FRC investigates ex-Carillion directors over financial reporting

Britain’s accounting watchdog has started an investigation into two former finance directors of Carillion, the construction firm that collapsed in January, confirming last week’s Guardian report.

The Financial Reporting Council said is investigating the conduct of Richard Adam and Zafar Khan, in relation to their reporting of financial statements of the failed government contractor and other financial information for the years 2014, 2015 and 2016 and the six months to 30 June 2017.

The FRC also started an investigation into KPMG’s audit of Carillion’s financial statements on 29 January.

The watchdog is liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and The Pensions Regulator.

The FRC can prevent a finance director who is a member of a professional association from practising. It can also impose significant fines on those found to have “fallen significantly short of the standards reasonably to be expected” or brought discredit to the accountancy profession.

The Insolvency Service is already investigating the conduct of directors employed at the point at which the outsourcing giant collapsed, but “also of any individuals who were previously directors”, following a request from the business secretary, Greg Clark.

Frank Field, the chair of the parliamentary work and pensions committee, has welcomed the FRC’s decision to widen its investigation to include directors but said regulators should have acted much sooner. “What Britain desperately needs is a regulatory system that is on the front foot.”

Carillion, which was involved in the HS2 rail link and the Battersea power station revamp, went into liquidation with a host of unfinished public sector contracts and pension liabilities and debts each exceeding £1bn. It had just £29m in cash before its collapse.