LONDON — The Financial Reporting Council fined the auditing firm King & King and its managing partner Milankumar Patel a total of £378,184. The council also issued a severe reprimand to both King & King and Patel, imposed serious restrictions on the firm's audit work, and prohibited Patel from performing future audits.

This action followed a four-year investigation by the Financial Reporting Council into King & King's audits of companies within Sanjeev Gupta's GFG Alliance between 2018 and 2020. During that period, King & King conducted more than 140 audits for GFG Alliance companies. Fees from these companies accounted for nearly 41% of King & King's revenues in 2021.

The audited GFG Alliance companies included Liberty Specialty Steels, Alvance British Aluminium, Liberty Steel Newport, and Liberty Performance Steels. Auditors are typically not allowed to derive more than 15% of their revenues from a single client. The Financial Reporting Council updated its rules to clarify that this revenue cap applies to entities under the same beneficial owner or controlling party.

The Financial Reporting Council said King & King failed to identify a clear self-interest when auditing GFG Alliance companies. The council also said the firm failed to meet key audit requirements, including those related to planning and risk assessment, income and expense recognition, going concern, and financial statement disclosures.

Andrew Twomey, acting deputy executive counsel of the Financial Reporting Council, stated, "It is paramount that statutory audits are performed with objectivity, independence and free from self-interest." Twomey added, "The widespread deficiencies across all the audits were a symptom of King & King's and Mr Patel's fee dependency on the GFG entities. The serious but commensurate sanctions, which include disgorgement of fees and prohibitions on Mr Patel performing future audits, send a clear message to the audit community that this behaviour will not be tolerated."

Greensill Capital, which issued billions of pounds in loans to GFG companies, collapsed in 2021. Gupta's companies owed Greensill Capital £3.6 billion at the time of the lender's collapse. The UK's Serious Fraud Office is investigating GFG Alliance for suspected fraud, fraudulent trading, and money laundering. GFG companies also received £400 million in loans via the coronavirus large business interruption loan scheme, which benefited from an 80% government guarantee.