Accountancy regulator investigates Deloitte's auditing of SIG

The Financial Reporting Council has started an investigation into Deloitte’s audit work for SIG, the building supplies company that admitted overstating profits after a whistleblower raised the alarm.

The accountancy regulator said its inquiry would cover the years ended 2015 and 2016.

“The investigation will be conducted under the Audit Enforcement Procedure and will focus on the audit of cash and supplier rebates,” the FRC said in a short statement.

In February SIG revealed it had overstated its 2016 profit by up to £3.7m and that profit for the first half of 2017 was overstated by as much as £2.5m There was a £0.4m overstatement for years before 2016.

Shareholders voted to sack Deloitte as SIG’s auditor at the company’s annual general meeting in May and it has put the work out to tender.

SIG said the profit overstatement was at SIG Distribution, its core UK insulation and exteriors business. It said some of the accounts were overstated intentionally and suspended some employees.

The SIG investigation is the latest in a flurry of actions taken by the FRC in 2018 after the regulator was accused of lacking teeth following the collapse of outsourcing company Carillion.

The FRC criticised KPMG on 18 June for “unacceptable deterioration” in its audit work for big companies and soon after slapped PwC, another big four accountant, with a record £6.5m fine over its auditing of BHS before the chain’s collapse.

John Kingman, a former Treasury official, is carrying out a review of the FRC for the government.