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KPMG’s London office (mattbuck/CC BY-SA 4.0)

KPMG suspends partner that audited Carillion

21 January 2019 | By GCR staff 1 Comment

Big-Four accountancy firm KPMG has suspended Peter Meehan, the audit partner for failed outsourcing company Carillion, and three other staff members after finding issues of concern in documents given to the Financial Reporting Council’s (FRC’s) audit quality review (AQR) of Carillion in 2017.

Meehan signed off Carillion’s accounts four months before the construction and services giant issued a profit warning in July 2017, revealing an £845m writedown in the value of its contracts.

He came under severe questioning by MPs investigating the collapse of the construction and services giant. KPMG in particular was criticised for not flagging up financial concerns.

“Carillion’s annual reports were worthless as a guide to the true financial health of the company,” Rachel Reeves MP, chair of the Business, Energy and Industrial Strategy (BEIS) Committee, said at the time.

“The fact that it was impossible to get a true sense of the assets, liabilities and cash generation of the business raises serious questions about Carillion's corporate governance. KMPG will have to explain why they signed-off on accounts which appear to have borne so little relation to reality.”

KPMG confirmed the suspension to GCR, saying it was taking legal advice in relation to the conduct of the individuals.

It declined to say more about the individual cases, but a KPMG spokesperson said: “Over the past year, we have been performing a thorough review of the firm’s audit of Carillion. Our investigation included the audit team’s response to the FRC’s AQR undertaken during 2017, which looked at aspects of the 2016 audit.

“Concerns were identified in connection with a small number of documents provided to the FRC’s team during the routine AQR. On discovery of this information, we immediately reported our findings to the FRC.

“It is important to note that this took place after the signing of the audit opinion and we have not identified any evidence or indication that it had any impact on the audit conclusions of Carillion.

“We are taking this matter extremely seriously and have engaged outside legal counsel to conduct an independent investigation into the circumstances of the AQR and the conduct of the individuals involved.

“We acted swiftly and decisively and will continue to take all necessary steps to deal with this, including cooperating fully with the FRC.”

Over 19 years KPMG earned £29m auditing Carillion.

Photograph: KPMG’s London office (mattbuck/CC BY-SA 4.0) https://creativecommons.org/licenses/by-sa/4.0/