KPMG fined £14.4m for forging documents to hide botched audit

KPMG has been handed a record fine for forging documents in an effort to mislead regulators over botched audits at the collapsed outsourcer Carillion.

Four former KPMG staff members have been banned from the industry, but a 25-year-old junior auditor was spared a fine or ban.

KPMG will have to pay £18.35m for providing “false and misleading information and documents” relating to the collapsed outsourcing group and a data company called Regenersis. The former employees have been suspended from the Institute of Chartered Accountants for between seven and 10 years and fined a combined £365,000 after a tribunal found they had created false spreadsheets and records of meetings to cover up failings in their work.

Peter Meehan, the partner responsible for auditing Carillion, was fined £250,000 and banned for 10 years.

Senior managers Alistair Wright and Adam Bennett were banned for eight years and fined £45,000 and £40,000 respectively. Richard Kitchen was handed a £30,000 fine and a sevenyear ban.

While junior auditor Pratik Paw was also found guilty of misconduct, the tribunal said he had acted without integrity but not dishonestly and he was spared a fine and ban.

Regulators on the Financial Report- ing Council’s Audit Quality Review (AQR) said the staff had “made, or connived in or were knowingly associated with making, certain false or misleading representations”.

They added: “The seriousness of the misconduct that we have found proved scarcely needs explanation. Effective audits are essential to the financial system. Management and investors should be able to rely on the audited financial reports of the company in question. The purpose of AQRS is to assess, and where appropriate suggest improvements to, the effectiveness of audits.”

KPMG was fined £20m, reduced to £14.4m because it co-operated and admitted wrongdoing, and agreed to pay nearly £4m in costs.

It is the biggest fine in the company’s history and the second largest ever levied on any accountant. Deloitte was fined £15m in September 2020 for an audit of software company Autonomy.

Jon Holt, chief executive of KPMG, said: “I accept the findings and sanctions of the tribunal in full.

“The behaviour underlying this case was wrong and should never have happened. We reported it to our regulator as soon as we uncovered it and have cooperated fully with their investigation.

“Since then, we have worked hard and with complete transparency to our regulator, to assure ourselves that the behaviour of the individuals concerned does not reflect the wider culture of the firm.”