Deloitte has been fined £6 million by the UK’s Financial Reporting Council (FRC) for multiple breaches in its audits of rail and transport operator Go-Ahead Group between 2016 and 2020. The regulator found a "highly concerning pattern of failure" in Deloitte’s work, which allowed Go-Ahead to retain and report millions of pounds in taxpayer funds as profit without sufficient scrutiny.
The investigation followed a crisis at Go-Ahead that culminated in the government stripping the company of its Southeastern rail franchise in 2021. The Department for Transport (DfT) fined Go-Ahead £23.5 million after it was revealed the company had deliberately concealed over £25 million of historic taxpayer funding tied to its operations on the Channel Tunnel rail link (HS1). This money, the DfT said, should have been returned to the government but was instead kept by Go-Ahead.
The FRC’s report indicated that while Go-Ahead had already begun misreporting these overpayments before Deloitte became its auditor in 2016, the firm failed to adequately challenge or investigate the issue during its audits. Deloitte’s audit team did not address the potential risk of fraud, despite internal warnings and evidence suggesting attempts by Go-Ahead management to conceal these amounts. In one instance, a Deloitte team member emailed a lead audit partner expressing concern that management did not want to “draw attention” to the overpayments. The partner, who reviewed documents indicating efforts to “hide” the sums, allowed the accounts to be signed off without further inquiry. The regulator chose not to take action against the partner, citing exceptional personal circumstances.
Beyond the Southeastern franchise, Deloitte’s audits also failed to detect similar problems at two other Go-Ahead subsidiaries. The London and Birmingham Railway was found to have attempted to conceal approximately £5.6 million owed to the Department for Transport. Meanwhile, Deloitte applied insufficient scrutiny to onerous contract provisions with Go-Ahead’s German subsidiary, Gabry, which initially reported significant losses but later claimed potential profits.
The FRC criticized Deloitte for lacking sufficient professional scepticism and failing to thoroughly investigate questionable accounting practices that put large amounts of UK taxpayers’ money at risk. As a result, the regulator imposed the £6 million fine, reduced from an initial £11 million figure due to Deloitte’s cooperation and admission of wrongdoing. This penalty is Deloitte’s second-largest ever, behind a £15 million fine levied in 2020 for serious failings in auditing software company Autonomy.
Go-Ahead, which was acquired by an Australian-Spanish consortium in 2022 after being taken private and delisted from the stock market, stated that the FRC’s investigation concerned historical issues and emphasized that the company has made significant reforms since then. Deloitte expressed regret for its audit deficiencies, committing to improved standards and the delivery of higher-quality audits going forward.
The FRC currently has three other ongoing investigations into Deloitte’s audit work. Last year, UK-based partners at the firm received an average remuneration of £1.3 million.