An investigation is to be launched into KPMG’s audits of collapsed construction giant Carillion.
The Financial Reporting Council (FRC), an independent regulator, said following inquiries made since Carillion’s profit warning in July a probe will be opened under the Audit Enforcement Procedure.
Audits covering the years 2014, 2015 and 2016 and also any additional work that was carried out in 2017 will be assessed by the accountancy watchdog.
The investigation will check whether KPMG breached any relevant requirements, in particular the “ethical and technical standards” for auditors.
The FRC pledged to conduct the investigation “as quickly and thoroughly as possible”.
“The FRC is progressing with urgent inquiries into the conduct of professional accountants within Carillion in connection with the preparation of the financial statements and other financial reporting obligations under the Accountancy Scheme.
“The FRC is liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator to ensure that there is a joined-up approach to the investigation of all matters arising from the collapse of Carillion,” the FRC said.
The news comes only days after the chair of two select committees wrote to the Big Four financial services firms – KPMG, EY, PWC and Deloitte – demanding details about their relationship with Carillion.
A letter from Frank Field MP and Rachel Reeves MP said their inquiry would look to “establish what services, if any, the Big Four accountancy firms have offered Carillion, its subsidiaries and their pension scheme.”
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The Commons Work and Pensions Committee also criticised the collapsed outsourcing giant after publishing a letter from Robin Ellison, chairman of trustees of Carillion’s pension scheme, which gave an account of the firm’s pension scheme.
Carillion’s liquidation left in its wake a £900 million debt pile, a £590 million pension deficit reported by the firm, and hundreds of millions of pounds of unfinished public contracts.
The company has been accused of trying to “wriggle out” of its obligations to pensioners while paying out tens of millions in dividends for shareholders and “handsome pay packets” for bosses.
Mr Ellison’s letter suggests the pension deficit could be even higher at £990 million, the committee said.