KPMG under scrutiny for audit of Entain's 2022 financials, FRC launches investigation

The Financial Reporting Council (FRC), Britain's accounting regulator, has launched an investigation into KPMG’s audit of the 2022 financial statements of Entain, the gambling company that owns brands such as Ladbrokes and Coral. The probe, which falls under the FRC’s Audit Enforcement Procedure, will be conducted by its enforcement division, the watchdog announced on Monday.  

A spokesperson for KPMG UK stated: “We will cooperate fully with the FRC to conclude this matter as quickly as possible.”

Entain, however, declined to comment on the investigation or its potential connection to the settlement the company reached with HM Revenue and Customs (HMRC) in 2023 over allegations of bribery related to its former Turkish operations.  

The investigation into KPMG comes amid scrutiny of the firm following a series of high-profile failures in recent years. The audit company faced notable reputational damage after the collapse of Carillion, a British construction company that went into liquidation in 2018. In 2023, KPMG was fined £21 million ($26 million) for what regulators described as a “textbook failure” in its audits of Carillion.  

Entain, previously known as GVC, reached a deferred prosecution agreement (DPA) with the UK’s Crown Prosecution Service (CPS) in December 2023, following a multi-year probe initiated by HMRC in 2019. The investigation focused on potential corporate offenses linked to the company’s former Turkish-facing online betting business, which it owned from 2011 to 2017. The company was accused of failing to implement adequate procedures to prevent bribery involving third-party suppliers and former employees.  

As part of the settlement, Entain agreed to pay £585 million ($711.65 million) to resolve the matter. This figure was recorded as a liability in its 2023 financial accounts, though the total payment reached £615 million ($759.55 million) after additional contributions, including £20 million ($24.70 million) to charity and £10 million ($12.35 million) to cover the costs of HMRC and the CPS.  

Entain’s chairman at the time of the settlement, Barry Gibson, sought to distance the company from past controversies, stating: “This legacy matter concerns a business which was sold by a former management team six years ago. The group has changed immeasurably since these events took place.”  

The investigation announcement impacted Entain’s stock performance, with shares falling nearly 2% on Monday morning, making it the worst performer on the FTSE 100 index. Investors have also sought over £100 million ($123.5 million) in compensation from Entain, alleging the company failed to disclose issues related to bribery and corruption at the Turkish division in a timely manner.  

KPMG has served as Entain’s external auditor for six consecutive years, according to the company’s latest annual report.