Carillion Collapse: KPMG To Be Investigated Over Audit

Pat Hurst  PA Wire  PA Images

Also this morning the Financial Reporting Council has made a decision to open an investigation in relation to KPMG's audit of the financial statements of Carillion.

The company had been falling short of the pension trustees' expectations since 2008, and had cited cash flow problems as reasons for not making higher contributions in 2011 and 2013 despite paying more than £70m in dividends in both of those years and awarding top executives generous pay and bonus packages. "The investigation will cover the years ended 31 December 2014, 2015 and 2016, and additional audit work carried out during 2017", said FRC in a statement.

Two House of Commons select committees, the Work & Pensions Committee and the Business, Energy & Industrial Strategy Committee, have also joined forces for an inquiry into the collapse of Carillion.

The investigation will consider whether KPMG breached any rules, in particular the ethical and technical standards for auditors.

Work and Pensions committee chair Frank Field said: "It's clear that Carillion has been trying to wriggle out of its obligations to its pensioners for the last 10 years".

But past year contributions to the pension funds were deferred until 2019, to help shore up the firm's finances.

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KPMG has said it would cooperate fully with the investigation and it believed it had conducted its role as Carillion's auditor "appropriately and responsibly". As recently as September 2017 TPR waved through an apparently bust company's request to skip pension contributions so it could keep borrowing.

The fall of Carillion has forced the government to guarantee public services ranging from school meals to road works provided by the company.

Meanwhile, Shadow Pensions Minister Jack Dromey told the BBC's Today Programme that the "system of oversight" of the Carillion pension scheme failed while it was a "bonanza" for the board and shareholders.

The committee of MPs has launched an inquiry into Carillion's collapse and this initial submission has drawn an angry response.

Tomorrow's evidence will include a session with the Financial Reporting Council and the Insolvency Service, which will examine the background to the collapse of Carillion and whether regulators had the necessary powers to prevent it from occurring.

Carillion, which manages a huge variety of public sector and private projects around the United Kingdom, from rebuilding Battersea Power Station to cleaning prisons, collapsed under a growing mountain of debt two weeks ago.

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