The UK’s accounting watchdog has fined and temporarily banned a tiny audit firm for “egregious” failures and “widespread deficiencies” linked to its work in signing off accounts of several companies in Sanjeev Gupta’s metals empire.

King & King and its managing partner Milankumar Patel have been fined a total of £378,184, received a “severe reprimand”, and hit with serious restrictions on audit work after a four-year investigation by the Financial Reporting Council (FRC).

The watchdog said the six-partner firm had “failed to identify clear self-interest” when it conducted more than 140 audits of companies that were part of the the metals tycoon’s GFG Alliance between 2018 and 2020, including Liberty Specialty Steels, Alvance British Aluminium, Liberty Steel Newport and Liberty Performance Steels.

King & King, whose main office is based above a row of shops in London’s Regent Street, relied heavily on fees from GFG Alliance companies, which made up nearly 41% of its revenues in 2021.

“This led Mr Patel and King & King to take a flawed and artificial approach to the ethical standards, resulting in pervasive breaches across all audits,” the FRC said. “They also failed to meet key audit requirements, including planning and risk assessment, income and expense recognition, going concern, and financial statement disclosures.”

Auditors are not allowed to take more than 15% of their revenues from an individual client, and the FRC has since updated its rules to make clear that its revenue cap applied to “a collection of entities with the same beneficial owner or controlling party”.

Gupta’s sprawling holding company, GFG Alliance, has for years been grappling with the fallout of a far-reaching scandal involving its former lender, Greensill Capital.

Greensill – which was founded by the Australian entrepreneur Lex Greensill – collapsed in 2021 amid concerns over billions of pounds of risky loans issued to GFG companies. That included £400m worth of loans via the coronavirus large business interruption loan scheme (CLBILS), which benefited from an 80% government guarantee. Gupta’s companies reportedly owed the lender £3.6bn when Greensill collapsed.

Gupta’s GFG Alliance has since come under investigation by the UK’s Serious Fraud Office for “suspected fraud, fraudulent trading and money laundering”. GFG has denied any wrongdoing and has said it will work with SFO.

Commenting on the FRC’s penalties, the watchdog’s acting deputy executive counsel, Andrew Twomey, said: “It is paramount that statutory audits are performed with objectivity, independence and free from self-interest. The failures by Mr Patel and King & King to meet these requirements were particularly egregious.

“The widespread deficiencies across all the audits were a symptom of King & King’s and Mr Patel’s fee dependency on the GFG entities. The serious but commensurate sanctions, which include disgorgement of fees and prohibitions on Mr Patel performing future audits, send a clear message to the audit community that this behaviour will not be tolerated.”

GFG and King & King did not immediately respond to requests for comment.