FRC Investigates KPMG Over Entain Audit Amid Rising Scrutiny
LONDON, January 21, 2025 – The Financial Information Council (FIC) opened an investigation into KPMG’s audit of Entain’s financial statements in 2022. This is another case of increased control over the audit practices of large companies. The decision of the FIU was taken at a meeting of the Steering Committee on 21 November 2024 and its Implementation Division was responsible for leading the probe in the verification procedure.
What did the investigation say?
Entain, owner of well-known brands such as Ladbrokes and Coral, has been the subject of regulatory and legal observations in recent years. KPMG, as Entain’s auditor since 2018, has been criticized for its audit deficiencies. In this case, the FIU clarified that the focus is strictly on the statutory auditor(s) and/or the legal audit signature(s) in question, stressing that no other entity or person is under control.
The CRF stated: “The investigation does not concern any person or entity other than the statutory auditor(s) and/or the statutory audit firm(s). It would not be fair to consider this announcement as evidence of an investigation into another person or entity. »
A history of challenges: KPMG and Entain
This investigation is already a turbulent period for KPMG and Entain. KPMG is working to restore confidence in its audit practices after several fines in recent years. At the same time, Entain was investigated separately by HM Revenue & Customs (HMRC) from 2020, focusing on allegations of corruption in a former Turkish subsidiary.
According to the City of A.M., the CRMH investigation resulted in the first deferred prosecution agreement with the Crown Prosecutor’s Office. It agreed to comply by paying £585 million, including financial penalties, withdrawal of profits and contributions to legal fees and charities. This agreement further aggravated the company’s reputational problems.
How do stakeholders respond?
In response to the investigation, a spokesperson for KPMG UK said: ”We will cooperate fully with the FRC to conclude this case as soon as possible.” Despite the guarantees, the announcement had a significant impact on market confidence. According to Richard Hunter, the market leader in the Interactive Investor, Entain’s shares fell by more than one percent after the news, with an annual decrease of 31 percent.
KPMG’s regulatory direction is an important development for the accounting profession, especially because of its position as one of the ”Grand Four” companies. Increased surveillance may indicate broader implications for industry as authorities promote higher standards of verification to protect investors and maintain market integrity.
What are you doing? Does this mean for industry?
The actions of the FIU are aligned with a global trend towards greater accountability of auditors. This measure highlights the growing demand for transparency and strict compliance with professional financial reporting standards. In recent years, the audit sector has been criticized for having misidentified financial irregularities, resulting in significant institutional failures.
As a result, regulators around the world tighten their grip. In the United Kingdom, reforms focused on strengthening the powers of the FIU and strengthening corporate governance. Audit companies like KPMG now have to adapt to this evolving regulatory landscape, as failure to meet expectations could result in serious penalties and damage to reputation.
What’s the rest of the investigation?
Although the FIU did not provide specific details on the scope of the investigation, its audit control procedure typically involves determining whether the auditors comply with professional standards. In the event of non-compliance, KPMG could be subject to financial sanctions, operational restrictions or other sanctions. However, the company’s willingness to cooperate can speed up the process and mitigate possible consequences.
The ongoing review also serves as a reminder to companies like Entain to ensure robust internal controls and compliance with regulatory requirements. As industry experts say, maintaining transparency and proactive collaboration with regulators will be crucial for auditors and their clients in the development of these challenges.
As research develops, financial and regulatory ecosystem stakeholders will closely monitor its consequences. If it results in systemic changes in audit practices or creates a precedent for similar probes, the case highlights the fundamental role of accountability in defending market integrity.
About The Author
