Nick Medcroft KC, Daniel Carall-Green, and Gillian Hughes acted for the Executive Counsel to the Financial Report Council (“FRC”) in its investigations under the Audit Enforcement Procedure (“AEP”) into failures by KPMG in its audits of Carillion plc’s financial statements. They were instructed by a team at the FRC and Gowling WLG, and acted alongside Tom Adam KC and Alan Roxburgh of Brick Court Chambers.
Carillion collapsed into insolvency in 2018, shortly after KPMG had given an unqualified audit opinion on its financial statements. The AEP investigations were about KPMG’s audits for the financial years 2013, 2014, 2015, and 2016.
Those investigations led to a separate case in which five KPMG auditors were found to have dishonestly misled the FRC’s Audit Quality Review team when it initially reviewed KPMG’s work on the 2016 audit, and one further auditor admitted acting without integrity in causing or allowing the team to be misled. Nick and Daniel also acted for the FRC on that case. More details can be found here and here; the sanctions imposed included a fine against KPMG of £20,000,000 (reduced to £14,400,000 million to reflect self-reporting, co-operation, and admissions), a fine against Mr Meehan (the lead audit partner from 2014 to 2016) of £250,000, and exclusion of Mr Meehan from the profession for a period of 10 years.
The AEP investigations continued and on 12 October 2023 the Executive Counsel issued two Final Settlement Decision Notices (one in respect of 2013 and one in respect of the years from 2014 to 2016) setting out the FRC’s findings that Carillion “was not subject to rigorous, comprehensive, and reliable audits in the three years leading up to its demise” and that “in 2016 KPMG and Mr Meehan’s work in respect of going concern and Carillion’s financial position generally was seriously deficient”.
Under the Notices, KPMG has been fined a total of £30,000,000 (reduced to £21,000,000 to reflect the firm’s co-operation and admissions) in respect of all four years, and Mr Meehan has been fined £500,000 (reduced to £350,000 for similar reasons) in his respect of the years from 2014 to 2016. Mr Meehan and Mr Turner (the lead audit partner in 2013) were also subject various other sanctions.
KPMG’s fine is the highest that the FRC has ever imposed.
More details can be found here.