KPMG UK fined record $40m over dodgy Carillion audit
London | KPMG UK has been hit with a record £21 million ($40.3 million) fine by the British accounting watchdog for failings in its auditing of collapsed outsourcer Carillion.
The UK Financial Reporting Council (FRC) said it found “significant and serious breaches” in the firm’s audits of Carillion before its collapse.
Carillion failed in 2018 with just under £7 billion of debts, making it one of Britain’s largest insolvencies.
UK ministers accused accounting firm KPMG of failing to respond to “red flags” in Carillion’s accounts ahead of its failure. Bloomberg
Elizabeth Barrett, executive counsel for the FRC, said: “The number, range and seriousness of the deficiencies in the audits of Carillion during the period leading up to its failure was exceptional and undermined that credibility and the public trust in audit.
“This is reflected in the financial sanction imposed on KPMG, the highest ever imposed by the FRC.”
Ministers previously accused the accounting firm of failing to respond to “red flags” in Carillion’s accounts ahead of its failure.
Carillion’s collapse left 450 projects unfinished and resulted in thousands of job losses. The UK government was forced to step in to handle the liquidation of both Carillion and Carillion Construction (CCL), its trading subsidiary.
“These findings are damning. We have co-operated fully with the investigation, and we accept its conclusions and the sanctions that have been imposed without reservation. I am very sorry that these failings happened in our firm,” said Jon Holt, CEO and senior partner at KPMG UK.
“It is clear to me that our audit work on Carillion was very bad, over an extended period. In many areas, some of our former partners and employees simply didn’t do their job properly. Junior colleagues were badly let down by those who should have set them a clear example, and I am upset and angry that this happened at our firm.”
The fine was reduced from £30 million to £21 million owing to KPMG’s admissions and cooperation during the investigation.
Last May, as part of a separate investigation, the FRC also fined KPMG UK £14.4 million for forging documents to mislead regulators over its audits of Carillion.
Six staff at the business were found by a tribunal to have created “fabricated” meeting minutes to cover up procedural failings.
Mr Holt said that he “simply cannot defend the work that we did on Carillion”, adding that he was “absolutely committed” to ensuring that similar errors will not happen again.
The Telegraph London
Introducing your Newsfeed
Follow the topics, people and companies that matter to you.
Find out moreRead More
Latest In Professional services
Fetching latest articles