KPMG has been handed a huge fine of £14.4 million in the UK for intentionally deceiving the accounting authority during inspections of its audits of Carillion and another UK business, Regenersis. An industry tribunal issued the penalties after finding that KPMG gave inaccurate and misleading papers and information to the Financial Reporting Council.
Four former KPMG auditors were penalised and barred from the profession, including Carillion audit partner Peter Meehan. Despite the FRC’s requirement that he pay £50,000, a fifth, more junior auditor was harshly reprimanded but avoided a sanction.
KPMG was directed by the tribunal to engage an independent assessor to investigate the efficiency of its procedures governing how it interacts with FRC inspectors. KPMG also agreed to pay expenses of £3.95 million, bringing its total payment to over £18.4 million.
The sanctions follow a five-week tribunal in January and February that determined that KPMG workers deceived the FRC during regular audits of Carillion’s 2016 finances and Regenersis, a London-listed IT business afterwards renamed Blancco Technology Group.
Carillion fell in 2018 despite having clear audit opinions, fuelling calls for audit reform and boardroom oversight in the UK. The implementation of the amendments has been postponed until at least 2023.The KPMG fine was reduced from £20 million to reflect this.
The fines are related to KPMG’s dealings with the regulator during work inspections. A second inquiry into the competence of KPMG’s audits at Carillion is currently ongoing.
Carillion’s liquidators have also filed a court claim for £1.3 billion against KPMG, which has denied wrongdoing and committed to defend the case.
A second judicial lawsuit is also underway to bar some of Carillion’s former directors from controlling UK firms.
Last year, KPMG’s UK partners earned an average of £688,000, their highest salary since 2014.
