EY fined £1.2 million over Made.com audit failures
Ernst & Young (EY) has been fined £1.2 million by the Financial Reporting Council (FRC) for failings in its audit of Made.com, the online furniture retailer that collapsed in 2022. The penalty was originally £2 million but was reduced by 40% for early settlement and other discounts.
FRC investigation details
The FRC investigation focused on EY's audit of Made.com's financial statements for the year ended 31 December 2021. The regulator found that EY failed to obtain sufficient appropriate audit evidence regarding the valuation of work in progress and finished goods inventory, which amounted to £34.6 million. The FRC also identified deficiencies in the audit of revenue recognition, particularly around cut-off procedures.
According to the FRC, EY's audit work fell short of required standards in several areas, including the assessment of management's assumptions and the application of professional scepticism. The regulator said the failings were serious and resulted in a lack of assurance over key financial statement figures.
EY's response
EY accepted the FRC's findings and agreed to the settlement. In a statement, EY said: "We are committed to the highest standards of audit quality and regret that in this instance our work did not meet those standards. We have taken steps to address the issues identified and have cooperated fully with the FRC throughout its investigation."
Impact on Made.com collapse
Made.com, which was founded in 2010, entered administration in November 2022 after failing to secure a rescue deal. The company's collapse resulted in the loss of around 700 jobs and left customers with outstanding orders. The FRC's investigation into EY's audit is part of a broader scrutiny of audit quality in the UK, particularly following high-profile corporate failures such as Carillion and BHS.
The fine is the latest in a series of penalties imposed on major audit firms by the FRC. In recent years, the regulator has stepped up enforcement actions to improve audit standards and restore confidence in the profession.
