The Financial Reporting Council’s (“FRC”) Executive Counsel has delivered a disciplinary Formal Complaint, under the Accountancy Scheme, against KPMG LLP, a former KPMG partner and certain current and former KPMG employees.
The Formal Complaint alleges Misconduct against KPMG and several individuals regarding the provision of allegedly false and misleading information and/or documents to the FRC by KPMG in connection with the FRC’s inspections of two audits carried out by KPMG; the audit of the financial statements of Carillion plc for the period ended 31 December 2016 (“the Carillion audit”) and the audit of the financial statements of Regenersis plc for the period ended 30 June 2014 (“the Regenersis audit”).
The individuals to whom the Formal Complaint has been delivered include Peter Meehan, the engagement partner for the Carillion audit (who is not alleged to have committed Misconduct in respect of matters relating to Regenersis), and Stuart Smith, the engagement partner for the Regenersis audit (who is not alleged to have been involved in matters relating to Carillion)*. The allegations in the Formal Complaint are made against each of the individuals only in respect of their own conduct and do not suggest that any individual was responsible for the Misconduct of any of the other individuals subject to the Formal Complaint.
The Formal Complaint does not allege Misconduct arising from the performance of the relevant audits, nor does it allege that in either case the financial statements had not been properly prepared. The audit, and preparation, of the 2016 Carillion financial statements are the subject of separate investigations, as announced on 29 January 2018 and 19 March 2018 respectively.
The FRC’s investigation was opened in November 2018 after KPMG had self-reported certain matters relating to the review of the 2016 Carillion audit. The scope of the investigation was expanded in July 2019 to include the inspection of the 2014 Regenersis audit after KPMG had self-reported certain matters relating to that inspection.
A Disciplinary Tribunal has been convened to hear the Formal Complaint and determine whether or not the Respondents have committed Misconduct. This hearing is scheduled to commence on 10 January 2022.
KPMG is a member firm of the ICAEW and these individuals are all members of the ICAEW.
* “Engagement partner” is defined in ISA (UK) 220 as “the partner or other person in the firm who is responsible for the audit engagement and its performance, and for the auditor’s report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body”.