The Financial Reporting Council has imposed sanctions on King & King and audit partner Milankumar Patel over statutory audits of four companies linked to the Gupta Family Group Alliance, after finding failures in objectivity, independence, and audit work.
The sanctions relate to audits of Liberty Specialty Steels Ltd for the year ending 31 March 2019, Alvance British Aluminium Ltd for the same year, Liberty Steel Newport Ltd for the same year, and Liberty Performance Steels Ltd for the year ending 31 March 2020.
The FRC said King & King was appointed to perform more than 140 audits of GFG Alliance companies between 2018 and 2020, with Patel acting as engagement partner and signing the audit reports on behalf of the firm.
The regulator said King & King recognised more than 30% of total firm income from GFG Alliance entities in its 2020 financial year, rising to more than 40% in 2021. The FRC said the respondents failed to identify clear self-interest threats arising from reliance on revenue from GFG Alliance entities, compromising independence and objectivity.
King & King received a financial penalty of £70,000, discounted by 25% to £52,000 for admissions and early disposal, alongside a severe reprimand. The firm must not seek registration on the Public Interest Entity Audit Register for five years, must not accept new appointments as auditor to high-turnover private companies for two years, must implement firm wide ethics training, and must submit to an ICAEW audit monitoring review.
Patel received a financial sanction of £326,184, made up of £288,684 in disgorgement of financial benefit and a discounted penalty of £37,500. The FRC also ordered the withdrawal of his Responsible Individual status and barred him from statutory audit work, or influencing statutory audit work, for three years. He cannot apply for Responsible Individual status until a further two years have expired.
Andrew Twomey, acting deputy executive counsel at the FRC, said: “It is paramount that statutory audits are performed with objectivity, independence and free from self-interest. The failures by Mr Patel and King and King to meet these requirements were particularly egregious.
“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.”
The case highlights an audit risk that is not confined to large listed companies. Smaller audit practices can face acute commercial dependence on a small number of clients, particularly where groups contain many separate entities requiring accounts and audit work. Fee concentration can create pressure before any individual audit judgement is tested.
The FRC said the flawed approach led to pervasive breaches across all audits, including planning and risk assessment, income and expense recognition, going concern, and financial statement disclosures. Those areas go to the core of audit reliability, especially in groups with complex funding, trading, and governance arrangements.
Audit independence is often discussed as a technical compliance issue, but it functions as a market confidence mechanism. Lenders, suppliers, customers, employees, boards, and regulators all depend on audited financial statements to provide assurance that management numbers have been challenged. When independence is weakened by fee dependency, the assurance value of the audit can be damaged before the opinion is even issued.
The sanctions also sit within wider scrutiny of UK audit quality and corporate reporting. Regulators have pushed for stronger audit challenge, clearer governance, and more accountability after a series of corporate failures and reporting controversies. Smaller practices are not outside that enforcement perimeter.
Auditor selection cannot be reduced to price, familiarity, or administrative convenience. Companies need to understand whether the auditor has the capacity, independence, sector knowledge, and professional scepticism required for the work. Auditors, in turn, need to assess whether a client relationship is becoming commercially compromising.
The FRC’s sanctions do not make findings against any persons other than King & King and Patel. Their wider significance lies in the governance signal: where audit fees become too concentrated and challenge weakens, the risk is not only regulatory sanction. Confidence in the accounts themselves can be damaged.
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