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UK organization KPMG has been fined £14.4m for deliberately misleading the UK Financial Reporting Council (FRC) over the control of now bankrupt contractor Carillion.
The FRC filed a complaint against KPMG in September 2021, alleging that the audit firm provided FRC with “factually inaccurate and misleading information”. Supervisor investigates the Carillion and Regenesis audit by KPMG.
After a five-week trial in January and February, the court ruled that KPMG’s auditors falsified documents surrounding the FRC inspection. This includes meeting minutes, spreadsheets, and a goodwill assessment.
Initially, a fine of twenty million pounds was agreed between KPMG and regulator FRC. But after the admission of wrongdoing by the accounting firm, it has been decided to reduce the fine to £14.4m. KPMG has also agreed to pay a fee of £4.3 million.
KPMG UK CEO Jon Holt admitted earlier in court that the wrongdoing was “unjustified and wrong”. According to him, it is appropriate for the companies and (former) accountants involved to be faced with “severe legal sanctions”.
Based on According to the Financial Times, it is the second-largest fine ever imposed on a British accounting firm, after the £15m fine imposed on Deloitte in 2020 for an audit error at software group Autonomy.
Five KPMG people involved have also been found guilty of committing violations. According to the FRC, they face heavy fines and are sometimes suspended for years. Previously, the company’s former auditors were fined £150,000 plus a three-year disqualification from employment, as part of the settlement with the FRC.
KPMG has indicated that it will defend itself against a £1.3 billion negligence claim filed by Carillion’s trustees. The big construction group, which mostly works for the British government, went bankrupt four years ago. The role of the auditor is one of the reasons for the discussion of reform of the UK audit sector.
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