FRC issues complaint against KPMG over Carillion audit

FRC issues complaint against KPMG over Carillion audit

The Financial Reporting Council has issued a formal complaint against KPMG, a former partner and some current and former employees over alleged misconduct.

The complaint is in relation to the FRC’s inspection of two audits carried out by KMPG, one of construction firm Carillion for the period ending December 31, 2016 and one of Regenersis for the period to June 30, 2014.

The complaint alleges misconduct by both the firm and several of its employees in relation to providing allegedly false and misleading information and documents to the FRC.

Article continues after advert

The individuals concerned include Peter Meehan, KPMG's engagement partner for the Carillion audit, and Stuart Smith, the engagement partner for the Regenersis audit. Neither is alleged to have committed misconduct in relation to any other firm’s audit.

The FRC’s investigation was opened in November 2018 after KPMG self-reported certain matters relating to the review of the Carillion audit in 2016.

The scope of the investigation was then expanded in July 2019 to include the inspection of the 2014 Regenersis audit after KPMG had also self-reported some matters relating to that inspection.

The FRC said: “The formal complaint does not allege misconduct arising from the performance of the 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.”

A disciplinary tribunal has been convened to hear the formal complaint and determine whether or not the respondents have committed misconduct. It is scheduled to commence on January 10 next year.

A spokesperson for KPMG UK said: “We take this matter extremely seriously. 

“We discovered the alleged issues in 2018 and 2019, and on both occasions immediately reported them to the FRC and suspended the small number of people involved. 

“The allegations in the formal complaint would, if proven, represent very serious breaches of our processes and values. 

“We have cooperated fully with our regulator throughout their investigation.”


The UK auditing watchdog had opened several investigations into the services KPMG provided to Carillion during the period from 2014 to 2017.

The firm, one of the UK government's biggest contractors, went into liquidation in 2018 and its 13 final salary pension schemes went into the Pension Protection Fund.

Carillion's 13 final salary schemes had more than 28,500 members and a deficit of £587m at the end of July 2017.

In the aftermath of the company's collapse, documents released by Parliament revealed a Carillion director thought funding the company's defined benefit pension schemes was a "waste of money".

The Big Four auditor firms - KPMG, EY, PwC and Deloitte – had billed Carillion, pension schemes and the government £71m in relation to their work with the collapsed contractor during the 10 years prior to its collapse.