The Financial Reporting Council has formally announced the sanctions against KPMG and five of its employees over the audits of Regenersis and Carillion plc. It follows an investigation into the provision of false and misleading information and documents supplied to the FRC in connection to Audit Quality Reviews.
Following a five-week hearing an independent disciplinary tribunal fined KPMG £14.4 million and severely reprimanded the firm. KPMG also agreed to pay £3.95 million towards Executive Counsel’s costs of the investigation.
The FRC also fined former KPMG partner Peter Meehan £250,000 and excluded him from the ICAEW for 10 years.
Three executives, Alistair Wright, Adam Bennett and Richard Kitchen, received fines of £45,000, £40,000 and £30,000 respectively. They were also excluded from the membership of ICAEW for a number of years.
PQ Pratik Paw was severely reprimanded, but not fine. There was talk of a heavy fine for him too, however this has been dropped
The tribunal made a number of findings of misconduct, involving breaches of the fundamental principle of Integrity which requires an accountant to be straightforward and honest in all professional and business relationships stating: “No accountant should require any education or training to realise that deliberately misleading anyone, but especially a regulator, is at least incompatible with integrity and, barring special circumstances, dishonest.”
When it came to the Carillion inspection the tribunal found that there had been misconduct in respect of the Carillion AQR inspection concerning minutes of year-end ‘clearance’ meetings, and an audit working paper on the selection of contracts for audit testing (the CCS Paper), that were presented to the AQR inspectors as having been created during the Carillion audit.
In respect of the meeting minutes the tribunal found that misconduct had been committed by Meehan, Wright, Kitchen, Bennett, and Paw in that:
- Wright and Paw had created, and Meehan, Kitchen and Bennett had assisted or encouraged the creation of, false or misleading meeting minutes, intending to mislead, or as a party to the deliberate misleading of, the AQR inspectors or being reckless as to whether they would be misled; and
- They had made, or connived in or were knowingly associated with making, certain false or misleading representations to the AQR inspectors as to when and in what circumstances the meeting minutes were created, intending to mislead, or as a party to the deliberate misleading of, them or being reckless as to whether they would be misled.
And that Meehan, Wright, Kitchen, Bennett were party to the dishonest misleading of the AQR inspectors. Wright had already admitted these allegations, and that his conduct was dishonest.
The Tribunal found that Paw, by implementing without question the instructions given to him by Wright to create false minutes, acted without the integrity required of an accountant and became a party to the deliberate misleading of the AQR. However, Paw was not found to have acted dishonestly.
A further allegation of misconduct in relation to the content of the meeting minutes made by Executive Counsel against Meehan, Wright and Kitchen was found not proved by the tribunal.
The full report of the tribunal has not been published at this time.