KPMG’s accounting processes for the Carillion pension scheme are to be probed by the Financial Reporting Council (FRC), following enquiries it made since a profit warning in July 2017, the watchdog confirmed today.
The FRC’s enforcement division will consider whether the auditor has breached any relevant requirements, in particular the ethical and technical standards for auditors.
Several areas of KPMG’s work will be examined including the audit of Carillion’s use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts, and accounting for pensions.
The investigation will cover the years ended 31 December 2014, 2015 and 2016, and additional audit work carried out during 2017.
Earlier this month Carillion filed for compulsory liquidation after it failed to reach agreement with creditors over outstanding debts.
More than 14,000 non-retired Carillion scheme members now face a reduction in benefits if, as expected, the collapsed construction company’s scheme goes into the Pension Protection Fund (PPF).
The company was criticised for increasing dividends year-on-year throughout its existence, only to collapse with a pension deficit estimated at £580m.
The FRC says it is now progressing with urgent enquiries into the conduct of professional accountants within Carillion in connection with the preparation of the financial statements and other financial reporting obligations under the Accountancy Scheme.
A spokesperson says: “We are liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator to ensure that there is a joined-up approach to the investigation of all matters arising from the collapse of Carillion.”