The accountancy firm KPMG is to be investigated by the UK’s Financial Reporting Council over its role in the collapse of Carillion.
The business secretary, Greg Clark, welcomed the investigation, which the accounting watchdog said followed inquiries made since Carillion’s shock profit warning in July. The FRC said it would conduct the investigation, which will cover 2014 to 2016, and additional audit work carried out during 2017, “as quickly and thoroughly as possible”.
Carillion went into compulsory liquidation two weeks ago with debts of £1.3bn, a pension deficit of nearly £1bn and a host of unfinished public contracts.
The investigation will consider whether KPMG breached any rules, in particular the ethical and technical standards for auditors. Several areas of KPMG’s work will be examined including estimates and recognition of revenue on significant contracts, and accounting for pensions.
KPMG said it would cooperate fully with the FRC’s investigation and it believed it had conducted its role as Carillion’s auditor “appropriately and responsibly”.
The shadow pensions minister, Jack Dromey, said the system of oversight at Carillion had failed. He added that 28,000 workers were now paying the price with their jobs and pensions.
“The responsibility falls upon the government, the regulators, the board, the trustees and the asset managers,” he told BBC Radio 4’s Today programme.
The FRC said it was working closely with the official receiver, the Financial Conduct Authority, the Insolvency Service and the Pensions Regulator to ensure there was a joined-up approach to the investigation.
Carillion is under investigation by the FCA, which is scrutinising its announcements between 7 December 2016 and 10 July 2017.
News of the FRC investigation comes as Frank Field, the chair of the Commons work and pensions committee, accused Carillion of trying to “wriggle out of its obligations to its pensioners for the last 10 years”. Instead of tackling its growing pension deficit, he said, the company paid out hundreds of millions of pounds in dividends to shareholders and pay packets to bosses.