Deloitte fined £1.45m over Mitie auditing failures

Accounting firm Deloitte has been fined £1.45m by Britain's accounting watchdog after failures in its audit of outsourcer Mitie Group.

The Financial Reporting Council (FRC) on Thursday also handed a £40,056 fine to John Charlton, who worked on the audit for Deloitte.

Both Deloitte and Charlton admitted to breaches related to their “audit work of the company’s impairment testing of goodwill”, the FRC said, adding that its initial fine of £2m for the firm was reduced after early admissions of guilt.

It added that breaches of regulations by the auditors meant that Mitie’s accounts for 2016 contained “a material uncorrected misstatement” regarding the headroom of its healthcare division.

The accounts attributed £465.5m to the value of goodwill – intangible company assets – with more than £107m of this related to its healthcare operation.

“It is vital that audit work in relation to the carrying amount of goodwill is conducted properly and the disclosures are sufficient to enable investors to understand the position and have confidence in the numbers included in the financial statements," said FRC deputy executive counsel Claudia Mortimore.

“Deloitte has accepted that there were deficiencies in its audit work of goodwill in Mitie’s full-year 2016 financial statements."

It comes as Deloitte faces further scrutiny over the quality of its accounting, with the FRC confirming last week that it is investigating the firm over its audits of rail and bus operator Go-Ahead.