KPMG has admitted at a tribunal hearing that it misled regulators over the audit of collapsed outsource firm Carillion, as it became apparent that its accountants had forged documents.

CEO Jon Holt apologised on the firm’s behalf, saying: “It is clear to me that misconduct has occurred and that our regulator was misled.”

He went on: “This misconduct is a violation of our processes and clearly against our values. It is unacceptable, we do not tolerate or condone it in any way, and I am very sorry that it occurred in our firm.”

His admission followed FRC accusations that the auditors at KPMG created ‘forged’ and ‘fabricated’ documents in a ruse to mislead inspectors reviewing the firm’s audits of Carillion and Regenersis (another outsourcer).

The KPMG audit of Carillion had given it a clean bill of health before it collapsed under a £7 billion pile of debt in 2018.

The FRC is not alleging misconduct in the performance of relevant audits or that the financial statements were not properly prepared at the hearing. FRC is running a separate investigation into possible audit failings for Carillion. But, FRC’s counsel told a tribunal that KPMG auditors created a spreadsheet and minutes of meetings months after the audit had taken place.

Holt explained that KPMG became aware of the misconduct as a result of its own internal investigations and immediately reported to the authorities. “We have co-operated fully with their investigation since then,” he explained.