot be overcome. We see evidence when conducting audit file reviews that these matters are either not considered, are misunderstood or not formalised in accordance with the responses received from the component auditor.