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FRC extends Carillion investigation

The UK’s Financial Reporting Council (FRC) has extended its investigation into the preparation, approval and audit of the financial statements of Carillion to include certain matter relating to the financial statements for the year ended 31 December 2013.

At the end of January 2018, the FRC launched an investigation into KPMG’s audit of the financial statements of Carillion for the years ended 31 December 2014, 2015, and 2016, and additional audit work carried out during 2017.

In March 2018, it launched an investigation into the conduct of the former group finance directors of Carillion and Institute of Charted Accountants in England and Wales (ICAEW) members Richard Adam and Zafar Khan.

This investigation is in relation to the preparation and approval of the financial statements of Carillion plc for the years ended 31 December 2014, 2015 and 2016, and the six months ended 30 June 2017, and the preparation and reporting of other financial information during the period 2014-2017.

At the start of this year, the FRC announced that it expects its investigation into the work KPMG conducted for Carillion to continue well into 2019.  

When Carillion collapsed at the start of 2018 it resulted in the loss of thousands of jobs and put into doubt the safety of its employees’ company pensions.

Due to widespread media coverage it brought the work of its auditors into the public and political spotlight which prompted a range of parliamentary inquiries.

Coupled with a number of other high profile company collapses over the last couple of years in the UK, such as British Home Stores, the audit market has faced major scrutiny which has led to reviews into a possible overhaul of the FTSE 350 audit market and suggestions for the FRC to be replaced, due to it being found as unfit for purpose.

Despite KPMG’s PR struggles over the last year, the firm reported its highest growth in a decade for the financial year ended 30 September 2018.

A KPMG spokesperson said: "Transparency and accountability are vital to building public trust in audit. We believe it is important that regulators acting in the public interest review the audit work related to high profile cases such as Carillion. We will continue to cooperate fully with the FRC’s investigation.”

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