KPMG audits of Carillion probed

KPMG audits of Carillion probed

The UK’s Financial Reporting Council has opened an investigation into KPMG’s auditing of the now-collapsed Carillion covering the years 2014 to 2017, the watchdog has said.

Construction and outsourcing firm Carillion collapsed this month after banks pulled the plug, raising concerns about hospitals, road and other infrastructure projects in the UK and school projects in Ireland, as well as the fate of hundreds of suppliers.

The council said it would look at issues such as how the auditors recognised revenue on significant contracts and accounted for pensions. The trustee of Carillion’s pension scheme said it may have a deficit of about £990m (€1.13bn).

“The Financial Reporting Council is progressing with urgent enquiries into the conduct of professional accountants within Carillion,” the council said.

The UK’s Department for Business, Energy and Industrial Strategy had asked the council to examine the preparation of Carillion’s accounts past and present, as well as the company’s auditors.

The fall of Carillion has forced the UK government to guarantee public services ranging from school meals to road works provided by the company.

The investigation will be conducted as quickly and thoroughly as possible, the council said.

It said it would be done in co-ordination with the Financial Conduct Authority, Insolvency Service and The Pensions Regulator, all of which are investigating the UK’s biggest corporate failure in a decade.

A KPMG spokesman said the firm believed that it conducted Carillion’s audit appropriately and responsibly, and would co-operate fully with the council’s investigation.

“Transparency and accountability are vital in building public trust in audit,” the spokesman said.

“We believe it is important that regulators acting in the public interest review the audit work related to high- profile cases such as Carillion,” he said. Carillion’s collapse followed three profit warnings in 2017.

Meanwhile, John Laing Infrastructure Fund one of Europe’s largest listed investors in public infrastructure projects, said it was working to replace Carillion as facilities management provider on nine projects.

There would be minimal service disruption, with advisory and transaction costs related to the appointment of replacement facilities managers to cost about £3m, the fund said.

Reuters

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