FT: Dubai court fines KPMG $231M over collapsed Abraaj Group
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A Dubai court has ordered KPMG Lower Gulf (the auditor’s regional arm) to pay a group of investors $231 million in a case of improper due diligence of the Abraaj Group investment fund, reports Financial Times.
The court decision was made at the end of March, but it has not yet been reported. The court held that KPMG Lower Gulf violated international auditing standards by confirming the financial statements of the Abraaj Group, which went bankrupt in 2018.
In a lawsuit filed shortly after the company’s bankruptcy, investors alleged that KPMG’s failure to properly audit the fund caused them to lose significant amounts of money on the fund’s investments in Saudi medical company Tadawi and Middle Eastern airline Air Arabia. Based on this, they demanded that the auditor pay them compensation.
According to the FT, the amount awarded by the court exceeds KPMG Lower Gulf’s $210 million in revenue for all of 2022. KPMG has not yet specified whether the company’s headquarters will intervene to cover the costs of the Lower Gulf, or whether insurance will cover the payment of compensation.
KPMG believes that such a severe punishment (this is one of the largest fines issued against audit companies) has no grounds, and therefore the company has already filed an appeal against the court’s decision.
It should be noted that in October last year, the Dubai Financial Services Authority fined KPMG Lower Gulf $1.5 million, and the head of the division $500,000 as part of an investigation into the reasons for the bankruptcy of Abraaj Group.
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