What the FRC found in the NMCN audit

The FRC identified what it called "numerous and pervasive breaches" in BDO's 2019 statutory audit of NMCN, a London-listed construction and national infrastructure consultancy, according to the regulator's published findings on 28 May 2026.

The failings centred on a failure to obtain sufficient and appropriate audit evidence. Specifically, the audit team did not properly assess risks related to revenue and profit recognition, or the recoverability of contract assets, trade receivables, and retentions, the FRC said.

The watchdog also found that the team failed to apply adequate professional scepticism when evaluating whether NMCN's status as a going concern was subject to material uncertainty. Given that the company entered administration less than two years later, in October 2021, the going-concern question proved to be far more than academic.

BDO had served as NMCN's auditor for 10 years. The FRC opened its investigation in October 2021, the same month the company collapsed, as first reported by City AM.

The regulator noted that the 2019 audit took place during the first Covid-19 lockdown and following the unexpected withdrawal of the original audit engagement partner. However, the FRC made clear that these circumstances did not excuse the breadth of the failings.

Both BDO and former audit partner Geraint Jones, who was head of BDO's London audit group, admitted breaches of relevant requirements across multiple areas of the audit. Jones resigned from BDO in April 2026 after 20 years at the firm, according to the FRC's published sanctions.

The FRC stressed that the breaches were not intentional, dishonest, deliberate, or reckless. There is no assertion that NMCN's financial statements were factually misstated.

BDO received a £2m financial penalty, reduced to £1.3m after a 5 per cent discount for what the FRC termed an "exceptional level of cooperation" and a further 30 per cent discount for early admissions and settlement. Jones was handed a £75,000 penalty, reduced to £49,875 on the same basis. BDO also agreed to cover the investigation costs.

"The 2019 audit of NMCN plc fell below the standards that we expect. We have made significant structural changes within our audit practice in the six years since this audit, and we remain committed to delivering consistency in the high quality of our audits."

A BDO spokesperson made that statement in response to the sanctions, as reported by City AM.

A second sanction in seven months

The NMCN penalty is not an isolated episode. In November 2025, the FRC fined BDO £6.5m after two of its former audit engagement partners admitted to fabricating audit evidence, a far graver category of misconduct. That case involved deliberate dishonesty; the NMCN matter does not. But the proximity of the two sanctions, barely seven months apart, creates a cumulative reputational problem for the UK's fifth-largest audit firm.

BDO is a common auditor choice for mid-market and AIM-listed companies. Its client base includes many of the businesses whose founders, finance directors, and board members make up BF's readership. Repeated enforcement actions, regardless of the specific facts in each case, inevitably raise questions about the consistency of audit quality across the firm's portfolio.

The firm has pointed to structural changes made since 2019. Whether those changes are sufficient is a matter the FRC's ongoing inspection programme will continue to test.

What mid-market boards should take from this

For audit committees at mid-cap and smaller listed companies, the NMCN case offers a pointed reminder. The failings the FRC identified, insufficient evidence, inadequate risk assessment on revenue recognition, and a lack of scepticism on going-concern assumptions, are precisely the areas where audit committee challenge is most critical.

Revenue and profit recognition on long-term contracts is a well-known risk area in construction and infrastructure. Contract assets and retentions carry inherent estimation uncertainty. Boards that rely on their auditors to flag these risks without prompting may find, as NMCN's board did, that the assurance they received was less robust than they assumed.

Going-concern assessment deserves particular attention. The FRC found that BDO did not gather enough evidence to determine whether NMCN faced material uncertainty over its ability to continue operating. Audit committees have a responsibility to press auditors on the assumptions underpinning going-concern opinions, especially during periods of economic disruption. The Covid-19 pandemic made that scrutiny more important, not less.

None of this absolves auditors of their professional obligations. But it underlines that audit quality is not solely the auditor's problem. Boards that treat the audit as a compliance exercise, rather than a substantive check on financial reporting, accept risk they may not fully appreciate.

The wider audit-reform backdrop

The NMCN case lands at a time when the UK's audit-reform agenda remains conspicuously unfinished. The proposed Audit Reform Bill, which would replace the FRC with a new regulator, the Audit, Reporting and Governance Authority (ARGA), has been delayed repeatedly. ARGA would carry expanded enforcement powers and a broader remit covering corporate governance and internal controls.

Until that legislation passes, the FRC operates within its existing framework. The regulator has shown a willingness to use the tools it has; the BDO sanctions, alongside other recent enforcement actions, demonstrate that. But critics argue that the current regime lacks the statutory teeth needed to drive systemic improvements in audit quality, particularly for the mid-market firms that sit outside the Big Four's orbit.

For now, the burden falls on boards themselves. Selecting an auditor is not a passive decision. Monitoring audit quality, challenging key judgements, and holding the engagement partner to account on evidence standards are governance responsibilities that no regulatory reform can substitute.