The UK’s accountancy watchdog is to open an investigation into accountancy giant KPMG over its audits of collapsed construction giant Carillion.
The Financial Reporting Council (FRC) said today that, following inquiries made since Carilion’s profit warning in July, it will open an investigation under the Audit Enforcement Procedure.
The probe will cover the years ended 2014, 2015 and 2016, and additional audit work carried out during 2017.
The investigation will be conducted by the FRC’s Enforcement Division and will consider whether the auditor has breached any relevant requirements, in particular the "ethical and technical standards" for auditors.
KPMG’s audit of the company’s use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts and accounting for pensions will all come under the FRC’s microscope.
The FRC also pledged to conduct the investigation "as quickly and thoroughly as possible".
"The FRC is progressing with urgent inquiries into the conduct of professional accountants within Carillion in connection with the preparation of the financial statements and other financial reporting obligations under the Accountancy Scheme.
"The FRC is liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator to ensure that there is a joined-up approach to the investigation of all matters arising from the collapse of Carillion," the FRC said.
It comes as Carillion was accused of trying to "wriggle out" of its obligations to pensioners while paying out tens of millions in dividends for shareholders and "handsome pay packets" for bosses.
The Commons Work and Pensions Committee criticised the collapsed outsourcing giant after publishing a letter from Robin Ellison, chairman of trustees of Carillion’s pension scheme, which gives an account of the firm’s pension scheme.
Carillion’s liquidation left in its wake a £900m debt pile, a £590m pension deficit reported by the firm, and hundreds of millions of pounds in unfinished public contracts.