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KPMG accused of providing ‘false and misleading’ information to audit watchdog

·2-min read

A formal complaint has been filed against KPMG and its current and former staff by the accounting regulator for allegedly submitting false information as part of audit inspections of collapsed firm Carillion and Regenersis.

The Financial Reporting Council (FRC) said the disciplinary complaint alleges that KPMG and several individuals gave false and misleading information and documents to the watchdog when it was carrying out a review of two audits.

One of the audits was for failed outsourcing giant Carillion and the other was a 2014 audit of then technology group Regenersis, according to the FRC.

It comes amid mounting pressure on KPMG over the quality of its audits after it was fined a near-record £13 million just weeks ago over the sale of bedmaker Silentnight to a private equity firm in 2011.

The FRC tribunal found that one of KPMG’s partners helped push client Silentnight towards insolvency, enabling HIG Capital to buy the business out of administration.

Carillion crisis
One of the audits was for failed outsourcing giant Carillion (Yui Mok/PA)

The individuals who have been served with the formal complaint in the latest case include Peter Meehan, the engagement partner for the Carillion audit, and Stuart Smith, the engagement partner for the Regenersis audit.

The FRC said the complaint does not claim the audits were wrongly done or that financial statements were not properly prepared.

A disciplinary tribunal will review the formal complaint case, with a hearing scheduled to start on January 10.

A KPMG spokesman said the group took the matter “extremely seriously” and is co-operating fully with the FRC.

He said: “We discovered the alleged issues in 2018 and 2019, and on both occasions immediately reported them to the FRC and suspended the small number of people involved.

“The allegations in the formal complaint would, if proven, represent very serious breaches of our processes and values.”

The 2016 audit of Carillion’s financial statements is being investigated in separate ongoing investigations, with KPMG facing a potentially hefty fine when the FRC probe wraps up in coming months.

KPMG and other Big Four accountancy firms are spinning off their restructuring arms in a bid to avoid conflicts of interest in its business.

It comes ahead of an expected Government move which would force them to split their audit divisions from the rest of the business to ensure they stay independent, following the Carillion demise and other major corporate failures.

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