Accounting watchdog in probe of crash at Carillion
● Financial Reporting Council spotlight on KPMG
The accountancy watchdog is to open an investigation into accountancy major KPMG over its audits of collapsed services and construction giant Carillion, it was confirmed yesterday.
Following inquiries made since Carillion’s profit warning in July, the Financial Reporting Council (FRC) said that it will open a formal inquiry under the Audit Enforcement Procedure.
It said the probe will cover the years ended 2014, 2015 and 2016, and additional audit work carried out during 2017.
The investigation will be conducted by the FRC’S Enforcement Division and will consider whether the auditor has breached any relevant requirements, in particular the “ethical and technical standards” for auditors.
KPMG’S audit of the company’s use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts, and accounting for pensions will all come under the industry regulator’s spotlight.
The FRC said it planned to conduct the investigation “as quickly and thoroughly as possible”.
It added: “The FRC is progressing with urgent inquiries into the conduct of professional accountants within Carillion in connection with the preparation of the financial statements and other financial reporting obligations under the Accountancy Scheme.”
The FRC also said that it was “liaising closely” with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator “to ensure that there is a joined-up approach to the investigation of all matters arising from the collapse of Carillion”.
The development comes as Carillion has been accused of trying to “wriggle out” of its obligations to pensioners while paying out tens of millions in dividends for shareholders and “handsome pay packets” for leading executive directors. The Commons Work and Pensions Committee criticised the collapsed outsourcing giant as it published a letter before last weekend from Robin Ellison, chairman of trustees of Carillion’s pension scheme, which gives an account of the scheme’s state.
The construction giant’s liquidation after a flurry of profit warnings and crashed share price has left in its wake a £590m pension deficit reported by the firm, a £900m debt pile and hundreds of millions of pounds in unfinished public contracts. The boss of Easyjet will take a salary cut to demonstrate his “personal commitment” to equal pay. Johan Lundgren requested that his £740,000 salary is reduced to match that of his prede cessor, Dame Carolyn Mccall, who earned £706,000 when she left the airline in November. Lundgren began his role as chief executive on 1 December last year, joining from tour operator Tui. He said: “At Easyjet we are absolutely committed to giving equal pay and equal opportunity.”