KPMG was fined £14.4m for deliberately misleading the accountancy regulator during audits of failed outsourcing firm Carillion and another UK company, Regenersis.
The fine, the largest ever against KPMG in the UK, was imposed by an industry tribunal which found that the Big Four firm had provided false and misleading documents and information to the Financial Reporting Council.
Four former KPMG auditors, including Carillion audit partner Peter Meehan, have been fined and banned from the profession. A fifth, junior auditor was severely reprimanded but avoided a fine despite the FRC’s demand that he be made to pay £50,000.
The tribunal ordered KPMG to appoint an independent reviewer to assess the effectiveness of its policies on how it interacts with FRC inspectors. KPMG also agreed to pay costs of £3.95m, bringing the total bill to almost £18.4m.
The penalties follow a five-week tribunal in January and February which found the FRC had been misled by KPMG staff during routine audit checks of Carillion’s 2016 accounts and the 2014 accounts of Regenersis, a London-listed IT company , later renamed Blancco Technology Group.
Carillion collapsed in 2018 after receiving clean audit opinions, fueling calls for reform of the UK audit sector and boardroom regulation. Legislation to implement the changes has been delayed until at least 2023.
KPMG’s fine was reduced from £20m to reflect its co-operation with the FRC and its admissions of wrongdoing. The £14.4m fine — the latest in a series of fines against KPMG — is dwarfed only by the £15m fine against Deloitte in 2020 for failings to audit former FTSE 100 software group Autonomy.
The fines relate to KPMG’s interactions with the regulator during inspections of its work.
The quality of KPMG’s audit at Carillion is the subject of a separate investigation which is still ongoing.
Former KPMG partner Meehan was fined £250,000 and banned from ICAEW membership for 10 years.
Senior audit managers Alistair Wright and Adam Bennett, who were pushed for promotion to partner at KPMG, were fined £45,000 and £40,000 respectively and each given an eight-year ban.
Their colleague Richard Kitchen was fined £30,000 and banned for seven years. Another auditor, Stuart Smith, was fined £150,000 and banned for three years under a settlement with the FRC before the tribunal began.
The fines will be paid to the Institute of Chartered Accountants in England and Wales, of which KPMG is a member.
John Holt, UK managing director of KPMG, said he accepted the tribunal’s findings.
“The conduct at the heart of this case was wrong and should never have been [have] happened,” he said.
“We reported it to our regulator as soon as we discovered it and we have co-operated fully with their investigation. Since then, we have worked hard and in full transparency with our regulator to ensure that the behavior of those affected does not reflect the wider culture of the firm.’
Carillion’s liquidators have also launched a £1.3bn lawsuit against KPMG, which has denied wrongdoing and vowed to defend the case.
A separate court case is also underway to disqualify some of Carillion’s former directors from running UK companies.
KPMG UK partners earned an average of £688,000 last year, their highest salary since 2014.
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