UK watchdog investigates KPMG Entain audits in latest controversy

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The Financial Reporting Council (FRC) has revealed a fresh probe into accounting organisation KPMG's 2022 audits of British gambling company Entain. This news follows a string of blows against the auditing company – which had been hit with significant fines in 2023 after the 2018 collapse of Carillion, a major UK construction business. 

Entain, which owns Ladbrokes and Coral among other leading iGaming platforms, has not publicly remarked on the issue. 

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News of the FRC’s probe into KPMG was announced in late 2023, though precise details on what was being evaluated were scarce. It is now understood that the FRC enforcement division will undertake an examination of KPMG’s 2022 books for Entain in accordance with the Audit Enforcement Procedure (AEP). Typically, the AEP process is as follows:

• Initial enquiry: Helped by the FRC board and Conduct Committee, the case examiner evaluates whether the case is worth exploring. Enquiries where a probe is green-lit are submitted to the Executive Council. 
• Investigation: An investigation report is readied by FRC accountants and lawyers, culminating in a ‘decision notice’. Such a notice will outline suggested sanctions to be inspected by an independent body. 
• Tribunal: If a decision notice is not agreed upon, the case shall be presented before a tribunal for further scrutiny.
• Settlement: All involved parties are permitted to agree to a settlement anytime throughout the probe, but not during a tribunal. Should an agreement come to fruition, the Executive Council will release a ‘settlement decision notice’ presenting full details of the arrangement. 

The FRC investigation of KPMG’s Entain audits is currently in the second phase of that process. Any proposed sanctions shall be communicated via a decision notice in the wake of this full-scale analysis by the UK’s primary auditing authority. 

As reported by Reuters, a KPMG spokesperson commented on the probe via email: “We will co-operate fully with the FRC to conclude this matter as quickly as possible.”

An official statement from the FRC on its ongoing examination of KPMG’s 2022 Entain audits reads:

“This press notice concerns the opening of an investigation into one or more statutory auditor(s) and/or statutory audit firm(s). The investigation does not relate to any persons or entities other than the relevant statutory auditor(s) and/or statutory audit firm(s) and it would not be fair to treat any part of this announcement as constituting or evidencing an investigation into any other persons or entities.”

Confirming that the probe has been initiated, the FRC said: “The Financial Reporting Council has commenced an investigation in relation to the audit conducted by KPMG LLP of the consolidated financial statements of Entain plc for the year ended 31 December 2022.” 

“The decision was made at a meeting of the FRC’s Conduct Committee on 21 November 2024. The investigation will be conducted by the FRC’s Enforcement Division under the Audit Enforcement Procedure.” 

Entain shares dropped by 2% subsequent to the FRC’s declaration that it would investigate KPMG on 20 January. What sanctions — if any — arise from this inquiry remains to be seen.

Further, the company's share price dropped by 7% in December after being sued by AUSTRAC for accepting £76m in bets from 17 'high-risk' criminal accounts.