Rolls-Royce’s bribery and corruption scandal has drawn in its departing auditor, KPMG, which has become the target of a probe by the UK accounting regulator.
The Financial Reporting Council said it has started an investigation into KPMG’s audits of Rolls-Royce’s earnings for 2010 through 2013, citing the engine maker’s deferred prosecution agreement over bribery and corruption allegations that was reached in January.
KPMG said it will co-operate “fully” with the probe, saying it is “confident in the quality of all the audit work” performed for Rolls-Royce.
The probe stemming from allegations of bribes paid to win tenders comes at an awkward time for the British manufacturer. The company yesterday hosted its annual shareholders meeting in Derby, England, as chief executive Warren East seeks to show progress made in cutting costs and streamlining operations.
Rolls-Royce yesterday said cashflow in the first half will be lower this year as it ramps up deliveries of its loss-making aircraft engines.
The London-based company held onto an earnings outlook detailed in February but pleaded for patience, saying pre-tax profit, before financing costs, will be weighted to the second half similar to last year.
Free cashflow in the first half will also be lower than it was in 2016, as the ramp-up of engine deliveries and one-time charges eat into cash reserves.
“We have some important transformation initiatives underway and, while we have made good progress in our cost-cutting and efficiency programmes, more needs to be done,” said Mr East.
Rolls is on track to deliver incremental savings in 2017 of £80m to £110m (€94m to €130m). Full-year sales will benefit by about £400m and pre-tax profit by £50m from current exchange rates.
Bloomberg and Reuters
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