Britain’s accounting regulator has fined KPMG a record £21m for audits of Carillion, the builder that imploded in 2018 and prompted a root and branch review of auditing standards.
“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,” said Elizabeth Barrett, executive counsel for the Financial Reporting Council (FRC).
“This is reflected in the financial sanction imposed on KPMG LLP, the highest ever imposed by the FRC.”
Carillion’s implosion in 2018 was one of the most high-profile failures in British corporate history, costing 3,000 jobs and plunging 450 public sector projects, including hospitals, schools and prisons, into chaos.
Earlier this year, KPMG settled a £1.3bn lawsuit brought by Carillion’s liquidators, who claimed the auditor was negligent and missed serious red flags in the outsourcing firm’s accounts before its collapse.
The lawsuit – which related to audits of Carillion accounts between 2014 and 2016 – had been launched by Britain’s official receiver, attempting to recoup losses on behalf of Carillion’s creditors.
Neither KPMG nor the official receiver would confirm the size of the settlement. “The parties have agreed that the terms of that settlement will remain confidential,” a spokesperson acting on behalf of the liquidator said at the time.
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In July, the outsourcer’s former finance director was banned from serving as a company director for 11 years over his role in the collapse.
