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Record Fine for KPMG Over Carillion Audit Failure

The UK’s Financial Reporting Council (FRC) has lodged a £21 million (US$25.8 million) fine at Big Four accountancy firm KPMG following the 2018 collapse of construction and building services firm Carillion. The FRC noted a series of “exceptional” failures in KPMG’s accounting work for Carillion, which took place between 2014-17, and said there were an unusually large number of breaches of relevant requirements. KPMG subsequently failed to gather enough evidence to enable the FRC to conclude that Carillion’s financial statements were true and fair. The company collapsed with debts in excess of £1.5 billion. Former KPMG Partner Peter Meehan and KPMG Partner Darren Turner were singled out. Meehan has personally been fined £500,000, reduced to £350,000 due to his cooperation with the investigation, whereas Turner has been fined £100,000, reduced to £70,000. Both men undermined credibility and public trust in the auditing process, the FRC said. Elizabeth Barrett, Executive Counsel for the FRC, said: “The number, range, and seriousness of the deficiencies in the audits of Carillion during the period leading up to its failure was exceptional and undermined that credibility and the public trust in audit. This is reflected in the financial sanction imposed on KPMG, the highest ever imposed by the FRC. Many of the breaches involve failing to adhere to the most basic and fundamental audit concepts, such as to act with professional scepticism and to obtain sufficient audit evidence.” Earlier this year, KPMG settled a £1.3 billion lawsuit which was brought by Carillion’s liquidators, who argued the auditor was negligent ahead of the collapse.

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