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Grant Thornton has been fined 拢1.3m and issued with a 鈥榮evere reprimand鈥� for its handling of Interserve鈥檚 accounts for the three years to 2017.

Simon Lowe, Grant Thornton鈥檚 audit engagement partner in charge of Interserve鈥檚 audits for the period, has been fined 拢70,000 and also issued with a 鈥榮evere reprimand鈥�.

Because of their 鈥榚xceptional鈥� co-operation with the investigation, the financial sanctions are reduced to 拢718,250 and 拢38,675 respectively.

The Financial Reporting Council (FRC) said that its adverse findings against the respondents (which were admitted at an early stage) concerned the audit work performed on:

• a substantial loss provision in the financial statements for FY 2015 and FY 2016 against an energy from waste contract for the construction of a waste treatment facility in Glasgow.
• aspects of the auditors鈥� assessments of going concern and goodwill impairment in the financial statements for FY 2017.

On the waste-to-energy plant losses, the FRC found that 鈥渢here were serious evidence and scepticism failings by the auditors in respect of key judgements and accounting estimates relevant to the loss provision, an area identified as a significant risk in the audit鈥�.

聽In the case of 鈥済oing concern and goodwill impairment鈥�, the FRC said that 鈥渨ork on elements of the analysis of management鈥檚 modelling of the financial data was inadequately performed or, in some respects, inadequately documented鈥�.

Claudia Mortimore, deputy executive counsel to the FRC, said: 鈥淭his is a proportionate package of sanctions in respect of failings over three consecutive audit years.聽 It reflects on one hand the seriousness of certain evidence and scepticism failures in FY 2015 and FY 2016, while recognising that the adverse findings were limited to discrete areas of large audits.

鈥淲e note the exceptional cooperation provided by the respondents throughout the investigation and this has been reflected in the discount to the financial sanctions.聽 Some of the evidence relevant to this decision is legally privileged and we acknowledge the assistance provided by the administrators of the company and Interserve Group Limited in agreeing that the material could be used in confidence for the limited purposes of our investigation and any subsequent enforcement proceedings.鈥�

There is no suggestion that the breaches resulted in the financial statements being materially misstated and the breaches were limited to discrete areas of the audit, the FRC said.

The respondents also have to pay the FRC executive council鈥檚 costs of 拢467,780.

A spokesperson for Grant Thornton UK LLP said: 鈥淗aving co-operated fully with the FRC throughout the course of its investigation into our audits relating to 2015-2017, we are pleased to now conclude this matter. Whilst we acknowledge the regulator鈥檚 findings that certain limited aspects of our work were below expectations in this instance, it鈥檚 important to note that the findings did not assert that the company鈥檚 accounts were materially misstated in respect of these matters. We have invested significantly in our audit practice since the period in question, to drive consistently high quality and are now seeing the positive outcome of this investment 鈥� evidenced most recently in our latest AQR [audit quality review] scores.鈥�

For further details of Grant Thornton's errors, .