The UK’s Financial Reporting Council (FRC) has announced that it will be issuing a fine of £21m ($26m) against Big Four firm KPMG over a series of failings relating to its audit of the now defunct Carillion, a major construction company that collapsed in 2018, resulting in major shockwaves for the British economy.
The FRC had originally sought to sanction KPMG for a sum of £30m, yet this was later reduced by 30% following cooperation from the firm.
According to an official statement issued by the FRC, the watchdog identified an “unusually large number of breaches” of audit standards, meaning that the company “was not subject to rigorous, comprehensive, and reliable audits in the three years leading up to its demise”.
The FRC further penalised two former KPMG partners, Peter Meehan and Darren Turner, for their role in what the FRC has referred to as a flawed auditing process.
Commenting on this, KPMG UK chief executive and senior partner, Jon Holt, said: “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.
“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. But ultimately it still falls to each of us, individually, to hold ourselves and each other to the highest professional standards every day.”
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By GlobalDataThe International Accounting Bulletin will update this story as more developments are made public.
