Big Four accountant KPMG has paid £5m to settle a claim brought by what used to be called Quindell over its audit of the one-time alternative business structure.
Watchstone Group, as Quindell is now known, announced yesterday that the settlement was made without admission of liability.
It sued KPMG over the conduct of its 2013 audit. Trial was not expected before 2024. KPMG had no comment except to confirm the agreement.
In 2018, the Financial Reporting Council (FRC) reprimanded and fined KPMG £3.15m after admitting misconduct in the audit, with audit engagement partner William Smith fined a further £84,000.
The fines were reduced from £4.5m and £120,000 respectively due to a settlement deal. KPMG was ordered to pay a further £146,000 in costs.
The FRC began its investigation in August 2015 after Quindell’s 2014 accounts were published with substantial restatements of prior year revenues, profits and net assets.
It said both KPMG and Mr Smith admitted that their conduct fell “significantly short” of the standards reasonably expected by their regulator, the Institute of Chartered Accountants in England and Wales.
The failures included not obtaining either reasonable assurance that the financial statements as a whole were free from material misstatement or sufficient appropriate audit evidence, and not exercising “sufficient professional scepticism”.
Watchstone has sold all of the group’s businesses in recent years and now focuses exclusively on managing its litigation assets.
Last year, it listed on the Aquis Stock Exchange to continue to provide a trading facility on a regulated market and delisted from AIM.
The main piece of outstanding litigation is against another Big Four accountant, PwC, which is expected to go to trial in January 2023.
This £63m claim alleges that PwC used confidential information to reduce the amount Slater & Gordon paid to buy Quindell’s professional services division.
There are two other pieces of litigation. One is a bid to recover £2m in historic VAT paid by Ingenie, Quindell’s telematics business.
Earlier this year, the First-tier Tax Tribunal found in favour of HM Revenue & Customs over the VAT treatment of certain supplies made by Ingenie. Watchstone is appealing to the Upper Tribunal.
The other is a claim by the group’s Canadian subsidiary against Aviva Canada, which is expected to go to trial in January 2024.
Last year, the Serious Fraud Office ended its investigation into what happened before the sale to Slater & Gordon with no further action.