Ernst & Young fined in relation to Stagecoach audit

A fine of £3.5 million - discounted to £2.2m for mitigating factors, admissions and early disposal - has been issued to Ernst & Young by the Financial Reporting Council.

Other sanctions relating to the audit of Stagecoach Group for the year ending April 29 2017 included a severe reprimand. The FRC reported that failings in the audit related to the East Coast Main Line franchise, as well as to pension obligations and insurance claims.

Stagecoach ran long-distance services on the ECML in 2015-18 under the Virgin Trains East Coast brand (together with minority partner Virgin), before the Department for Transport brought operations in-house under LNER.

“Whilst it is not alleged that the Financial Statements were in fact misstated, in several material instances, the Respondents failed to obtain sufficient appropriate audit evidence and to apply sufficient professional scepticism in their conduct of the Audit,” reported the FRC.

“Further, the content and extent of the audit documentation which the Respondents were required to prepare was of a low quality which did not record the full extent of the procedures and judgements made.

“The breaches of Relevant Requirements were not intentional, dishonest, deliberate or reckless.”

RAIL has approached Ernst & Young for comment.