KPMG was charged with a £14.4 million fine on Thursday, after the Big 4 accounting group was brought to tribunal over claims related to an investigation by the Financial Regulations Council (FRC) opened in 2018 over the company’s 2016 audit of defunct outsourcing firm Carillion.
Carillion collapsed in January 2018 with £7 billion in debt, crashing with 3,000 jobs lost and hundreds of projects thrown into disarray including hospitals, roads and football club Liverpool FC’s stadium, Anfield.
The fine was confirmed by the FRC at the tribunal in London after an accountant formerly linked to KPMG reportedly forged documents and deceived regulators.
KPMG self-reported matters linked to the review of the 2016 Carillion audit, with the investigation later expanded in July 2019 to include the review of the audit for data erasure management company Regenersis after KPMG also self-reported a series of matters linked to the audit.
The FRC said it had been misled by information provided by KPMG relating to audit quality reviews (AQR) undertaken by the government organisation to uphold the integrity of audits conducted for the two companies from 2014 to 2016.
The forged documents included falsified minutes for KPMG meetings, alongside doctored spreadsheets which were subsequently submitted to the FRC.
The £14.4 million fine was reportedly scaled down from the recommended £20 million amount, which would have been the largest fine on record ahead of Deloitte’s £15 million fine in 2020 as a result of its handling of software group Autonomy.
The final sum was apparently reduced on the basis of KPMG’s compliance and willingness to accept responsibility for the matter.
The tribunal, which kicked off in January, is scheduled to continue its processing of KPMG’s staff to decide appropriate penalties for employees including partner Peter Meehan, who is currently facing a potential ban from the accounting and auditing industry for 15 years with an estimated fine of at least £400,000.
“I am saddened that a small number of former employees acted in such an inappropriate way, and it is right that they – and KPMG – now face serious regulatory sanctions as a result,” said KPMG CEO Jon Holt.
“As a firm, we are committed to serving the public interest with honesty and integrity. We have worked hard, and with complete transparency to our regulator, to assure ourselves that this matter does not represent the wider culture or practice of our firm.”
KPMG employees Adam Bennett, Alistair Wright and Richard Kitchen are also facing a potential fine of £100,000 and a proposed ban of 12 years from the sector.
Former lower-level worker Pratik Paw is also being considered for a four-year ban from the business and a £50,000 fine.
The KPMG partner in charge of the Regnersis audit oversight reportedly reached a confidential settlement with the FRC earlier in January 2022.
The FRC is currently looking into KPMG and prior Carillion directors linked to the audit and preparation of Carillion’s accounts from 2016.
“The misconduct found in this case is extremely serious,” said FRC QC Mark Ellison.
“It cuts at the very heart of the protection of the public interest in the respondents’ regulator, the FRC.”
“It was misconduct deliberately aimed at deceiving AQR inspectors appointed by the FRC.”