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KPMG Fined £21 Million for Carillion Audit Failings 

KPMG Fined £21 Million for Carillion Audit Failings 
13 October 2023

Big Four accounting firm KPMG has been fined for “exceptional” breaches when auditing the now-liquidated FM company Carillion.

The initial £30 million fine has been reduced to £21 million due to KPMG’s cooperation with proceedings. This is in addition to the £14.4 million fine handed to KPMG in 2022 after an independent disciplinary tribunal found the company guilty of misconduct during Carillion audits ending 31 December 2016. 

KPMG audited the financial statements of Carillion for the financial years 2014, 2015, and 2016, each time confirming that the statements “gave a true and fair view of Carillion’s affairs.” Carillion was liquidated in 2018, causing huge project delays nationally and abroad, and over 3,000 redundancies. 

The Financial Reporting Council ruled that Carillion was “not subject to rigorous, comprehensive, and reliable audits in the three years leading up to its demise” and that Peter Meehan, Audit Engagement Partner at KPMG at the time, had “failed to respond to numerous indicators that Carillion’s core operations were loss-making".

Peter Meehan has been fined £500,000 and is excluded from membership of the Institute of Chartered Accountants in England and Wales (ICAEW) for ten years. 

Elizabeth Barrett, Executive Counsel said: “The number, range, and seriousness of the deficiencies in the audits of Carillion during the period leading up to its failure was exceptional and undermined that credibility and the public trust in audit. This is reflected in the financial sanction imposed on KPMG LLP, the highest ever imposed by the FRC.

“Many of the breaches involve failing to adhere to the most basic and fundamental audit concepts such as to act with professional scepticism and to obtain sufficient appropriate audit evidence. The breaches in relation to the 2016 audit even include failing to ensure that the audit process itself was properly managed and that the audit file was a reliable record. These requirements lie at the heart of proper auditing.”

This month has also seen further consequences for the former CEO of Carillion Richard Howson, who has been banned from holding directorship roles for eight years for falsifying the deterioration of major construction contracts and false accounting which overstated profit levels. Trials for other directors are ongoing.

Picture: a photograph of a laptop with the KPMG logo on its screen. Image Credit: Shutterstock

Article written by Ella Tansley | Published 13 October 2023


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