An ex-partner of KPMG sought to portray himself as negligent because it was the “lesser of two evils”, a tribunal heard today, as former employees of the big four accounting firm gave evidence about its audit of collapsed outsourcer Carillion.
The tribunal is investigating claims made by the Financial Reporting Council, which regulates accountants, that KPMG and its staff misled FRC inspectors by forging documents in relation to its work on the accounts of Carillion and a software company, Regenersis.
On Tuesday, the FRC published a settlement with KPMG and its former employee Stuart Smith over the 2014 Regenersis audit. Smith will pay a fine of £150,000 and is barred from accountancy for three years, while KPMG is liable for a sanction that will be determined after the tribunal.
As the tribunal continued on Tuesday, much of the evidence focused on KPMG’s “misleading” disclosures to the FRC over its audit of Carillion.
Carillion collapsed with £7bn of debts in January 2018, resulting in 3,000 job losses and causing chaos across hundreds of its projects – including two big hospitals, schools, roads and even Liverpool FC’s stadium, Anfield.
KPMG has admitted misleading the FRC during routine checks on the quality of its audit but former staff members accused of misconduct by the FRC disagree over who was to blame.
They include Peter Meehan, one of the most senior staff members, known as partners. He was suspended by the company in 2019 and left in 2021.
On Tuesday, Meehan repeatedly denied being involved in the alleged falsification of documents.
He had earlier told the tribunal that he was “shocked and devastated and angry” to find that members of his team had allegedly duped the regulator.
Fionn Pilbrow, acting for one of Meehan’s team, Richard Kitchen, said Meehan knew about the alleged forgery of documents but “sought to paint a picture of yourself as just a negligent auditor” because it was the “lesser of two evils”.
“Your evidence now is untrue and like all the evidence you’ve given, trying to distance yourself from your team,” said Pillbrow.
Meehan denied this.
The FRC alleges that Kitchen, an audit manager of Carillion, edited a key formula in a spreadsheet handed to the FRC, to increase a threshold for scrutiny of contracts from £300,000 to £1.5m.
The change ruled out a large number of contracts that would have been flagged, and avoided uncomfortable questions on why more contracts had not been scrutinised, the FRC alleged.
Kitchen strongly denies all wrongdoing. Pilbrow has argued that Kitchen was following Meehan’s directions, and that he did not knowingly make false representations to the regulators.
Alistair Wright, a KPMG group senior manager working under Meehan, has already admitted “serious misconduct”.
But lawyers for Meehan have argued that he was a “patsy” for actions carried out by members of his team. The tribunal continues.
