UK regulator sanctions auditor of metals magnate Sanjeev Gupta's GFG Alliance

By Kirstin Ridley

LONDON, June 23 (Reuters) - The UK's auditing watchdog has sanctioned a small accounting firm in Britain over its audits of four companies in the GFG Alliance, the business empire of metals magnate Sanjeev Gupta, for an "egregious" lack of objectivity and independence.

The Financial Reporting Council said on Tuesday that King & King and Milankumar Patel, the engagement partner who signed the audit reports, hid "clear self interest threats" during more than 140 audits of GFG entities between 2018 and 2020.

The sanctions are related to the audits of GFG's British businesses Liberty Specialty Steels, Alvance British Aluminium, Liberty Steel Newport and Liberty Performance Steels.  

King & King, at the time a six-partner firm, relied on GFG entities for revenues, compromising its independence and objectivity, and failed to meet audit requirements such as planning and risk assessments, income and expense recognition, and going-concern and financial statement disclosures, the FRC said.

King & King declined to comment. Patel did not immediately respond to a request for comment via LinkedIn. GFG declined to comment.

Patel, who made almost £877,500 ($1.16 million) in pre-tax profits from GFG audits over two years, has been fined a total of £326,184, received a severe reprimand, banned from statutory audit work for three years and has seen his "responsible individual" status withdrawn for two years.

King & King has been fined £52,000, banned from seeking registration on the Public Interest Entity audit register for five years and from accepting high-turnover clients for two years, and ordered to submit to external monitoring and implement training on ethical compliance.

Some penalties were reduced by 25% for early settlement.

The FRC's PIE register was introduced in 2022 to boost the quality of audits of companies with significant public focus, turnover or staff numbers.

Gupta was once dubbed the "saviour of steel", but the failure in March 2021 of GFG's main lender, Greensill Capital, prompted a scramble to refinance. The UK Serious Fraud Office opened a fraud, fraudulent trading and money laundering investigation two months later.

GFG, which has denied wrongdoing, said last year it had struck a deal with Greensill creditors on global debt settlement terms.

($1 = 0.7567 pounds)

(Reporting by Kirstin Ridley; Editing by Jan Harvey)