FRC makes final decisions in KPMG's Carillion audit failures

10th May 2024 07:13

(Sharecast News) - The Financial Reporting Council (FRC) announced historic penalties against KPMG and two former partners on Friday, in its final decision round audit failures linked to the collapsed Carillion.

It stemmed from an extensive investigation into audits conducted between 2014 and 2016, before Carillion's insolvency in January 2018.

KPMG was handed a record £30mfine, reduced to £21m for cooperation.

It was also issued "severe reprimands", and was ordered to review and report on its current measures to avert similar breaches.

The firm would also be required to cover the executive counsel's investigation costs, topping £5m.

Former partners Peter Meehan and Darren Turner meanwhile faced substantial fines and professional ramifications.

Meehan was fined £0.5m, reduced to £0.35m for cooperation, barred from the Institute of Chartered Accountants in England and Wales (ICAEW) for a decade, and severely reprimanded.

Turner meanwhile received a £0.1m fine, reduced to £70,000, as well as a severe reprimand.

The FRC's investigation revealed multiple breaches of auditing standards, with key deficiencies including inadequate challenge to Carillion's management, insufficient audit evidence, and a dearth of professional scepticism.

Those lapses significantly contributed to misinformation regarding Carillion's financial status, as the company reportedly concealed substantial losses and relied on unsustainable short-term financial tactics.

Reporting by Josh White for Sharecast.com.