The Strategist

UK watchdog issues record fine to KPMG

10/13/2023 - 03:29

The UK's Financial Reporting Council (FRC) penalised KPMG for £21 million ($25.8 million) for significant irregularities in the audit of the now-defunct Carillion, the regulator said in a statement.

Tony Webster
Tony Webster
Thanks to KPMG's cooperation during a 5.5-year inquiry, the fine was lowered from £30 million, but the Financial Times reports that it is still a record for the UK audit business. KPMG LLP will cover the majority of the 18.55 million pounds, with KPMG Audit Plc covering the remaining portion.

In addition, the regulator ordered the firm to reimburse its costs of £5.3 million and penalised two former KPMG partners a total of £420,000.

Carillion was a significant mainland contractor and the second-biggest construction business in the nation. However, it was deeply indebted and initiated liquidation in January 2018 after failing to reach an agreement with creditors on a debt restructuring.

According to the FRC, KPMG's audit determined that Carillion's financial statements for the years 2014 to 2016 were trustworthy and that the company was using short-term, unprofitable strategies to sustain cash flow despite several indicators that its core business was losing money.

Carillion also catered for hospitals, supplied meals to 900 schools, was a prison operator, repaired motorways and built high-speed railways. Its collapse sparked political controversy and prompted calls for reform of the audit industry, the FT recalls.


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