KPMG to pay £18.4m for misleading regulator
Big four accountancy firm KPMG has been hit with a £14.4 million fine, plus £3.95m in costs, over its audits of the failed outsourcer Carillion and Regenersis, a data company.
A tribunal concluded that KPMG provided false and misleading documents and information when the Financial Reporting Council (FRC) undertook routine inspections of KPMG’s audit of Carillion’s 2016 accounts and Regenersis’ 2014 books.
KPMG was “severely reprimanded” by the FRC which also barred four members of staff from the accountancy sector’s professional body, including the audit partner on the Carillion account, Peter Meehan.
Meehan was fined £250,000 and excluded from the Institute of Chartered Accountants in England and Wales for 10 years, effectively a ban from the profession. Three other members of staff were fined between £30,000 and £45,000 and banned for seven or eight years. A fifth was severely reprimanded.
The tribunal said: “The seriousness of the misconduct that we have found proved scarcely needs explanation. Effective audits are essential to the financial system. Management and investors should be able to rely on the audited financial reports of the company in question.”
Jon Holt, chief executive of KPMG UK, said: “I accept the findings and sanctions of the tribunal in full. The behaviour underlying this case was wrong and should never have happened.
“We reported it to our regulator as soon as we uncovered it and we have cooperated fully with their investigation. Since then, we have worked hard and with complete transparency to our regulator, to assure ourselves that the behaviour of the individuals concerned does not reflect the wider culture of the firm.”
The fine was reduced from £20m to reflect that KPMG reported the problems itself to the FRC and then co-operated.
The full levy would have made it the biggest fine ever paid by any major UK accountancy group, passing the £15m Deloitte paid in 2020 over its auditing of the software group Autonomy.
KPMG’s UK partners were paid an average of £688,000 last year, their biggest payout since 2014.