The regulator found that Eric Healey, former partner at the mid-tier firm, joined the audit committees of drinks company Nicholas and the university while Grant Thornton was conducting audit work for them.
This created “serious familiarity and self-interest threats” the FRC said, and resulted in the loss of independence in respect of eight audits between 2010 and 2013.
As a result, Grant Thornton received a severe reprimand and a fine of £4m, which was discounted to £3m. It was also ordered to pay £165,000 in costs.
Former partner Healey was excluded from ICAEW for five years and received a fine of £200,000, which was then discounted to £150,000.
Healey admitted that his conduct was “reckless”, that it fell significantly short of the standards reasonably expected of a ICAEW member and that he failed to act in accordance with ICAEW’s fundamental principle of objectivity.
Three other former senior statutory auditors, Kevin Engel, David Barnes and Joanne Kearns were reprimanded and fined. Engel received a severe reprimand and was fined £100,000, discounted to £75,000, while Barnes and Kearns were reprimanded and received a £70,000 and £60,000 fine respectively, discounted to £52,500 and £45,000.
The FRC said it also found “widespread and serious inadequacies” in the control environment of Grant Thornton’s Manchester office over the period, and firm-wide deficiencies in policies and procedures relating to retiring partners.
Grant Thornton, Engel, Barnes and Kearns also admitted that their conduct fell significantly short of standards and that they had failed to act competently.
A Grant Thornton spokesperson said the firm had “reached a settlement agreement with our regulators on this matter, which relates to audits dating up to eight years ago”.
“Whilst the focus of the investigation was not on our technical competence in carrying out either of these audit assignments, the matter of ethical conduct and independence is equally of critical importance in ensuring the quality of our work and it is regrettable that we fell short of the standards expected of us on this occasion.
“We have since made significant investments in our people and processes and […] are confident that such a situation should not arise in the future.”
Last month, the regulator announced it had closed its investigation into GT’s audit work at mobile technology developer Globo, saying there was no realistic prospect of finding misconduct at the firm.