One of the four largest accounting firms, KPMG, has been fined £14.4m by the UK Financial Reporting Council (FRC) due to ‘false and misleading’ information regarding its accounting audits.
The investigation found KPMG to be within breach of the FRC’s Audit Quality Reviews after it was revealed two audits carried out by KPMG; Carillion and Regeneris, involved false and misleading documents.
As well as condemning the audits of Carillion and Regeneris, the FRC also found a former KPMG partner and four former KPMG employees guilty.
Following an independent disciplinary tribunal hearing between January – February 2022, sanctions were handed after an additional hearing in May 2022. Initially a £20m fine, the fee was reduced to £14.4m, which was down to KPMG’s cooperation and self-reporting. The fine is the largest handed to KPMG within the UK.
Within its findings, the FRC highlighted the provision of false and misleading documents and information to the Audit Quality Review teams. The initial complaint did not allege misconduct arising from the performance of the aforementioned audits, nor did it allege that either case that the financial statements had not been properly prepared.
The tribunal did however, found misconduct on KPMG’s behalf pertaining to breaches of fundamental principle of integrity which requires an accountant to be straightforward and honest in all professional and business relationships.
The tribunal stated: “KPMG’s conduct in bringing the misconduct to the attention of the FRC, its cooperation with the FRC’s inquiry, and the action it has taken to address the possibility, hopefully remote, of recurrence.
“Effective audits are essential to the financial system. Management and investors should be able to rely on the audited financial reports of the company in question. The purpose of AQRs is to assess, and where appropriate suggest improvements to, the effectiveness of the audits.”
Elizabeth Barrett, Executive Counsel, added: “Misconduct that deliberately undermines the FRC’s ability to monitor and inspect the effectiveness of audits is extremely serious because it obstructs the FRC’s ability to protect the public interest.”