KPMG fined $231mn over audit error

KPMG Lower Gulf, an accounting firm, has been ordered by a Dubai court to pay more than $231 million compensation to a group of investors. The compensation is one of the largest ever awarded against an accounting firm. The investors claimed that they lost money due to poor-quality audit of Abraaj by KPMG. Abraaj was one of the biggest funds operating in developing markets and had high-profile investors like Bill Gates. However, it went bankrupt in 2018.

The Dubai Financial Services Authority (DFSA) had previously imposed fines on KPMG and a former KPMG Audit Partner for their role in approving the financial statements of an infrastructure fund managed by Abraaj Group. The investors argued that KPMG Lower Gulf breached international auditing standards by approving the financial statements of the investment fund.

The court found KPMG Lower Gulf guilty of committing many violations during the audit process. The court ruling stated that the investors had lost significant sums of money on investments the fund made in Saudi healthcare company Tadawi and Air Arabia. The judgment was issued last month, and KPMG Lower Gulf has stated that it intends to appeal the ruling.

KPMG Lower Gulf stated that it believed it had strong grounds to appeal and had taken the case to the supreme court. The ruling has raised concerns about the quality of auditing services offered by accounting firms in the region. It has also highlighted the importance of adhering to international auditing standards to prevent the recurrence of similar events in the future.