KPMG LLP will pay more than £14 million ($17.1 million) over misconduct on major work it carried out for collapsed Carillion Plc and data services company Regenersis, in the latest in a long list of audit scandals surrounding the firm.
The Financial Reporting Council, the UK’s audit watchdog, asked a tribunal to sanction the firm for as much as £20 million, at the start of a two-day London hearing last week. Its executive counsel said that the firm had agreed to a severe reprimand, with the fine reduced to £14.4 million for admissions and mitigating factors. It will also pay all of the costs from the case.
The proceedings follow a five-week tribunal hearing in January where details of KPMG and six ex-employees’ wrongdoing, including accusations of acting dishonestly, came to light.
The FRC’s counsel also proposed sanctions against five former KPMG staff. It asked for a £400,000-pound fine for Peter Meehan, KPMG’s audit engagement partner at the time, and for him to be excluded as a qualified accountant for 15 years.
Three senior managers, Alistair Wright, Richard Kitchen and Adam Bennett, should be fined £100,000 apiece and excluded for 12 years, with audit junior Pratik Paw excluded for four years and facing a £50,000 fine. A decision on the final amount will be delivered in the coming months.
The watchdog opened an investigation after KPMG self-reported concerns related to the Carillion audit, and later widened it out to include Regenersis. KPMG admitted to the misconduct. The claims relate to a 2015 audit of Regenersis, now known as Blancco Technology Group Plc, and a 2017 audit of Carillion.
The latest hefty fine is a fresh blow to KPMG which has faced ongoing criticism over the quality of its work. The company faces an accumulation of disciplinary action over its audits of Carillion, including a £1.3 billion
“I am saddened that a small number of former employees acted in such an inappropriate way, and it is right that they — and KPMG — now face serious regulatory sanctions as a result,” Jon Holt, Chief Executive of KPMG UK, said. “As a firm, we are committed to serving the public interest with honesty and integrity.”
The FRC’s record fine was when it penalized Deloitte LLP £15 million over the audit of Autonomy Corp.
