EY has been sanctioned by the Financial Reporting Council over serious breaches in its audit of Made.com, placing renewed scrutiny on going concern work, management forecasts, and challenge inside major audits.
The FRC imposed a financial sanction of £1.197m on Ernst & Young LLP, reduced from £1.8m after mitigation, admissions, and early disposal. Julie Carlyle, the audit engagement partner, received a £49,000 sanction, also reduced following admissions and early disposal. Both EY and Carlyle received severe reprimands.
The regulator also declared that the FY21 audit report signed on behalf of EY did not satisfy the relevant requirements. The case related to the audit of Made.com Group Plc for the financial year ended 31 December 2021.
Made.com listed on the London Stock Exchange in June 2021, but the online furniture retailer entered administration in November 2022 after supply chain disruption, weaker consumer demand, and deteriorating financial performance hit the business. Its brand, domain names, and intellectual property were later acquired by Next.
The FRC found breaches connected to the audit team’s work on going concern and the company’s deferred tax asset. These were high-risk areas because they depended heavily on management forecasts and assumptions about future trading. Audit evidence in those areas needed to be sufficient and appropriate, with robust professional scepticism applied to management’s modelling.
The sanction adds to a broader debate over audit quality at complex, fast-growing, and recently listed companies. Businesses that expanded rapidly during the pandemic often faced a sharp reversal as consumer behaviour changed, supply chains remained disrupted, and capital became more expensive. Auditors reviewing those companies had to test whether growth assumptions still held under changing conditions.
The Made.com case sits within that wider market adjustment. The retailer’s rapid expansion, public listing, and subsequent collapse exposed the fragility of business models built around high demand, inventory availability, and confidence in discretionary consumer spending. Once market conditions shifted, the reliability of forecasts became central to the company’s financial reporting.
The FRC’s findings underline the importance of challenge when management forecasts support critical judgements. A spreadsheet model can appear orderly while still relying on assumptions that are too optimistic, insufficiently tested, or inconsistent with trading evidence. Auditors are expected to interrogate those assumptions, test mathematical integrity, assess sensitivities, and document why the evidence supports the conclusion reached.
The case reaches beyond the audit profession. Boards and audit committees rely on external audit as part of their assurance framework, but they retain responsibility for the quality of financial reporting and the governance of significant judgements. Where management forecasts underpin going concern, impairment, tax assets, or liquidity planning, directors need to understand the assumptions being made and the evidence behind them.
Investor confidence is also at stake. The UK market has faced repeated concern over listed company failures, audit shortcomings, and whether the existing audit and governance regime identifies risk early enough. Sanctions after a collapse provide accountability, but they do not repair investor losses or restore supplier, employee, and customer confidence after failure.
Pressure on audit quality has intensified as companies face more volatile trading conditions. Inflation, wage costs, weak demand, supply chain risk, refinancing pressure, and changing consumer behaviour can quickly make prior-year assumptions outdated. Audits of companies under stress require careful judgement, particularly where management believes conditions will improve but near-term evidence points in the opposite direction.
EY’s sanction will feed into expectations around documentation, scepticism, and the treatment of management forecasts. It also reinforces the need for audit committees to challenge both executives and auditors when financial statements depend on uncertain future performance. In a market still shaped by cost pressure and consumer volatility, the quality of that challenge has become a central governance test.
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