LONDON, June 29 (Reuters) – Britain’s accounting watchdog said on Thursday it had fined PwC and KPMG, two of the world’s top four auditors, for “serious” failings in their auditing of Eddie Stobart Logistics (ESL) company in 2017 and 2018.

PwC was fined 1.9 million pounds ($2.4 million), reduced from 3.5 million pounds due to exceptional cooperation and admissions, the Financial Reporting Council (FRC) said in a statement.

PwC admitted failings related to property transactions entered into by ESL, audit procedures, and property lease accruals, the watchdog said.

The FRC also fined PwC audit partner Philip Storer 51,187 pounds. He avoided a fine of 90,000 pounds due to exceptional cooperation and admissions.

“Our work was not of the required standard on this occasion and for this we apologise,” PwC said in a statement, adding it was focused on ensuring consistent delivery of high quality audits.

KPMG had performed the 2017 audit on the logistics firm and resigned as auditor in 2018 because of a breakdown in its relationship with ESL’s management, following difficulties in obtaining sufficient appropriate audit evidence, the FRC said.

PwC was subsequently appointed for the 2018 audit.

The FRC said it had fined KPMG 877,500 pounds, reduced from 1.35 million pounds due to admissions.

“KPMG’s poor disciplinary record was noted as an aggravating factor,” the FRC said, adding KPMG had been ordered to take specified actions to prevent a re-occurrence of the contravention.

Cath Burnet, head of audit at KPMG UK, said the accounting firm was committed to resolving and learning from past cases, and regretted that elements of its work fell short of required standards in this audit.

“This development marks another step forward in dealing with these matters, and we continue to invest significantly in audit quality, in our technology and training, to drive further improvements,” Burnet said.

The FRC also fined KPMG’s former audit partner Nicola Quayle 45,500 pounds, cut from 70,000 due to admissions.

“Notable aggravating factors were Ms Quayle’s seniority at the point of signing the audit report and past disciplinary record,” the FRC said, adding she had made an undertaking not to carry out a statutory audit or sign audit reports in the future.

($1 = 0.7919 pounds)

Reporting by Huw Jones; editing by John Stonestreet and Mark Potter

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