By Sam Nagarajan, Bloomberg News (TNS)
KPMG LLP was fined a record of £21 million ($25.9 million) over its failings in the audit of defunct construction and facilities management firm Carillion Plc by the U.K.’s watchdog.
The Financial Reporting Council said Thursday that the number of errors in the reporting were “exceptional” and “failed to adhere to the most basic and fundamental audit concepts.”
Carillion’s collapse was one of the biggest corporate casualties in British history. It fell into liquidation in 2018 after the U.K. government refused to bail it out, costing almost 3,000 jobs and leaving 30,000 suppliers and subcontractors with £2 billion in unpaid bills.
KPMG has been heavily criticized and censured over the quality of its past work and the company was facing an accumulation of disciplinary action over its audits on Carillion. In February it reached an agreement with the administrators of Carillion to settle a £1.3 billion London lawsuit over negligent and misleading audits.
The firm audited the financial statements of KPMG for three years through 2016 and in each of the years, it provided unqualified opinion that the disclosures gave a true and fair view of Carillion’s affairs, FRC said. In 2017, Carillion announced expected provisions totaling about £1.5 billion, primarily arising from expected losses on a number of its contracts.
“These findings are damning,” Jon Holt, chief executive officer of KPMG in the U.K., said. “It is clear to me that our audit work on Carillion was very bad, over an extended period.”
The FRC also sanctioned two former partners of the firm.
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©2023 Bloomberg News. Visit at bloomberg.com. Distributed by Tribune Content Agency LLC.
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Tags: Accounting, Auditing
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