Key facts
- EY and its London managing partner have been fined nearly £1.3 million by the FRC for audit failings.
- The fines relate to the 2021 statutory audit of the now-collapsed retailer Made.com.
- EY was fined £1.1 million, and managing partner Julie Carlyle was fined £49,000.
- The audit failures included inadequate assessment of financial forecasting models and insufficient evidence for deferred tax assets.
- Made.com entered administration in 2022 after a drop in consumer demand.
The Financial Reporting Council (FRC) has imposed fines totaling nearly £1.3 million on Big Four firm EY and its London managing partner, Julie Carlyle, for audit failings related to the 2021 statutory audit of the now-collapsed retailer Made.com.
EY received a fine of £1.1 million, while Carlyle was fined £49,000. Both sanctions were reduced due to early admissions of failings and cooperation with the FRC's investigation.
The audit failures specifically involved inadequate procedures to assess the accuracy and reliability of Made.com's management's financial forecasting models. Additionally, EY and Carlyle failed to gather sufficient evidence regarding the company's deferred tax assets to confirm their recoverability. The auditors also did not adequately consider new evidence that became available between the creation of the audit and the signing of the final report.
Made.com, a furniture giant listed on the London Stock Exchange, entered administration in 2022 following a drop in consumer demand after the Covid pandemic. It was subsequently removed from the market. In December 2022, Next purchased the company's intellectual property for £3.4 million.
Penrose Foss, executive counsel at the FRC, stated that the auditors relied on management's forecasts without sufficient challenge or adequate testing, increasing the risk of inaccurate financial statements.