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FRC: Don’t expect Carillion resolution until ‘well into 2019’

The UK’s Financial Reporting Council (FRC) has said it expects its investigation into KPMG for its work on Carillion to continue well into 2019.

The news came alongside a reveal that it launched a further investigation into thee Big Four firm in November, also in relation to its work for the Carillion, which collapsed in January last year.

The November investigation is in relation to the provision of materials to the FRC by KPMG in connection with the FRC’s Audit Quality Review into aspects of the audit of Carillion for the year end 2016.

The FRC said that the decision to open this investigation followed matters self-reported by KPMG.

The regulator is currently investigating KPMG’s audits of Carillion (2014-2017) and the conduct of two former finance directors, Richard Adam and Zafar Khan.

One of the investigation’s main area of focus has been the financial performance of Carillion’s major contracts in both the construction and services divisions, and whether Carillion management and its auditors ensured that this was appropriately reported in its financial statements.

The investigations are also considering conduct relating to pension liabilities, goodwill, cash disclosures and going concern.

The regulator said it is investigating significant quantities of documents and has conducted detailed interviews with audit team members and Carillion senior executives. Further interviews are planned for early 2019.

In its statement today, the FRC acknowledged that the update comes due to the ‘significant public interest’ in the collapse of Carillion and the role KPMG played in its collapse.


KPMG UK has suspended one of its partners, Peter Meehan, and three other members of staff in relation to the information they provided to the FRC in regards to Carillion.

KPMG could not comment on individual cases of suspensions but did provide a statement:  “Over the past year, we have been performing a thorough review of the firm’s audit of Carillion. Our investigation included the audit team’s response to the FRC’s Audit Quality Review undertaken during 2017, which looked at aspects of the 2016 audit.

“Concerns were identified in connection with a small number of documents provided to the FRC’s team during the routine Audit Quality Review. On discovery of this information, we immediately reported our findings to the FRC.

“It is important to note that this took place after the signing of the audit opinion and we have not identified any evidence or indication that it had any impact on the audit conclusions of Carillion. At this stage the investigation is ongoing and as such, the firm has reached no conclusion around individual responsibility.

“We are taking this matter extremely seriously and have engaged outside legal counsel to conduct an investigation into the circumstances of the Audit Quality Review and the conduct of the individuals involved. We acted swiftly and decisively and will continue to take all necessary steps to deal with this, including cooperating fully with the FRC.”


The collapse of Carillion created much public and political scrutiny of the role of the auditors in the collapse of large listed companies. This scrutiny in turn led to the Kingman Review of the whether or not the FRC is fit for purpose and the Competition and Markets Authority’s investigation into the statutory audit market.

A report made by parliamentary select committees in to the collapse of Carillion lambasted the FRC for being ‘chronically passive’ as it had identified concerns with Carillion’s accounts in 2015 but failed to follow them up.

The Kingman Review has since called for the FRC to be replaced with a new regulator, tentatively called the Audit, Reporting and Governance authority (ARGA), which would be accountable to Parliament and have new powers and leadership to better serve the public interest.

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