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KPMG avoids a record fine due to audit tests for Carillion and Regenersis.

KPMG admitted to giving false and misleading information and was fined 14.4 million pounds ($17.27 million) on Monday.


KPMG avoids a record fine due to audit tests for Carillion and Regenersis

July 25 (Reuters) - During spot checks on the audits of the construction company Carillion and the outsourcing firm Regenersis, KPMG acknowledged giving its regulator inaccurate and misleading information, and the accounting firm was fined 14.4 million pounds ($17.27 million) as a result. The relevant regulator, the Financial Reporting Council, also mandated that KPMG engage an impartial reviewer to examine the company's present Audit Quality Review (AQR) policies and procedures.

The FRC stated that if KPMG had not received a discount for reporting the occurrences on its own, cooperating with the FRC, and confessing to the misconduct, it would have fined 20 million pounds. Without the discount, Deloitte's 15 million pound fine in September 2020 for an audit of software company Autonomy would have been the highest FRC sanction ever. One of the "Big Four" auditing companies in the world, KPMG, also contributed 3.95 million pounds toward the FRC and Tribunal's expenses. Although five KPMG employees had disputed FRC claims of misconduct in connection with the audits, an impartial tribunal concluded against them. Before the start of the January Tribunal proceedings, a sixth employee settled.

The former KPMG workers had "forged" and "fabricated, according to the FRC, missing papers that the regulator had asked for. The Tribunal stated that "the magnitude of the misbehavior that we have found proved hardly needs elaboration. It is responsible for its employees' actions, KPMG was accused of the same things as its staff. Four of the five employees who participated in the Tribunal hearing received fines ranging from 30,000 to 250,000 pounds and were suspended from their profession for a period ranging from seven to ten years. The fifth offender received a harsh rebuke but avoided paying a fee.

Jon Holt, the head of KPMG in the UK, said, "I accept the findings and sanctions of the tribunal in full. Since the instances, KPMG has reportedly worked arduously and completely transparently with the FRC to ensure that the behavior of the concerned people does not reflect the firm's culture as a whole, Holt added. The audit of Carillion by KPMG is still under FRC investigation, whose demise prompted discussions about how to raise auditing standards.

Source: https://www.reuters.com/business/finance/uk-watchdog-fines-kpmg-24-mln-over-carillion-regenersis-audits-2022-07-25/

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