Further probe launched into KPMG’s audits for Carillion
The Financial Reporting Council revealed it opened a further probe last November after KPMG ‘self-reported’ material.
A second investigation has been launched by the UK’s accounting watchdog into KPMG’s auditing of collapsed construction giant Carillion.
The Financial Reporting Council (FRC) revealed it opened a further probe last November after KPMG – one of the Big Four accountancy giants – “self- reported” material relating to Carillion’s audit for the financial year ending 2016.
The update comes just days after KPMG suspended partner Peter Meehan, who signed off Carillion’s last full set of accounts, along with three members of his team.
KPMG acted amid reported concerns that documents provided to the FRC were backdated.
The FRC said on Tuesday that it “continues to progress its original investigations”, but stressed these will continue “well into 2019”.
But there is pressure for action to prevent another Carillion, with MP Frank Field – chairman of the Work and Pensions Committee – calling for the Government and regulators to “put it right” after news at the weekend of the KPMG suspensions.
We know what went wrong. We have known it, and been saying it, for years. When are the Government and the regulators going to put it right? Frank Field, Work and Pensions Committee chairman
Mr Field said: “Where are the law changes that will stop these directors and their merry bands of advisers, auditors and hangers-on richly lining their own pockets at a cost of billions in lost jobs, in decimated pensions, in ruined small businesses and stalled public services?
“We have known it, and been saying it, for years. When are the Government and the regulators going to put it right?”
The FRC launched investigations last January and March into KPMG’s audits of Carillion for the years ending 2014 to 2017, as well as the conduct of two former finance directors, Richard Adam and Zafar Khan.
The FRC said: “A key area of focus has been the financial performance of Carillion’s major contracts in both the construction and services divisions, and whether Carillion management and its auditors ensured that this was appropriately reported in its financial statements.”
Pension liabilities and cash disclosures are also among areas being scrutinised.
The FRC said it was analysing a “very significant” number of documents and had conducted detailed interviews with KPMG audit team members and Carillion bosses, with more planned in early 2019.
It added: “They are a critical stage in the process, the findings of which form the bedrock on which any regulatory proceedings are based.
“The FRC is committed to completing its investigations promptly and thoroughly.”