KPMG hit with record fine for misleading watchdog
Big four accountant KPMG has been hit with a record £20 million fine after some of its former employees were found to have misled the accounting regulator during its audit of Carillion, which later collapsed.
It is the largest fine imposed by the Financial Reporting Council, surpassing the £15m penalty handed out to Deloitte two years ago for failings in its audits of Autonomy, the former FTSE 100 software company.
The fine related to audit work that KPMG completed for failed outsourcers Carillion and Regenersis in 2016 and 2014 respectively.
The FRC agreed to reduce KPMG’s penalty to £14.4m because of its admissions of wrongdoing.
Jon Holt, chief executive of KPMG UK, said: “We are deeply sorry that such serious misconduct occurred in our firm. It was unjustifiable and wrong. It was a violation of our processes and a betrayal of our values.”
A five-week tribunal in London earlier this year heard how five KPMG accountants had given “false and misleading information” to the regulator’s inspectors investigating KPMG’s 2016 audit of Carillion, which failed a year later with £7 billion of liabilities and the loss of 3,000 jobs.
The tribunal heard that the KPMG staff backdated documents and created fake spreadsheets which were passed off as current records.
Peter Meehan, lead partner on the Carillion audit, along with senior managers Alistair Wright, Richard Kitchen and Adam Bennett, and Pratik Paw, a junior auditor, were found guilty of misconduct. KPMG said that they were no longer employed by the firm.
The FRC called for Meehan to be fined £400,000 and banned from the profession for 15 years. The regulator also said that Wright, Kitchen and Bennett should each be fined £100,000 and banned for 12 years, with a 10% discount for Wright, who had admitted some of the allegations made against him.
Paw, who was not a qualified accountant during his time working on the Carillion audits, should be fined £50,000, the regulator said.
The tribunal will decide on the final penalties after hearing from lawyers on both sides. KPMG has confirmed that it will not pay the fines on behalf of its former employees.