KPMG accepts the findings of (Liam McBurney/PA)
(Picture: PA Archive)Big-four accountancy firm KPMG has been hit with the biggest fine it has ever faced in the UK after it deliberately mislead its regulator.
The £14 million penalty relates to its audits of Carillion, the failed outsourcer, and Regenersis, an IT company. It was imposed by a tribunal which concluded KPMG provided false and misleading documents and information when the Financial Reporting Council (FRC) undertook routine inspections of KPMG’s audit of Carillion’s 2016 accounts and Regenersis’ 2014 books.
There is an active, separate investigation into the way in which KPMG audited Carillion, which collapsed in 2018 after its books were signed off. The scandal led to calls to reform the UK’s accountancy practices.
KPMG will also pay costs of almost £4 million. It was “severly reprimanded” by the FRC, which also ordered the company to appoint “an independent reviewer” to assess “the affectiveness” of KPMG’s audit quality review procedures.
KPMG also accepted that the behaviour of five members of staff -- including the audit partner on the Carillion account, Peter Meehan -- amounted to misconduct. Their behaviour included creating meeting minutes and an audit working paper that were misleading.
Meehan was fined £250,000 and excluded from the Institute of Chartered Accountants in England and Wales for 10 years, effectively a ban from the profession. Three other members of staff were fined between £30,000 and £45,000 and banned for seven or eight years. A fifth was severely reprimanded.
The tribunal said: “The seriousness of the misconduct that we have found proved scarcely needs explanation. Effective audits are essential to the financial system. Management and investors should be able to rely on the audited financial reports of the company in question.”
Jon Holt, Chief Executive of KPMG UK, said: “I accept the findings and sanctions of the tribunal in full. The behaviour underlying this case was wrong and should never have happened.”
“We reported it to our regulator as soon as we uncovered it and we have cooperated fully with their investigation. Since then, we have worked hard and with complete transparency to our regulator, to assure ourselves that the behaviour of the individuals concerned does not reflect the wider culture of the firm.”
The fine was reduced from £20 million to reflect that KPMG reported the problems itself to the FRC and then co-operated. The full levy would have made it the biggest fine ever paid by any major UK accountancy group, passing the £15 million Deloitte paid in 2020 over its auditing of the software group Autonomy.
