False information on Carillion audit – KPMG facing complaint

KPMG allegedly provided false information about its audits of collapsed builder Carillion and data erasure company Regenersis for regulatory checks. That information was provided in connection with the Financial Reporting Council’s (FRC) routine annual quality checks of audits by the main accounting firms.

The FRC said that the complaint is against KPMG itself, a former partner, and certain current and former employees. The formal complaint alleges misconduct against KPMG. And there several individuals were also alleged regarding the provision of false and misleading information and/or documents to the FRC by KPMG in connection with the FRC’s inspections of two audits carried out by KPMG.

KPMG stated that they discovered the alleged issues in 2018 and 2019. In both time they immediately reported them to the FRC and suspended the number of people involved. A disciplinary tribunal will hear the formal complaint and determine whether there has been misconduct or not. The hearing will start in January 2022. The allegations in the formal complaint would, if proven, represent very serious breaches of their processes and values. They have cooperated fully with their regulator throughout the investigation. Separately, the FRC is investigating KPMG’s audit of Carillion. This led to improve standards in a market dominated by KPMG, EY, Deloitte and PwC, known collectively as the Big Four. In its latest annual report on routine quality checks published in July, the FRC said that the KPMG’s bank audits needed improvements. They also warned that they will be monitored closely.