A record £21 million fine on big four accountancy firm KPMG has prompted an admission from its boss that its work was ‘very bad’.

Chief executive Jon Holt said he could not defend the firm’s poor audit of the construction and facilties management firm Carillion, which became Britain’s biggest ever industrial corporate collapse when the official receiver was called in 2018.

The Financial Reporting Council, which is the accounting regulator, said the deficiencies in KPMG’s audits were “exceptional” and had undermined public trust in the independent auditing of companies.

Its findings were described by Mr Holt as “damning” and he said he “simply cannot defend the work that we did on Carillion”.

The FRC said that KPMG’s audits of the business had failed to adhere to “the most basic and fundamental audit concepts”.

The fine imposed was reduced from £30m as a result of the firm’s cooperation, but is on top of a £14.4m penalty which KPMG was handed last year for handing over misleading information to the regulator. It will also pay legal costs of around £5.3 million.

Two of KPMG’s former auditors were also fined a combined £420,000, and one was banned from membership of the Institute of Chartered Accountants in England and Wales for a decade.

Carillion had been one of the UK’s biggest construction and facilities management companies, with a number of major Government contracts.

KPMG audited its books between 2014 and 2016, saying each time that without qualifications the financial statements were true and fair.

But the FRC today said it had found “an unusually large number of breaches”.

In response, Mr Holt said: “These findings are damning. We have co-operated fully with the investigation, and we accept its conclusions and the sanctions that have been imposed without reservation. I am very sorry that these failings happened in our firm.

“It is clear to me that our audit work on Carillion was very bad, over an extended period. In many areas, some of our former partners and employees simply didn’t do their job properly.

“Junior colleagues were badly let down by those who should have set them a clear example, and I am upset and angry that this happened at our firm.

“Since this audit work was undertaken, we have done an enormous amount to improve controls and oversight across our firm, to ensure that these failings could not take place today. But ultimately it still falls to each of us, individually, to hold ourselves and each other to the highest professional standards every day.

“As an auditor, I simply cannot defend the work that we did on Carillion. As the chief executive of KPMG, I am determined that we face up to this failure, and I am absolutely committed to continuing to work with my colleagues across the business to ensure that nothing like this can happen again.”

Last week, the former boss of Carillion, Richard Howson, was banned from being a director of a UK business for eight years.