FCA to investigate M&C Saatchi accounting errors

The Financial Conduct Authority (FCA) has launched an investigation at leading advertising agency M&C Saatchi, which was forced to make £11.6m of adjustments to its 2018 and 2019 financial results at the end of last year after external auditor KPMG flagged up accounting issues

In a regulatory statement, the company said: ‘The Financial Conduct Authority (FCA) has notified M&C Saatchi plc that it has commenced an investigation following the accounting adjustments announced by the Company, most recently on 4 December 2019, and following the completion of an independent forensic review commissioned by the board.

‘The company will co-operate fully with the FCA.’

The regulator has made no comment on the scope or timetable for its investigation.

At the time it first revealed the problems in August last year, M&C Saatchi said an internal audit review had identified £4.9m of specific issues, and that it would also make an adjustment of £1.4m in respect of its property-related assets. This resulted in a one-off exceptional charge of £6.4m to its 2019 results.

Subsequently, following an independent forensic review conducted by PwC, the total value of the previously disclosed adjustments was increased by £1.15m, with PwC identifying other areas which needed investigation.  Some of these relate to misreporting of income under revenue recognition accounting rules, which had been exacerbated by the introduction of IFRS 15, Revenue from Contracts with Customers, which came into effect for accounting periods starting 1 January 2018.

As a result, M&C Saatchi said at the end of 2019 that additional items totalling £2.65m had been identified, bringing the total proposed adjustment to £11.6m to be apportioned between its 2018 and 2019 financial results.

The advertising giant has appointed PwC to take over as external auditor, replacing KPMG. KPMG was first appointed as M&C Saatchi auditor for the financial year ended 31 December 2012. According to the 2018 annual report, the firm was paid a total of £838,000 for the year, made up of £768,000 in audit fees and £70,000 for other services

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