Companies
Auditing Giant KPMG Fined $18M Linked to Carillion Bankruptcy
In a deal with regulators, the U.K. unit of global financial auditor and consultant KPMG will pay an $18-million fine for misleading a government review into the quality of its financial audit of British construction giant Carillion PLC before its collapse under huge debt in 2018.
The Financial Reporting Council, a UK government agency, has also proposed fines of up to $500,000 and 15-year suspensions from professional practice for five now former KPMG auditors. A decision on these contested sanctions is pending.
The penalty against the firm is one of the largest the agency has levied.
KPMG itself discovered wrongdoing in the Carillion audit review during an internal investigation, says a spokesman for the accountant. The review was done in parallel with the government’s ongoing broader probe into how auditors failed to unearth Carillion's perilous condition before its surprise failure.
"We are deeply sorry that such serious misconduct occurred in our firm. It was unjustifiable and wrong,” said Jon Holt, CEO of KPMG UK, in a statement. “It was a violation of our processes and a betrayal of our values."
KPMG is currently also facing a $1.8-billion lawsuit related to its Carillion audit by the contractor’s liquidator, the UK Official Receiver on behalf of creditors. The legal action alleges that the firm failed in its duties by not spotting financial misstatements.
Carillion executives themselves acted “recklessly” in reporting the company’s finances, the government said in September 2020.
With a global payroll of 43,000, Carillion crashed with a $3.2 billion hole in its pension fund and owing $2.5 billion to suppliers and creditors.
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