The Financial Reporting Council (FRC) has begun an investigation into the auditing of accounts pertaining to failed construction services group Carillion.
It means the role of auditor KPMG will come under intense scrutiny.
“The Financial Reporting Council (FRC) has decided, following enquiries made since a profit warning in July 2017, to open an investigation under the Audit Enforcement Procedure in relation to KPMG’s audit of the financial statements of Carillion plc. The investigation will cover the years ended 31 December 2014, 2015 and 2016, and additional audit work carried out during 2017,” said FRC in a statement.
FRC´s enforcement division will consider whether the big four accountant has breached any ethical or technical standards.
“Several areas of KPMG’s work will be examined including the audit of the company’s use and disclosure of the going concern basis of accounting, estimates and recognition of revenue on significant contracts, and accounting for pensions,” said FRC.
It comes after market regulator the Financial Conduct Authority (FCA) said earlier this month that it was looking at the adequacy of Carillion´s financial statements prior to its July 2017 profit warning.
For its part, however, the FCA does not have a mandate to consider the propriety of auditing.
The FRC said it would be “liaising closely” with the FCA, the Official Receiver, the Insolvency Services and The Pensions Regulator in its investigation of KMPG´s work.
In statement, KPMG said: “Transparency and accountability are vital in building public trust in audit. We believe it is important that regulators acting in the public interest review the audit work related to high profile cases such as Carillion. We will co-operate fully with the FRC’s investigation.”