The Carillion failure is still working its way through the courts and now KPMG is accused by Carillion’s liquidators of missing multiple red flags, the likes of which should not have been missed had KPMG had any clue what it is doing. So say the liquidators.
KPMG received £29 million from Carillion without qualifying its audit opinions over the course of 19 years, according to the liquidators. Qualified opinions indicate that auditors have found issues in a company’s financials.
Carillion’s liquidators in court filings Friday said that KPMG has yet to address claims that it failed to properly audit the accounting of 20 construction contracts. Carillion says the value of two contracts alone in the year ended in 2016 was misstated by nearly £352 million and that had KPMG acted as a reasonably competent auditor, it would have detected the misstatements.
KPMG says that the value of the construction contracts was concealed, a claim the liquidators countered by saying a concealment on that level would have “required all relevant personnel in the project teams, business units and senior management to engage in a widespread and concerted fraud on the Group’s auditors, which they would not have done.” And if this were the case, say the liquidators, a reasonably competent auditor wouldn’t have allowed Carillion to withhold relevant documents.
The allegations are without merit, a KPMG spokesman said in a statement to WSJ. “Responsibility for the failure of Carillion lies solely with the company’s board and management, who set the strategy and ran the business,” he added.
So what even is the point of an audit then?