The U.K.’s audit and accounting regulator fined KPMG LLP and sanctioned five former employees for providing false and misleading information in relation to two audits, one of them of the now-defunct Carillion PLC.
On Monday, the Financial Reporting Council said KPMG was fined £14.4 million—equivalent to $17.3 million—for failings related to the audits of construction and outsourcing giant Carillion and
PLC, a data-security company that has been renamed Blancco Technology Group PLC. The fine was reduced from £20 million to acknowledge KPMG’s own reporting of misconduct as well as its cooperation with the regulator.
An audit and accounting industry tribunal imposed the fine, saying KPMG provided false and misleading information and documents to the FRC. The tribunal also ordered KPMG to appoint an independent reviewer to consider the effectiveness of the firm’s policies and its engagement with audit inspectors. KPMG agreed to pay £3.95 million in costs related to the investigation.
Four of the accounting firm’s former employees were fined and banned from the auditing profession for varying numbers of years. A fifth was “severely reprimanded,” the FRC said.
“I accept the findings and sanctions of the tribunal in full,”
chief executive of KPMG UK, said in a statement. “The behavior underlying this case was wrong and should never have happened.”
Of the five former employees,
a former partner, received the most severe penalty, with a ban of 10 years from auditing and a £250,000 fine. Mr. Meehan, who led the fiscal 2016 Carillion audit, acted alongside
to mislead audit inspectors with respect to year-end clearance meeting minutes and an audit working paper, according to the FRC. Pratik Paw followed instructions from Mr. Wright to create the false meeting minutes, the FRC said.
Mr. Meehan’s representatives didn’t respond to a request for comment.
The tribunal found Messrs. Bennett and Wright either had a role in or made false or misleading representations to audit inspectors related to Regenersis’s fiscal 2014 audit. Both men were banned from auditing for eight years and fined: Mr. Wright £45,000, and Mr. Bennett £40,000.
Representatives for Mr. Bennett and Mr. Wright didn’t respond to requests for comment.
Mr. Kitchen, whose representatives declined to comment, was banned from accounting for seven years and fined £30,000.
Representatives for Mr. Paw—a 25-year-old junior auditor when he worked on the Carillion account—noted that the tribunal found that he had failed to question the instructions given him, but not that he had acted dishonestly.
“Pratik deeply regrets not questioning these instructions from his superior and has learned a great deal from his conduct at the time, especially so early in his career,” the representatives said.
who had led the Regenersis audit for KPMG, in January reached a settlement with the FRC in which he agreed to a £150,000 fine and a three-year ban from the profession.
The £14.4 million fine was the second largest ever issued by the FRC, after a £15 million penalty against Deloitte in 2020 in relation to its audits of software company Autonomy Corp. Deloitte is a sponsor of CFO Journal.
Spurred by the collapse of Carillion in early 2018, the U.K.’s audit and accounting sector is set to be overhauled. The revamp, which includes creation of a new regulator to replace the FRC—called the Audit, Reporting and Governance Authority—has been criticized by industry observers for being slow to take form.
Misconduct that thwarts the FRC’s ability to monitor and inspect audit quality is “extremely serious,”
the FRC’s executive counsel, said in a statement.
The tribunal’s full report is expected out in “due course,” an FRC spokesman said. A separate investigation into the quality of KPMG’s audits of Carillion’s financial statements remains ongoing, he added.
Write to Jennifer Williams-Alvarez at email@example.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8