KPMG will pay one of the largest fines in the history of audits in the UK, after former employees forged documents and misled the regulator regarding audits of companies, including the bankrupt contracting authority Carillion.
The Financial Reporting Council (FRC) – which regulates accountants – reaffirmed the £ 14.4 million agreement at a hearing at the London tribunal on Thursday and said KPMG would also face “severe reprimand” for the “extremely serious” breach. related to the misconceptions of the guard dog staff.
The fine relates to misleading information provided to the FRC as part of the audit quality reviews (AQR) designed to confirm the integrity of the audits carried out for both Carillion and Regenesis between 2014 and 2016. The tribunal confirmed the allegations of FRC that KPMG and former employees created false minutes of meetings and retrospectively edited spreadsheets before sharing these documents with the FRC.
Mark Ellison QC, who represented the FRC on the first day of the tribunal’s two-day hearing, said KPMG’s total fine would be £ 20 million – the largest fine in history before the £ 15 million fine imposed on Deloitte in 2020. over the historical audits of the software company Autonomy – but the figure was reduced to £ 14.4 million to reflect the cooperation and willingness of the accounting firm to admit guilt.
“The misconduct found in this case is extremely serious,” Ellison told the tribunal. “This is at the heart of protecting the public interest in the respondents’ regulator, the FRC. This was a violation deliberately aimed at defrauding AQR inspectors appointed by the FRC.
The agreement is the latest in a long-running saga involving the FRC’s investigation into the events surrounding Carillion’s failure in January 2018, which has since drawn widespread criticism about the quality of audits in the UK.
The contracting authority collapsed with £ 7 billion in debt in January 2018, leading to the loss of 3,000 jobs and wreaking havoc on hundreds of its projects – including two major hospitals, schools, roads and even Liverpool FC Anfield Stadium.
The tribunal, which began in January, will consider the sentences of individual KPMG employees in the coming weeks, including one of its partners, Peter Meehan. The FRC recommended on Thursday that the 60-year-old be banned from the accounting and auditing sector for 15 years and face a fine of at least £ 400,000.
The regulator also believes that three other KPMG employees – Alistair Wright, Richard Kitchen and Adam Bennett – should be excluded from the sector for 12 years and face a £ 100,000 fine. Pratik Pau, who was a younger member the team at the time of the offense may face a four-year suspension and a fine of £ 50,000.
Stuart Smith, Regenersis’ audit partner, reached a confidential agreement with the FRC in January.
Commenting on the agreement with the FRC, KPMG CEO John Holt said that KPMG “deeply regrets that such a serious breach has occurred in our company. It was unjustified and wrong. It was a violation of our processes and a betrayal of our values.
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“I am sad that a small number of former employees have acted in such an inappropriate way, and it is right that they – and KPMG – are now facing severe regulatory sanctions as a result.
He noted that KPMG itself had reported the regulator’s misconduct and fully cooperated with the tribunal and the FRC during the investigation.
“As a company, we are committed to serving the public interest with honesty and integrity. We have worked hard and with full transparency to our regulator to make sure that this issue does not represent the broader culture or practice of our company.
The FRC is separately investigating KPMG and former Carillion directors about the audit and preparation of Carillion’s 2016 accounts.
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