EY and a partner at the firm have been fined approximately £1.2 million over failures linked to the audit of online furniture retailer Made.com. The Financial Reporting Council (FRC) imposed a £1.197 million sanction on EY for breaching audit rules, while audit engagement partner Julie Carlyle was fined around £49,000.
Audit failures and reliance on forecasts
The watchdog stated that the auditors relied too heavily on Made.com’s own forecasts and did not sufficiently challenge them to assess the company’s financial resilience. The FRC highlighted a “failure to perform adequate procedures” to evaluate the accuracy and reliability of management forecasts regarding the company’s ability to operate as a going concern. There was also a failure to obtain sufficient audit evidence related to a deferred tax asset.
Collapse and aftermath
Made.com collapsed into administration in November 2022, resulting in hundreds of job losses. The company had suffered a sharp downturn after launching on the London Stock Exchange less than two years earlier with a valuation of £775 million. The brand was later acquired by retail group Next in a rescue deal and continues to operate under its ownership.
Fines and admissions
The fines for both EY and Carlyle were reduced by 30% from their initial potential amounts due to early admission. Penrose Foss, executive counsel at the FRC, said: “In this case the auditors relied on management’s forecasts without applying sufficient challenge or carrying out adequate testing to obtain sufficient evidence. Absent such challenge and evidence, there is a heightened risk that financial statements present an inaccurate picture of a company’s financial position.”
