The fine is the highest ever handed down by the UK’s Financial Reporting Council.
The UK’s accounting regulator on Thursday fined KPMG a record £21 million (€24.3 million) for audits of Carillion, the construction company that imploded in 2018 and prompted a root and branch review of auditing standards.
The collapse of Carillion in January 2018, along with the collapse of retailer BHS two years earlier, led to three government-backed reviews of auditing markets and standards.
“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,” said Elizabeth Barrett, executive counsel for the Financial Reporting Council, in a statement on Thursday.
“This is reflected in the financial sanction imposed on KPMG LLP, the highest ever imposed by the FRC,” she added.
The total fine, in two parts covering two sets of investigations in the audits of Carillion, would have been £30 million but was discounted due to admissions and co-operation by the auditor.
Jon Holt, chief executive and senior partner of KPMG in the UK, said the FRC findings were damning, and the auditor has cooperated fully with the investigation and accepts its conclusions and the sanctions.
“I am very sorry that these failings happened in our firm,” Holt said.
“It is clear to me that our audit work on Carillion was very bad, over an extended period… Since this audit work was undertaken, we have done an enormous amount to improve controls and oversight across our firm, to ensure that these failings could not take place today,” Holt said.
A parliamentary report in 2018 said the collapse of Carillion exposed the “toothlessness” of the FRC. One of the three reviews into auditing recommended replacing the FRC with a more powerful watchdog, though legislation has yet to be tabled to do this.
Source: Euro News
