Watchdog could probe failure to spot the looming disaster

ONE of Britain’s biggest accountancy firms could face a probe over how it failed to spot huge financial problems at Carillion before it went bust.

Scandal-hit KPMG signed off the firm’s accounts published in March 2017 when it reported 14 per cent growth in sales.

Four months later Carillion issued a disastrous trading warning, ending in yesterday’s compulsory liquidation. KPMG, described as a ‘robust and cost-effective auditor to the group’, earned £1.4million to audit Carillion’s accounts in 2015 and also in 2016.

Yesterday, the Financial Reporting Council watchdog said it was monitoring the situation and had powers to investigate.

The Carillion scandal is not the first to engulf KPMG. It signed off audits at RollsRoyce during a period when the firm was mired in an international corruption probe. It failed to find a black hole in Co-op Bank’s finances ahead of a failed bid to buy 632 Lloyds branches in 2013. However, it was cleared of wrongdoing over its failure to spot the collapse of HBOS.

KPMG last night said it carried out its role as Carillion’s auditor ‘appropriately and responsibly’.