Grant Thornton UK has been fined and reprimanded by the UK’s Financial Reporting Council (FRC) for the admission of misconducts in relation to audits and financial statements.

The fine of £4m ($5.14m), which was discounted for settlement to £3m, was issued to Grant Thornton for failing to flag misconduct in its audit work and financial statements for Nichols, a UK drinks brand, and the University of Salford for the years ended 2010, 2011, 2012 and 2013.

In addition, the regulator issued a fine of £200,000, reduced to £150,000 for settlement, to Eric Healey, a former senior partner of Grant Thornton.

The regulator excluded Healey from the Institute of Chartered Accountants in England and Wales (ICAEW) for a recommended period of five years.

Healey’s misconduct relates to him joining the audit committee of Nichols and the University of Salford, which at the time were audit clients of Grant Thornton, while he was also engaged by the firm to provide services under a consultancy agreement.

The FRC noted this ‘created serious familiarity and self-interest threats and resulted in the loss of independence in respect of eight audits over the course of four years’ and that this case revealed ‘widespread and serious inadequacies’ in the control environment in the firm’s Manchester office over the period, as well as firm-wide deficiencies in policies and procedures in relation to retiring partners.

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The regulator issued further fines and reprimands to three senior statutory auditors: Kevin Engel (£100,000), David Barnes (£70,000), and Joanne Kearns (£60,000). All three fines were discounted by 25% for settlement.

Healey admitted to the FRC that his conduct in certain respects was ‘reckless’ and that it fell significantly short of the standards to be expected by the ICAEW.

Grant Thornton, Engel, Barnes, and Kearns, also admitted to falling short of the standards to be expected of a member firm and members and that they failed to act in accordance with the ICAEW’s fundamental principle of competence.

In response, a spokesperson for Grant Thornton said: “Whilst the focus of the investigation was not on our technical competence in carrying out either of these audit assignments, the matter of ethical conduct and independence is equally of critical importance in ensuring the quality of our work and it is regrettable that we fell short of the standards expected of us on this occasion.

“As we have since made significant investments in our people and processes and remain committed to continuous improvement in this regard, we are confident that such a situation should not arise in the future.”