KPMG must pay out record fines over its ‘exceptional’ audit failings of Carillion, the construction company that collapsed in 2018.
The Financial Reporting Council issued two fines, one of £18,5550,000 and another of £2,450,000. Along with two severe reprimands the Big 4 firm was also ordered to pay Executive Counsel’s costs of both investigations, which amount to £5,324,365.68.
Two former audit partners, Peter Meehan and Darren Turner, were also fined, with Meehan given a 10-year exclusion from membership of the ICAEW.
Elizabeth Barrett, Executive Counsel stressed: “The credibility of reports and opinions issued by auditors in connection with financial statements depends upon beliefs concerning the integrity, objectivity and independence of auditors and the quality of audit work performed.
“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 LLP, the highest ever imposed by the FRC.
“Many of the breaches involve failing to adhere to the most basic and fundamental audit concepts such as to act with professional scepticism and to obtain sufficient appropriate audit evidence. The breaches in relation to the 2016 audit even include failing to ensure that the audit process itself was properly managed and that the audit file was a reliable record. These requirements lie at the heart of proper auditing.
“The seriousness of the failings in the 2016 audit is compounded by the breaches of the Ethical Standards relating to the fundamental principles of objectivity, independence, and integrity.
The non-financial sanctions imposed on KPMG LLP are focused on ensuring that failures on this scale will never be repeated.”
Earlier in 2023, KPMG settled a lawsuit brought by Carillion’s liquidators, who claimed the firm mossed serious red flags in the outsourcing company’s accounts.
