KPMG has been given a record fine for failings in its auditing of construction company Carillion which collapsed in 2018 and led to a loss of thousands of jobs.
The Financial Reporting Council (FRC) said the firm has been fined a total of £30 million, this has been reduced by 30% after co-operation and admissions were taken into account.
KPMG will also be required to declare that past audit reports did not satisfy requirements and take action to prevent such breaches from happening again in the future.
Elizabeth Barrett, Executive Counsel at FRC said “The credibility of reports and opinions issued by auditors in connection with financial statements depends upon beliefs concerning the integrity, objectivity and independence of auditors and the quality of the audit work performed.”
“The number, range, and seriousness of the deficiencies in the audits of Carillion during the period leading up to its failure was exceptional and undermined that credibility and the public trust in audit. This is reflected in the financial sanction imposed on KPMG LLP, the highest ever imposed by the FRC.”
“Many of the breaches involve failing to adhere to the most basic and fundamental audit concepts such as to act with professional scepticism and to obtain sufficient appropriate audit evidence. The breaches in relation to the 2016 audit even include failing to ensure that the audit process itself was properly managed and that the audit file was a reliable record. These requirements lie at the heart of proper auditing.”
“The seriousness of the failings in the 2016 audit is compounded by the breaches of the Ethical Standards relating to the fundamental principles of objectivity, independence, and integrity. The non-financial sanctions imposed on KPMG LLP are focused on ensuring that failures on this scale will never be repeated.”