Global auditing specialist KPMG has been fined £21 mn and told to pay a further £5.3 mn in costs for failing to identify the true state of collapsed construction and outsourcing giant Carillion’s finances in the years before its demise.
Regulator the Financial Reporting Council said KPMG’s shortcomings stretched over multiple years before Carillion went bust in early 2018 with around £1.5 bn in debt. It said KPMG had lacked “an adequate degree of professional scepticism” in its work with the business.
At the time of its demise Carillion had around 420 public sector contracts including building two new hospitals, parts of the HS2 rail network, providing school meals and maintaining sites such as military bases and prisons.
In damning decisions, the FRC said KPMG and its former partner Peter Meehan had been “seriously deficient” in the three years leading up to Carillion’s collapse because they had not properly established its true financial position.
“KPMG and Meehan failed to respond to numerous indicators that Carillion’s core operations were loss making and that it was reliant on short term and unsustainable measures to support its cash flows,” the FRC said.