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Carillion collapse investigation by UK government hits KPMG audits

The UK's Financial Reporting Council is focusing on KPMG's 2014-17 audits of the insolvent construction and services giant

Investigation is under way into KPMG's audits of the insolvent UK firm Carillion.
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Investigation is under way into KPMG's audits of the insolvent UK firm Carillion.

An independent audit regulator in the UK is investigating the auditing of insolvent contracting and support services heavyweight Carillion and the behaviour of two of the failed firm’s finance directors.

In its latest investigatory update on 22 January, 2019, the UK's Financial Reporting Council (FRC) said it is specifically investigating KPMG’s audits of Carillion between 2014 and 2017, as well as former finance chiefs Richard Adam and Zafar Khan.

November 2018 also saw FRC open a further investigation relating to the materials it was provided by KPMG in connection with an audit quality review into aspects of the Carillion business for the year-end 2016.

READ: GCC contractors must learn from Carillion's mistakes

The decision to open this investigation followed matters self-reported by KPMG, FRC added.

Carillion confirmed in January 2018 that it had gone into liquidation following a meeting held between Carillion, its financial stakeholders, and the UK Government.

Commenting on the latest review, FRC said: “A key area of focus has been the financial performance of Carillion’s major contracts in both the construction and services divisions, and whether Carillion management and its auditors ensured that this was appropriately reported in its financial statements.”

As part of its investigations, the FRC said is obtained and is analysing “analysing very significant quantities of documents relating to these areas”.

READ: UK-based construction giant Carillion confirms liquidation

The regulator added that detailed interviews have already been conducted with audit team members and Carillion senior executives, with more planned over the coming year.

The update came just weeks after former chairman, Philip Green, and former chief executive, Richard Howson, were both reported to have been “interviewed by the Insolvency Service” in December 2018, as reported by Sky News. If any of the defunct contractor’s former executives are found guilty of extreme wrongdoing, then they face up to 15 years of corporate bans.

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Jul 20, 2019