EY, accountant sanctioned over Made.com auditing failures

July 28 (Reuters) - Britain's accounting watchdog on Tuesday fined auditor EY and one of its partners a combined £1.25 million ($1.66 million) for failing to sufficiently challenge the internal forecasts of Made.com, the online furniture retailer that collapsed in 2022.

The Financial Reporting Council said the accounting giant and audit engagement partner Julie Carlyle did not properly assess the accuracy and reliability of management models, challenge assumptions and evaluate potential risks when auditing Made.com's 2021 full year results.

They also failed to obtain appropriate audit evidence about the recoverability of the deferred tax asset, the FRC said. However, it did not say the 2021 results were misstated.

EY and Carlyle admitted "going concern" and "deferred tax asset" breaches and EY UK said it had updated internal advice.

"While there was no suggestion by the FRC that the (2021) financial statements had been misstated, we committed to learning from this matter and, in the years since this audit, have updated our internal guidance as part of our focus on continuous improvement," EY said in a statement.

Carlyle did not respond to a separate request for comment sent through the company's website.

The FRC fined EY almost £1.2 million and Carlyle £49,000 after reductions for admissions and early settlement. Both also received a severe reprimand.

Made.com listed on the London Stock Exchange in June 2021, but supply chain disruption and slower consumer demand prompted the board to explore a sale in September 2022. The business entered administration two months later.

($1 = 0.7528 pounds)

(Reporting by Kirstin Ridley in London and Yamini Kalia in Bengaluru; Editing by Mrigank Dhaniwala and Tomasz Janowski)