Accounting watchdog launches probe into Deloitte’s auditing of Go-Ahead

The UK’s accounting watchdog today launched an investigation into Deloitte’s audit of public transport company Go-Ahead Group, after the UK government fined the firm £23.5m for its failures in running Southeastern rail service.

The Financial Reporting Council (FRC) said its investigation will focus on Deloitte’s audits of Go-Ahead’s accounts over a six-year period covering the financial years 2016 to 2021.

In looking into six years’ worth of audits, the probe is set to cover a longer period than any other investigation launched by the FRC.

Go-Ahead made the headlines its subsidiary Govia – a joint venture with French firm Keolis – was fined £23.5m after it was found guilty of concealing £25m of taxpayer’s money related to HS1.

Speaking to City A.M. audit industry expert Professor Atul Shah said the fact the FRC’s probe covers a six-year period suggests that any issues are not simply a “one-off problem” in Deloitte’s audits of Go-Ahead’s accounts.

Instead, the investigation signals there may have been “consistent” issues with Deloitte’s audits over a number of years, Shah said.

The professor added that the investigation comes as “more evidence that serious systemic reform needs to take place to improve audit performance,” as the Big Four audits come under fire for repeated failures in auditing some of the UK’s major companies.

In a statement, a spokesperson for Deloitte said: “We will co-operate fully with the FRC’s investigation. Deloitte is committed to the highest standards of audit quality.”

The investigation follows reports the FRC is seeking to reclaim powers to withdraw licenses from auditors if they consistently carry out poor quality work.

The plans would bolster the watchdog’s powers and give it greater freedom to sanction the UK’s major accountancy firms for systemic issues, in contrast to current rules which only allow the regulator to impose fines and other sanctions in response to specific failures.

The probe comes a week after Go-Ahead said it would go back to paying dividends to shareholders as part of its new accountability-focused strategy, City A.M. reported.