The UK accounting regulator has imposed sanctions on King & King, a small audit firm, and its managing partner, Milan Patel, following a four-year investigation into the auditing of four companies within Sanjeev Gupta’s GFG Alliance. The Financial Reporting Council (FRC) found that the firm’s audits between 2019 and 2020 contained serious deficiencies, including failures to identify conflicts of interest and adequately question management, which undermined the objectivity and independence required in statutory audits.

King & King, operating from two modest offices in London, conducted over 140 audits of entities within Gupta’s steel, aluminium, and energy conglomerate from 2018 to 2020. At its peak, the GFG Alliance employed around 35,000 people. The FRC noted that in 2021, more than 40 percent of King & King’s revenue came from GFG-related clients, a dependency the regulator said led to "pervasive breaches across all audits" and a flawed approach to their auditing responsibilities.

The failings were described as "particularly egregious" by the FRC, highlighting that King & King and Patel did not maintain the necessary objectivity and independence. The watchdog concluded that this situation arose from significant fee dependence on GFG businesses, compromising Mr. Patel’s ability to conduct impartial audits. Among the issues cited was the firm’s inadequate scrutiny of management’s representations, which may have resulted in misstatements that portrayed some GFG companies as more profitable than they were.

The case drew heightened attention following the 2021 collapse of Greensill Capital, a key lender to Gupta’s empire, which precipitated financial difficulties and a political scandal involving former Prime Minister David Cameron. Subsequently, the Serious Fraud Office initiated an investigation into the GFG Alliance, although no charges have been filed to date.

The FRC imposed a £326,184 fine on Milan Patel, which included disgorgement of fees received and a penalty reduced for his cooperation and early settlement of the probe. Patel’s authorization as a “responsible individual” leading statutory audits has been withdrawn, and he faces a three-year ban on performing such audit work. King & King was fined £52,000 following a discount for admissions and early resolution, barred from auditing public interest companies in the UK for five years, and restricted from auditing high-turnover companies for two years. The firm must also undergo training and submit to oversight by the Institute of Chartered Accountants in England and Wales.

The disciplinary action reflects broader concerns in the auditing sector about fee dependency on major clients and the need for greater independence. Auditing rules in the UK prohibit firms from deriving more than 15 percent of total fee income from a single client to avoid conflicts of interest.

King & King and Milan Patel did not respond to requests for comment. Meanwhile, GFG’s auditors historically included a network of smaller firms, with no single auditor overseeing the entire conglomerate’s accounts, underscoring the complexity of the group’s financial reporting.