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KPMG has been fined £14.4mn for deliberately misleading the accounting regulator during inspections of its audits of collapsed outsourcer Carillion and another UK company, Regenersis.
According to Financial Times, the fine was the largest ever against KPMG in the UK.
It was reportedly imposed by an industry tribunal that found the Big Four firm provided false and misleading documents and information to the Financial Reporting Council.
Four former KPMG auditors, including Carillion audit partner Peter Meehan, were fined and banned from the profession. A fifth, more junior auditor was severely reprimanded but escaped a fine despite the FRC’s request that he be made to pay £50,000.
KPMG also agreed to pay costs of £3.95mn, taking its total bill to almost £18.4mn.
The penalties follow a five-week tribunal in January and February, which found that the FRC was misled by KPMG staff during routine inspections of the audit of Carillion’s accounts for 2016 and the 2014 accounts of Regenersis, a London-listed IT company later renamed Blancco Technology Group.
Carillion collapsed in 2018 after receiving clean audit opinions, fuelling calls for reform of the UK audit sector and boardroom regulation. Legislation to implement the changes has been delayed until at least 2023.
KPMG’s fine was reduced from £20mn to reflect its co-operation with the FRC and its admissions of misconduct. The £14.4mn penalty — the latest in a string of sanctions against KPMG — is eclipsed only by the £15mn fine against Deloitte in 2020 for its auditing failures at former FTSE 100 software group Autonomy.
The fines relate to KPMG’s interactions with the regulator during inspections of its work.
The quality of KPMG’s auditing at Carillion is the subject of a separate investigation, which is still under way.
Former KPMG partner Meehan was fined £250,000 and excluded from membership of the ICAEW for 10 years.
Audit senior managers Alistair Wright and Adam Bennett, who had been tipped for promotion to partner at KPMG, were fined £45,000 and £40,000 respectively and were each handed eight-year bans.
Their colleague Richard Kitchen was fined £30,000 and banned for seven years. Another auditor, Stuart Smith, was fined £150,000 and banned for three years under a settlement with the FRC before the tribunal started.
The fines will be paid to the Institute of Chartered Accountants in England and Wales, of which KPMG is a member.
Jon Holt, UK chief executive of KPMG, said he accepted the tribunal’s findings.
“The behaviour underlying this case was wrong and should never [have] happened,” he said.
“We reported it to our regulator as soon as we uncovered it and we have co-operated fully with their investigation. Since then, we have worked hard and with complete transparency to our regulator, to assure ourselves that the behaviour of the individuals concerned does not reflect the wider culture of the firm.”
Carillion’s liquidators have also launched a £1.3bn legal claim against KPMG, which has denied wrongdoing and pledged to defend the case.
A separate legal action seeking to disqualify some of Carillion’s former directors from running UK companies is also under way.
KPMG’s UK partners were paid an average of £688,000 last year, their biggest payday since 2014.
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