KPMG has been slapped with its biggest-ever fine after a tribunal found it deliberately misled regulators over to its work for Carillion.
The beleaguered auditor was initially set to pay out £20million, but the Financial Reporting Council (FRC) agreed to reduce the penalty to £14.4million due to KPMG’s admissions of wrongdoing.
The fine related to audit work that KPMG completed for failed outsourcers Carillion and Regenersis in 2016 and 2014 respectively.
KPMG was initially set to pay out £20m, but the Financial Reporting Council agreed to reduce the penalty to £14.4m due to KPMG’s admissions of wrongdoing
‘We are deeply sorry that such serious misconduct occurred in our firm,’ said Jon Holt, chief executive of KPMG UK. ‘It was unjustifiable and wrong. It was a violation of our processes and a betrayal of our values.’
Audits are supposed to check a company’s financial statements, and flag to investors, customers and suppliers if anything appears awry.
When the FRC tried to inspect those audits, to make sure the accountants were doing their job correctly, KPMG staff invented documents to show the inspectors – and tried to pass them off as though they were made at the time.
During the tribunal hearing in January, KPMG made a rare admission of guilt and apologised for its employees’ conduct.
But six workers tried to absolve themselves of responsibility.
Yesterday, the London tribunal ruled that five of those staff were guilty of misconduct.
They were Peter Meehan, who led the Carillion audit, senior managers Alistair Wright, Richard Kitchen and Adam Bennett, and junior auditor Pratik Paw.
Wright, Kitchen and Bennett were each recommended a 12-year ban and a £100,000 fine by the FRC – though Wright should receive a 10 per cent discount for admitting to some of the allegations, the regulator said.
Paw should get a £50,000 fine and be banned for four years.
But their lawyers hit out at the penalties. Kitchen’s barrister Fionn Pilbrow said the tribunal’s decision had ‘career-crippling consequences’.
David Turner, acting for Wright, said the fine should be no more than £50,000.
Stuart Smith, the sixth defendant, accepted a £150,000 fine and a three-year ban as part of a settlement with the FRC earlier this year.
KPMG’s penalty is the second-largest ever handed to an accountancy business, following the £15million punishment imposed on Deloitte for its audit work at software group Autonomy.
KPMG is still on the hook for its Carillion failures, in separate investigations being brought by the FRC and a negligence claim from the outsourcer’s liquidators.
Britain’s Big Four auditors – which also include EY and PwC – have been involved in a string of corporate failures in recent years, leading to the Government launching a shake-up of the industry outlined in this week’s Queen’s Speech.