KPMG UK Already Gearing Up For Massive Punishment Over Carillion Audit Failures

Jon Holt

“It is of course for the tribunal to reach a conclusion on the allegations as they relate to the individuals concerned. Nevertheless, it is clear to me that misconduct has occurred and that our regulator was misled. The misconduct that this tribunal will hear about over the coming weeks is disturbing and upsetting for me and for my colleagues, who are committed to serving the public interest with honesty and integrity. 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.”

Jon Holt, CEO of KPMG UK, said in a statement today during the start of a disciplinary tribunal hearing on KPMG being accused of providing the Financial Reporting Council with false and/or misleading information on the firm’s audits of Carillion, the construction and services company that collapsed nearly four years ago, and Regenersis, an IT software company.

KPMG and six of its former auditors have been accused of participating in a scheme in which forged documents were created to mislead inspectors reviewing the firm’s audits of Carillion and Regenersis. The Guardian reported:

The tribunal on Monday heard via a public video call allegations of “forgery” by KPMG’s auditors, including the “fabrication” of documents. The FRC’s counsel, Mark Ellison, told the tribunal that auditors manufactured a spreadsheet and minutes of meetings to appear as if they were created during the audits, when in fact they were created months later and presented to inspectors.

The tribunal is expected to hear evidence over the next several weeks from the FRC and the respondents, which include KPMG, a former KPMG partner, and certain current and former KPMG employees.

The current record-holder for Big 4 firm with the largest fine ever received from the FRC is Deloitte at £15 million, which didn’t include an additional £5.6 million to cover the costs of the FRC’s investigation and the costs of a disciplinary tribunal, over its shoddy auditing of Autonomy, the UK-based software company that was acquired by Hewlett-Packard in 2011 and was involved in an epic accounting fraud. Some longtime Big 4 UK observers think KPMG will overtake Deloitte for No. 1 once this hearing is all said and done.

KPMG says accounting regulator ‘was misled’ over Carillion audits [The Guardian]
KPMG boss ‘clear’ regulator was misled as Carillion forgery tribunal kicks off [Financial News]

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