KPMG Audits of Carillion Probed by FRC

According to Bloomberg, The U.K. Financial Reporting Council (FRC) opened a probe into New York-based KPMG LLP’s (FY16 gross revenue of $8.6 billion) audits of Carillion Plc, after the builder collapsed under debt earlier this month.

The FRC will examine KPMG’s work from 2014 and whether the auditor breached any “ethical and technical standards.” The FRC will also look at how KPMG recognized revenue on significant contracts and its accounting for pensions.

Carillion, a U.K. construction company with government contracts in everything from hospitals to the HS2 high-speed rail project, collapsed in January after failing to shore-up finances and get a government bailout, leaving behind debts of $2.3 billion.

“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,” the FRC says. We will “conduct the investigation as quickly and thoroughly as possible.”

“Transparency and accountability are vital in building public trust in audit,” KPMG said in statement to Bloomberg. “We believe it is important that regulators acting in the public interest review the audit work related to high profile cases such as Carillion.”

“It is vital that we are able to have confidence in audit and financial statements,” says Michael Izza, chief executive of the institute of chartered accountants in England and Wales. “If there are lessons that need to be learned, whether by auditors, the accountancy profession, or management, we must identify them and act.”