KPMG LLP was fined a record £21 million ($25.9 million) over its failings in the audit of defunct construction and facilities management firm Carillion Plc by the UK’s watchdog.
(Bloomberg) — KPMG LLP was fined a record £21 million ($25.9 million) over its failings in the audit of defunct construction and facilities management firm Carillion Plc by the UK’s watchdog.
The Financial Reporting Council said Thursday said that the number of errors in the reporting were “exceptional” and “failed to adhere to the most basic and fundamental audit concepts.” It’s the largest penally ever imposed by the regulator.
Carillion’s collapse was one of the biggest corporate casualties in British history. It fell into liquidation in 2018 after the UK government refused to bail it out, costing almost 3,000 jobs and leaving 30,000 suppliers and subcontractors with £2 billion in unpaid bills.
KPMG has been heavily criticized and censured over the quality of its past work and the company was facing an accumulation of disciplinary action over its audits on Carillion. In February it reached an agreement with the administrators of Carillion to settle a £1.3 billion London lawsuit over negligent and misleading audits.
The firm audited the financial statements of KPMG for three years through 2016 and in each of the years, it provided unqualified opinion that the disclosures gave a true and fair view of Carillion’s affairs, FRC said. In 2017, Carillion announced expected provisions totaling about £1.5 billion, primarily arising from expected losses on a number of its contracts.
The FRC also sanctioned two former partners of the firm.
“These findings are damning,” Jon Holt, chief executive officer of KPMG in the UK, said. “It is clear to me that our audit work on Carillion was very bad, over an extended period.”
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