KPMG will pay one of the largest fines in UK audit history, after former staff forged documents and misled the regulator over audits for companies including the collapsed outsourcer Carillion. The FRC is separately investigating KPMG and former Carillion directors over the audit, and preparation of Carillion’s 2016 accounts.
The Financial Reporting Council (FRC) – which regulates accountants – confirmed the £14.4m settlement at a London tribunal hearing on Thursday, and said KPMG would also face a “severe reprimand” over the “extremely serious” misconduct related to employees’ false representations to the watchdog.
The tribunal upheld allegations by the FRC that KPMG and former staff created false meeting minutes and retroactively edited spreadsheets, before sharing those documents with the FRC.
KPMG’s total fine would have been worth £20m – the largest fine on record, ahead of the £15m fine issued to Deloitte in 2020 over its historic audits of the software company Autonomy – but the figure was reduced to £14.4m to reflect the accounting firm’s willingness to admit guilt.
“The misconduct found in this case is extremely serious,” Ellison told the tribunal. “It cuts at the very heart of the protection of the public interest in the respondents’ regulator, the FRC. It was misconduct deliberately aimed at deceiving AQR inspectors appointed by the FRC.”
The tribunal, which began in January, will consider over the coming weeks the penalties for individual KPMG staff, including one of its partners, Peter Meehan. The FRC recommended on Thursday that the 60-year-old be banned from the accounting and auditing sector for 15 years and face a fine of at least £400,000. The regulator also believes that three other KPMG staff – Alistair Wright, Richard Kitchen, and Adam Bennett – should each be excluded from the sector for 12 years and face a £100,000 fine. Pratik Paw, who was a more junior member of the team at the time of the misconduct, could face a four-year exclusion and a £50,000 fine.