IN Brief:
- BDO has been fined £1.33m over its audit of NMCN’s 2019 financial statements.
- The FRC found serious breaches relating to long-term contracts, going concern, and audit evidence.
- The case highlights the financial reporting risks attached to construction and infrastructure contracting.
BDO has been fined £1.33m by the Financial Reporting Council over failings in its 2019 audit of NMCN, the construction and infrastructure contractor that entered administration in October 2021.
The regulator imposed sanctions against BDO and Geraint Jones, the audit engagement partner, after finding serious and significant breaches in the statutory audit of NMCN’s financial statements for the year ended 31 December 2019.
The original financial penalty against BDO was £2m, reduced to £1.33m after a 5% reduction for exceptional cooperation and a further 30% discount for admissions and early disposal. Jones was fined £49,875 after equivalent reductions from an original £75,000 penalty.
The FRC also issued severe reprimands and declared that the 2019 audit reports signed on behalf of BDO and by Jones did not satisfy the relevant requirements. BDO has also paid the agreed costs of the investigation.
NMCN operated as a construction and consultancy services group delivering major building and national infrastructure projects across the UK. Its shares were listed on the London Stock Exchange, and its core business was based on long-term contracts.
The FRC said the breaches occurred predominantly within audit work on NMCN’s long-term contracts. The respondents had identified significant risks of material misstatement in relation to revenue and profit recognition on those contracts, as well as the recoverability of contract assets, trade receivables, and retentions.
The regulator found that the audit work performed in response to those risks was deficient and that the auditors failed to obtain reasonable assurance over whether the financial statements as a whole were free from material misstatement. It also identified further breaches in the audit of going concern, including a failure to plan and perform the audit with professional scepticism.
The FRC said it was not suggested that the breaches were intentional, dishonest, deliberate, or reckless, nor was it asserted that the financial statements were in fact misstated. Both BDO and Jones were credited with exceptional cooperation during the investigation.
Contract accounting in construction remains difficult to audit because reported performance is often built on judgement-heavy project data. Revenue, margin, retentions, variations, claims, defects, compensation events, and cost-to-complete forecasts all depend on evidence drawn from live projects rather than simple transactional records.
When those assumptions weaken, the accounts can change quickly. A contractor may appear stable while unresolved commercial positions, delayed payments, cost overruns, or disputed entitlements sit inside work-in-progress and receivables balances.
NMCN’s collapse remains one of the more significant contractor failures of recent years because it exposed fragility across a business active in infrastructure, water, telecoms, and building markets. Rescue deals protected parts of the operation, but the failure left a long tail of questions around governance, financial control, audit scrutiny, and risk pricing in long-term contracts.
The FRC’s findings reinforce the close link between site-level evidence and board-level financial reporting. A contractor’s accounts are assembled from project assumptions about progress, cost, entitlement, recoverability, and future risk. Weak challenge at that level can flow directly into reported profit, cash expectations, and going-concern judgements.
Audit quality therefore sits inside the construction risk chain. Lenders, clients, suppliers, subcontractors, employees, and joint venture partners all rely on financial statements to judge whether a business can carry its workload. In a market still exposed to inflation, tight margins, and delayed payments, robust contract evidence remains one of the clearest tests of financial resilience.
