Big Four

KPMG to receive £14m fine over Carillion audit

The FRC said the firm would also face a ‘severe reprimand’ describing the misconduct by certain employees as ‘extremely serious’

KPMG is set to pay a £14.4m fine over its audit of Carillion after a tribunal found former members of its staff misled the Financial Reporting Council (FRC) as part of audit quality reviews.

The settlement was confirmed by the FRC at a London Tribunal yesterday (12 May) with the figure originally sitting at £20m – reduced to reflect mitigating factors and KPMG’s cooperation and  admission of wrongdoing made at the start of the hearing on 10 January.

The regulator said the firm would also face a “severe reprimand” describing the misconduct by certain employees as “extremely serious”. It comes after the tribunal ruled that during the inspections KPMG auditors created false documents, including meeting minutes, spreadsheets and assessments of goodwill.

The tribunal is set to consider the penalties for individual KPMG staff; Peter Meehan, Alistair Wright, Richard Kitchen, Adam Bennett and Pratik Paw. The FRC has recommended that Meehan be banned from the accounting and auditing sector for 15 years and face a fine of at least £400,000.

The regulator has also called for Wright, Kitchen, Bennett to be excluded from the sector for 12 years and face a £100,000 fine. It also recommended Paw to face a four-year exclusion and a £50,000 fine.

Commenting on the settlement with the FRC, KPMG UK chief executive, Jon Holt, said: “As I said back at the start of the tribunal, we are deeply sorry that such serious misconduct occurred in our firm. It was unjustifiable and wrong. It was a violation of our processes and a betrayal of our values.

“I am saddened that a small number of former employees acted in such an inappropriate way, and it is right that they – and KPMG – now face serious regulatory sanctions as a result.”

He added: “We became aware of the misconduct at the centre of this case as a result of our own internal investigations and immediately reported it to our regulator. We have co-operated fully throughout the FRC’s investigation, and with the Tribunal.

“As a firm, we are committed to serving the public interest with honesty and integrity. We have worked hard, and with complete transparency to our regulator, to assure ourselves that this matter does not represent the wider culture or practice of our firm.”

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