Questions for auditors over state of Carillion accounts
INVESTORS IN Carillion were “fleeing for the hills” after spotting that the construction giant was heading for disaster, it has been revealed.
Evidence to a Parliamentary inquiry into the company’s collapse last month showed that one leading investor was considering suing Carillion and believed management should be investigated.
Almost 1,000 former Carillion workers have been made redundant and jobs have also been lost among sub contractors since the firm went into liquidation.
Auditor KPMG will be questioned on Thursday by the Business and Work and Pensions select committees and asked why Carillion’s accounts were signed off.
Frank Field, chairman of the Work and Pensions Committee, said there was a disconnect between what Carillion directors told MPs earlier this month – that all was sunny until problems with a contract in Qatar hit them “out of the blue”.
The MP said: “Their stewardship had, they proudly told us, been adjudged ‘best in class’ by their friends at KPMG.
“On the other hand, investors were fleeing for the hills, and it appears those who looked closest ran fastest.
“We will be taking evidence from the auditors and the investors – as well as demanding more company papers – to get to the bottom of who knew what and, most importantly, when.”
Rachel Reeves, who chairs the Business Committee, said: “Investors spotted that Carillion was heading for disaster and fled.
“The company had unsustainably high levels of debt, weak cashgeneration and was saddled with a widening pensions deficit.
“It’s a tragedy for those who have lost their jobs and the suppliers left struggling for survival that Carillion directors ignored these issues. Carillion’s annual reports were worthless as a guide to the true financial health of the company. The fact that it was impossible to get a true sense of the assets, liabilities and cash generation of the business raises serious questions about Carillion’s corporate governance. KMPG will have to explain why they signed-off on accounts which appeared to bear so little relation to reality.”
Standard Life Aberdeen began a process of divestment in December 2015 due to concerns about financial management, strategy and corporate governance which they raised with the board in regular meetings, the committees were told.