KPMG was fined £14.4m for intentionally misleading the accounting regulator during its audits of outsourcers Carillion and another UK firm, Regenesis.
The fine, the largest ever against KPMG in the UK, was imposed by an industry court the Big Four company supplied false and misleading documentation and information to the Financial Reporting Council.
Four former KPMG auditors, including audit partner Carillion Peter Meehan, were fined and banned from the profession. A fifth, more junior auditor was heavily reprimanded but escaped the fine even though the FRC required him to made to pay £50,000.
KPMG also agreed to pay the cost of £3.95 million, bringing their total bill to almost £18.4 million.
The penalties followed a five-week court in January and February, which found that the FRC had been misled by KPMG staff during routine audits of Carillion’s accounts for the year. 2016 and 2014 accounts of Regenesis, a London-listed IT company, later renamed Blancco Technology Group.
Carillion collapsed in 2018 after receiving explicit audit opinions, spurring calls to reform the UK’s audit sector and boardroom regulation. Legislation to implement the changes has been delayed until at least 2023.
KPMG’s fine has been reduced from £20 million to reflect their cooperation with the FRC and their acceptance of misconduct. The £14.4m fine – the latest in a string of sanctions against KPMG – is only overshadowed by a £15m fine against Deloitte in 2020 for audit errors at software group FTSE 100 formerly Autonomy.
The fines relate to KPMG’s interactions with the regulator during the review of their work.
The quality of KPMG’s audit at Carillion is the subject of a separate investigation and is still underway.
KPMG’s former partner Meehan was fined £250,000 and removed from ICAEW membership for 10 years.
Audit senior managers Alistair Wright and Adam Bennett, who were promoted to partner at KPMG, were fined £45,000 and £40,000 respectively and banned for eight years each.
Their colleague Richard Kitchen was fined £30,000 and banned from playing for seven years. Another auditor, Stuart Smith, was fined £150,000 and banned for three years by law deal with FRC before the trial begins.
Fines will be paid to the Institute of Chartered Accountants in England and Wales, of which KPMG is a member.
Jon Holt, UK chief executive officer of KPMG, said he accepted the court’s conclusion.
“The behavior in this case is wrong and should never be [have] happened,” he said.
“We reported it to our regulator as soon as we discovered it and we have fully cooperated with their investigation. Since then, we have worked hard and been completely transparent with our regulator, to ensure ourselves that the behavior of the individuals involved does not reflect the broader culture of the company. “
Carillion liquidators also launched legal claim £1.3 billion against KPMG, has denied wrongdoing and pledged to defend the case.
A separate legal action seeking to disqualify several former Carillion executives from running UK companies is also underway.
KPMG’s UK partners are pay an average of £688,000 last year, their biggest payday since 2014.
